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The fundamental drivers of Dubai real estate remain strong, despite the regional and global economy being slightly shaky in the aftermath of volatility in oil prices and ongoing geopolitical tensions. Today the UAE remains a safe haven within a volatile region, as it cements its place as a business and financial hub.
Investors should have a number of iconic buildings, mega projects and real estate attractions to choose from on the road to 2020. This includes residential properties around Dubai Opera and the Dubai Canal, which should be ready by end of the year, the Dubai Tower, which is set to be completed by 2020, and much more.
The construction of mega projects, especially those related to infrastructure, play a crucial role in shaping the future of cities, as they have the potential to transform entire countries. With Dubai's announcements of mega projects across retail, commercial and residential sectors, the infrastructure front will continue to maintain its sheen and cement Dubai's status as one of the world's fastest growing real estate markets.
Key events such as Cityscape Global certainly have an impact on an investor's decisions to buy property. Such events concurrently highlight the projects that are currently available in the pipeline or will be launched in future, giving an important indication to prospective buyers on the array of inventory available to choose from. In addition, buyers are able to compare payment plans according to their requirements, which helps in the decision-making process.
Many who find a property of their choice during such events usually approach banks for an offer in principle, to understand their financial capacity. This enables them to set limitations on their buying decisions. Buyers are now savvy and analyse the market scenario as well as projects prior to purchase. Hence, they look at all aspects, including obtaining bank pre-approval prior to any purchase decision.
For example, after last year's Cityscape, a number of our clients enquired about newly launched projects where we had strategic tieups with developers, such as Mudon by Dubai Properties, Meydan Sobha and those by Emaar and others. With the property market now bottoming out, there is certainly a heightened interest around this year's Cityscape. A lot of buyers who are currently renting are now looking for properties to purchase.
In addition, since property prices have flattened out, many investors are now looking for lucrative purchase options.
Buy a property for end use or investment depends a lot on the project. If the project promises a higher rental yield with good capital appreciation, it would appeal more to the investor segment. As always, location is the most significant element that is crucial to every investor. Projects that are more community based and are closer to amenities such as schools, medical facilities, parks, etc., will probably appeal more to the end user. These could be both villa and apartment communities.
Community infrastructure is also a vital component of a buyer's decision-making process. For example, we have witnessed an increase in demand in Dubai Marina and Jumeirah Lakes Towers, which are well connected due to the public transportation system.
Over the past 18-24 months, policymakers and real estate developers have also worked together to provide housing solutions for the middle-income market by launching new affordable developments. These new projects have helped to widen the pool for homebuyers, thus increasing home finance queries and transactions.
With more and more mid-segment buyers looking for properties to purchase rather than rent, there is no doubt that affordable housing is picking up, and banks are more inclined to provide home finance options for this segment due to the minimal risk exposure and smaller finance amounts.
At Noor Bank, we received many enquiries from various clients who are looking at purchasing properties in key locales, including affordable projects. Hence, we are witnessing a surge in number of transactions for such affordable projects.
The long-term outlook of the home financing market remains positive due to future growth and demand drivers like the World Expo 2020, other mega infrastructure developments and the Dubai market being expected to recover next year.
As reported by the Dubai Land Department, total real estate transactions in Dubai during the first half of the year amounted to Dh113 billion, achieved through 28,251 sales, homes finance and other transactions. Among the contributing factors behind this growth, especially on the residential front, were the strong rental yields and flexible payment plans offered by numerous developers. These conditions are encouraging many tenants to become homeowners and thereby also increasing demand from end users for home finance.
Undoubtedly, there is an opportunity for banks at mega events such as Cityscape, and they can play an important role in financing end users for selective projects, even though only a handful of banks offer financing to off-plan projects. Noor Bank, for example, offers financing for select under-construction projects that are approved and empanelled after a review and listing process.
Did you know that Sobha Group calls in interest for townhouse cluster
Source: Pawan Dhawan, Special to Property Weekly
The author is the Head of Home Finance at Noor Bank