The outcropping of new property projects in the United Arab Emirates has become as commonplace as, say, news about the latest electronic gadgets and what-have-you. This is a fact that seems to belie the complexity of the process and the expense that property development entails.
The challenges of property development in the UAE
The rising cost of building materials is one of the biggest challenges faced by property developers in the UAE today. There has been an unprecedented increase in demand for property which has triggered a chain reaction, starting with the spate of new developments in the country.
Most of the major projects focus on the mixed-use segment since self-contained complete communities are more popular among investors for obvious reasons. As a result, there has been a sharp increase in the demand for building materials which, in turn, has hiked the prices of some materials thereof.
Everything – from labor costs to land prices to cost of materials like cement and iron – is usually subject to increases, and there is a real dearth of contracting companies who are able to fulfill the quality work expected of them.
Very often, developers are left to choose between increasing selling prices and lowering their profit margins. But any reputable developer worth their salt would never sacrifice quality for short-term financial gains.
UAE properties are still globally competitive
Today, the UAE real estate market remains one of the fastest-growing markets in the world. In terms of infrastructure and facilities provided to end-users, the developments in the region are on par with those of the greatest metropolises in the world.
Real estate prices in the region, moreover, are competitive, when compared to similar developments in other parts of the world.
The real estate sector in the UAE has several factors working to its advantage, such as:
- Geographic location. Strategically located, the UAE is a vital transit point, easily accessible from all major cities of the world.
- Impressive infrastructure. The UAE sports world-class infrastructure and facilities.
- Free zones. The various UAE free zones attract investors from all over the globe.
- The low crime rate in the UAE ensures safety for everyone, including high net worth individuals.
- Luxurious lifestyle. Five-star hotels, fabulous shopping malls, beautiful beaches and endless entertainment options keep local and global tourism thriving in the country.
- High level technological advancement. Technology penetration in the UAE is extremely high and Dubai is on the fast track to becoming a smart city in a few years’ time.
- The UAE government continually collaborates with property developers and financial institutions to ensure maximum transparency in all dealings.
- Ease of processing. The actual buying and selling process in the UAE real estate market takes place smoothly, with minimal delays and obstacles.
Today, the UAE real estate market is currently focused on high-end properties, and since there is a large middle-income population, property developers have begun to expand to medium- and low-cost housing development as well.
Low- to medium-cost housing options
Jumeirah Village Circle, Remraam, Sports City, Dubai Silicon Oasis, Dubai International City, Arjan and Dubai Investments Park are some of the developments that provide value housing options.
During the initial stages, builders in any growing real estate market in the world tend to focus on developing high-end luxury properties mainly to ensure financial stability to their company, and to set the stage for what they can offer. One such ambitious mega development is the Mohammed Bin Rashid City in Dubai which is envisioned to be another one of the city’s premiere mixed-use developments.
But once the market matures and reaches stability, more developers would consider developing medium-cost and low-cost properties. The UAE real estate market continues to stabilize, and eventually, there will be more low-to-medium cost housing available in the country.
Moreover, Dubai and the rest of the UAE have set high standards for housing and, by default, attract high net worth individuals (HNWI) to invest in properties.