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Dubai: The conventional wisdom in Dubai’s realty market is to make sure speculative buying and selling do not happen. But one developer has now decided to break with convention.
Dubai based Al Madina Al Raeda has just launched the Dh500 million Elite Downtown Residences project at the much in-demand Burj Downtown locality, with unit prices averaging Dh1,800 a square foot. So far, so conventional.
But where the project veers off the tried-and-tested track is that the developer is not placing any sort of restrictions on buyers selling the off-plan units on in the secondary market.
“We have no restrictions on selling, because we believe that a free market, which includes investors, end-users and tenants combined, should decide and not be controlled by developers as is the case all over the developed world,” said Juwaad Beg, CEO of Al Madina Al Raeda. “The project is open to both investors and end-users and we leave it to the buyers to decide what they want to do with their assets. If a buyer wants to cash in on the second or third day after he bought, so be it.”
The master-developer of the Burj Downtown, Emaar Properties, has in place strict provisos on secondary sales in its sales and purchase agreements. Market sources say these include having the original off-plan buyer meet a certain percentage of the payments before he can sell on. (Also, Dubai had raised transaction charges to 4 per cent in a bid to curb the flipping of units on inflated price movements.)
According to Simon Gray, regional head at Chesterton International, Emaar has had several off-plan project launches at the Downtown Dubai since 2012. “They have been priced in the range of Dh2,000-2,800 and have appreciated between 8-10 per cent over the last year,” Gray said. “Emaar Properties, in its corporate presentation, said over 95 per cent of the units launched in 2012 and 2013 have been sold.”
Which does raise the question as to why Beg is coming in with a lower pricing for the Elite Downtown Residences.
“As a developer we feel the profitability at the price range of Dh1,800 a square foot is acceptable,” said Beg. “Currently, there aren’t any off-plan stock at the Downtown except on the secondary market, with entry levels starting at Dh2,400 per square foot due to the fees and premiums. So our product is approximately 20 per cent below market value from day one.”
The developer is also offering incentives such as its own direct payment plan with a three-year tenure. It is also projecting rental yields of 7-9 per cent on the units.
Al Madina Al Raeda has helmed other projects — five towers have been handed over in Dubai Sports City and another two are in the process. Together, these represent more than 2,000 furnished units.
On further plans for the Downtown locale, “At present we don’t have any other plots as they are extremely difficult to come by. But with the Elite Downtown, we are trying to make a statement.”
Source: Manoj Nair, Associate Editor, gulfnews.com