Cost of land has final say in setting unit prices, property developers say

Cost of land has final say in setting unit prices, property developers sayImage Credit: Supplied

If developers in Dubai are able to access to cheaper land, they stand a better chance of developing projects that are accessible to a wider base of prospective buyers. Ideally, land related costs should make up between 20-30 per cent of the overall project value, but in Dubai this tends to be between 25-35 per cent. Even a small percentage difference can have a telling impact on the eventual end-user pricing set by the developer.

''The government is putting infrastructure in place — such as Mohammad Bin Zayed Road or Dubai Bypass — that is opening up new areas and allowing developers to access land further out from the more mature — and higher priced — locations,'' said Ian Albert, Regional Director at Colliers International. ''This could potentially solve some of the pricing issues related to land.

''Another issue that developers typically face are the upfront payments for the plot purchases. This means they will have to start paying off their loans from Day One. If there is some cooperation on the part of everyone involved to change the payment plans it would reduce the financial burden on the developer at the back end.''

Where they can, developers are still looking to extract maximum returns from the established locations. According to Colliers' data, of the forthcoming residential supply, around 50 per cent of the units target the upper-mid and higher-end of the market in locations such as Business Bay, Dubai Marina, Dubailand Villas, Culture Village, Legends, and Palm Jumeirah. Just recently, the first releases took place at the Dubai Creek Harbour (part of The Lagoons master-development), again looking at pricing well over the Dh1,500 a square foot mark.

Areas such as Culture Village and MBR City too were the focal point of recent high-profile launches. According to Sameer Lakhani, Managing Director at Global Capital Partners, ''At Culture Village, the pricing is at the higher end (D1 and Palazzo Versace and offerings by Dubai Properties). We expect that this community, being waterfront, will remain on the upper end of the price spectrum and launches should happen next year as the pace of construction accelerates. Dubai Properties (the master-developer) will continue to offer a variety of projects with different themes, although private developers are expected to follow suit as well. At MBR City, the product mix will change once private sector developers enter.

''There is a definitive trend towards the mid-income segment by most of these developers though the price offerings are still not quite at the ''affordable'' level yet when looking at median incomes. It is apparent that developers are still catering to overseas buyers rather than the domestic populace.''

Read about Dubai's developers who now have an eye on finish line

Source: Manoj Nair, Associate Editor,


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