Abu Dhabi’s move to open up its real estate sector further will make an impact at multiple levels, some immediate and others of a far longer nature. The immediate gains will come from a shift in sentiments, with foreigners now allowed full freehold rights to buy land, build on it and operate it in perpetuity. Or sell when they want to. The change in law instils that confidence, because in a property owner’s mind there is a significant emotive difference between owning land on leasehold, even one that extends to 99 years, and having full freehold rights vested with them. Removing the difference in buyer sentiment is what Abu Dhabi has done now.
Then there are the mid-to-long term benefits, which will accrue when foreign-owned corporate houses and funds plough investments into land in Abu Dhabi at the designated zones. These could be for their occupancy or to lease to third-parties, and generate yield. If enough businesses can take this route, this would have a deeper impact on the emirate’s freehold status. This would make Abu Dhabi’s property market an investment destination for global institutional investors, in much the same way Dubai emerged in the last decade. And apart from residential and office categories, industrial real estate could be a winner as will zones such as Kizad.
For developers, especially the government-owned giants, this reform creates another opportunity to tap into buyer sentiments, by selling plots to individuals or businesses. For a real estate market to mature, developers too should have the leeway to adjust to market cycles. And right now, they stand a better chance with their land holdings than the usual route of selling offplan homes or building signature office towers. Developers thus have the space to recalibrate their strategies, and some have already done so successfully. The property market needs time for interest to pick up again for buying homes and leasing offices.
For now, Abu Dhabi is offering its land and it will be for market dynamics to prove the merits of the decision.
The latest move by Abu Dhabi should also not be seen in isolation ... it’s integral to what the emirate has promised to do to jumpstart the economy by opening up key sectors and reaffirming the rights of investors. And the Dh50 billion stimulus package will lubricate what the reforms intend to achieve. And set the pace as well.