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Infrastructure development is on top of the Middle East's agenda, and with Dubai hosting World Expo 2020 and Qatar getting ready for the 2022 Fifa World Cup, real estate investment is on the rise post the financial crisis.
In terms of global importance, Fifa World Cup and World Expo rank quite high, which bodes well for the construction industry, which is engaged in building the necessary infrastructure. The events are anticipated to attract substantial real estate investment to the region as investors gain confidence in the region's property market once again.
Developers and investors should be aware of the legal structure and laws applicable to the particular region within which they are operating. The laws of the UAE are based on civil law systems, codified in the UAE Civil Code. Dubai is subject to both federal laws and those specific to the emirate.
Developers and investors should also be aware of land ownership restrictions applicable to the region. Dubai's laws restrict foreign individuals and companies from owning land in certain areas.
Those wishing to operate in the region may need to consider their company structure in order to comply with the GCC's ownership requirements and/or explore ownership structures, which comply with foreign ownership restrictions applicable in the region. One method to ensure compliance is by way of a long-term lease or through a mudaraba arrangement, which involves the foreign entity partnering with a local company.
In addition, developers and investors should be aware that foreign nationals can acquire lesser real estate rights in the form of musataha rights, that is, the right to occupy and build on land for periods of up to 50 years, and usufruct rights, which give the right to use and occupy land belonging to another person for a period of up to 99 years.
In order to support the estimated 25 million visitors expected to visit Dubai in 2020 (a figure that is up by 15 million in 2012), Dubai is expected to invest more than $8.1 billion (about Dh29.7 billion) in new infrastructure to host the expo. According to Deutsche Bank, it is estimated that investments as much as $43 billion will be required for infrastructure projects in preparation for the event.
As part of the Expo bid, Dubai focused on its ability to attract visitors due to its strategic location, developed infrastructure and capacity for expansion. According to the bid, two-third of the world's population lives eight hours away by flight from the city, and Emirates Airline has an extensive expansion plan to make the region accessible to the world.
Additionally, the expo site's strategic location in Jebel Ali, between Dubai and Abu Dhabi and adjacent to Dubai World Central and Jebel Ali Port means that Dubai will be well placed to provide ease of access for the millions of international and local visitors who are expected to attend the event.
Infrastructure development projects include airport expansion, the construction of Terminal 3 at Jebel Ali Port and the expansion of Dubai Metro's Red Line from the existing terminus to Dubai World Central, which is close to the proposed expo site. Investment in infrastructure development is essential and is expected to pave the way for development in other areas.
Asset markets in Dubai are recovering rapidly and it is clear that infrastructure projects, which were abandoned or delayed in the wake of the financial crisis, are now resuming with greater foresight and regulation. This, undoubtedly, is promoting market confidence and thereby attracting great amounts of real estate investment in the region.
What does this mean for real estate investors in the region? It is clear that the commitment to infrastructure investment will create immense opportunities for real estate developers and investors in Dubai and the wider region. Bank of America Merrill Lynch has estimated that hosting the Expo 2020 could boost Dubai's GDP by 24.4 per cent to $23 billion from 2015-21 and a Dubai Chamber study indicates that business confidence is at an all-time high as a result of Dubai's successful bid.
It is anticipated that growth will be felt across the region with big opportunities for investors particularly in the tourism, hospitality, transportation, logistics and retail sectors.
Previous trends suggest that opportunities for real estate investors are significant with the boom in infrastructure development in the Middle East. In fact, improvements in Dubai's transport network have had a dramatic effect on pricing, according to Dubai Road and Transport Authority.
For example, properties situated in prime areas in the vicinity of the metro lines and around developed business and marina areas have seen a strong price appreciation. But areas further inland, where infrastructure is less developed, are still offering great value. This is a sure sign that developing infrastructure and improvements to living standards provide lucrative opportunities for real estate investors.
And it's not just Dubai that is benefiting. Vast construction efforts as a result of hosting two of the world's biggest events is predicted to have a domino effect, which will be felt across the GCC, creating opportunities for construction businesses.
In the UAE, the estimated total value of infrastructure projects planned or in progress is $549 billion. Saudi Arabia is planning the expansion of King Abdul Aziz International Airport and the development of a high-speed railway line connecting Mecca and Medina, while Kuwait is developing the Kuwait City Metro, Kuwait International Airport and motorways.
Source: Keri Watkins, Special to Property Weekly