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The tiny emirate of Ajman is fast becoming a haven for property investors as real estate prices in Dubai and Sharjah shoot up and become unaffordable for many residents. Furthermore, property agents tell investors are attracted to Ajman because of the good rental returns in the emirate.
''For a property 350,000-450,000 sq ft, the rental return is around 9 per cent,'' says Mohammed Fahim, General Manager of Universal Properties. ''You will not get that in Dubai.''
Fahim cites a Dh300,000 one-bedroom apartment in Garden City, which can fetch a yearly rent of Dh28,000. The maintenance charges are likewise reasonable at Dh4 per square foot. A two-bedroom apartment will cost Dh450,000-Dh500,000. The project will be ready by December and there is huge interest from buy-to-rent investors.
Easy access to Dubai through the Shaikh Mohammad Bin Zayed Road has also been a key factor why many residents and investors are being lured to Ajman. Real estate agents report receiving several rental inquiries in the past few months, particularly from Dubai and Sharjah residents looking to relocate.
''Every day we get eight to ten inquiries [for rentals],'' says Fahim.
As more people move to Ajman, land prices in the emirate are also peaking.
''A plot of land that used to cost Dh85 per square foot is now selling for more than Dh100 per square foot,'' says Faisal Mehmood, Manager of Notting Hills Real Estate.
Property appreciation is also driven by the growing number of investors and businesses looking for land to build warehouses and labour camps in the emirate. The sales prices of apartments, however, have remained stagnant and generally affordable.
There are two types of rental property in Ajman: those powered by generators and those connected to the government's power grid.
Electricity supplied by the grid is cheaper at 23 fils per kilowatt-hour, but rents are higher in buildings connected to the grid, such as the aforementioned Garden City.
The rental price for a one-bedroom apartment that sources power froma generator is around Dh27,000, while it is around Dh30,000 for an apartment with grid-supplied electricity. A two-bedroom apartment in a building connected to the grid is rented out for Dh40,000, compared to Dh35,000 in a generator-powered building.
However, investors are optimistic of the long-term prospects of the emirate, especially as Ajman continues to expand its power infrastructure. In areas such as Al Jurf and Al Zahra, where electricity connection to is still unavailable, many investors are buying property in the hope that power will be supplied by the middle of next year. Moreover, real estate agents say new villas are getting connections quicker.
The Federal Electricity and Water Authority started connecting properties to the grid two years ago, but some property managers say the connections take time. Many buildings have to run on diesel generators and the fuel surcharge pushes up the charges.
Meanwhile, a new power plant near Shaikh Mohammad Bin Zayed Road has provided connection to many properties in Al Sawan.
Aside from high electricity charges, the downside of generator-powered buildings include noise and pollution produced by the generators. Despite these concerns, residential property is still high in demand in areas not connected to the grid.
Real estate prices
According to Fahim, land prices in the industrial area average around Dh110 per square foot. On the other hand, a huge 5,000-sq-ft villa in Ajman can be bought at a reasonable price of around Dh1.6 million.
A G+4 building (ground floor plus four floors) in Al Nuamiyah could fetch a price of Dh4.3 million, with an expected rental rate of Dh570,000. Fahim says Russians are the top buyers of whole buildings, which they then lease out. A warehouse, on the other hand, could fetch a rental income of 8-9 per cent, while labour camps without grid connection could fetch around Dh1,700 per room.
While the government is taking steps to further open up the property market, banks such as Ajman Bank are also offering attractive rates. For a Dh10-million ready property, buyers can take out a loan payable in 25 years. Expatriates need to put down 25 per cent of the cost, while it is 20 per cent for Emiratis.
Mohammed Sabir, proprietor of Best Home Real Estate, says it is relatively inexpensive to invest in the emirate as there are no taxes, except for additional payment for utility use and a transfer fee of 2 per cent for expatriate buyers.
He says paperwork is also easy and it takes 10-15 days to get a mortgage.
When the recession hit in 2008, several developments in the emirate were put on hold. However, many were restarted and are now nearing completion.
''There are now people living in Ajman One [that was launched in 2008]. Ajman Pearl will be handed over in a couple of months,'' Mehmood says. ''There is a lot of construction underway.''
The top investors in rental property in Ajman are Indians and Pakistanis. Following the political turmoil in some countries in the region, many Syrians and Egyptians have also relocated and bought properties in Ajman.
Relevant regulations have also been enacted to support the growth of the property market. Under the law, rents cannot be increased within three years of the tenancy, and, thereafter, landlords can only impose a maximum 20 per cent increase. Landlords also cannot ask tenants to leave the property before the expiry of the contract period.
The Ajman Municipality imposes heavy fines on landlords found to be illegally evicting tenants, which was a common practice to seek higher rates from new tenants.
Ajman's land market is also attracting investors, with Saudis, Kuwaitis and Chinese among the top buyers.
''The return on investment is lucrative in Ajman,'' says Mehmood, noting that an investment of Dh1 million in Dubai would get a rental of around Dh70,000, while a Dh700,000 investment in Ajman would fetch Dh60,000 in rent. ''You also have better choices here.''
The government is also making Ajman's property market more attractive for investors by allotting nearly 40 per cent of its budget on new developments and projects to boost tourism in the emirate.
Shaikh Ammar Bin Humaid Al Nuaimi, Crown Prince of Ajman, has announced a new airport project in Al Manama, while work on two new seaports is being intensified as part of Ajman's 2021 strategy. A state-of-the-art sewage plant is also being constructed and will be connected to 127,000 houses in the emirate.
Read on why Dubai remains an exciting investment destination
Source: Mahmood Saberi, Special to Property Weekly