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With several integrated communities offering attractive high-end stocks at par with the best developments of Dubai and Abu Dhabi, Ras Al Khaimah is raising the stakes in the lucrative real estate market. Beaches, mountains and freehold land at a fraction of the cost of Dubai's pricey real estate are among the northern emirate's key assets, providing viable alternatives to developers, investors and homebuyers in the UAE. But just how bigger can the country's fourth-largest emirate go with its real estate development plans?
Mohammad Sultan Al Qadi, Managing Director and CEO of RAK Properties, says things are moving in the right direction for the emirate, which for years had been conservative with its real estate development activities.
''We have a lot of demand for our projects,'' says Al Qadi. ''One of the most important [considerations] for those who would like to invest in Ras Al Khaimah [is] we have freehold and full title deeds. [Expats] can own a house. Number two, our market, though small, [offers] prices less than others. Number three, there is no congestion. There are also a lot of opportunities for those who would like to do business through RAK Free Trade Zone, through Ras Al Khaimah Investment Authority [Rakia]. All of these add value.''
Ras Al Khaimah is certainly gaining popularity from a business standpoint. In 2009 fDi Magazine, a Financial Times publication, labelled the emirate the most attractive for Foreign Direct Investment in the Middle East. The city is only a 45-minute drive from Dubai, while tourism also seems to be heating up with Qatar Airways announcing new flights to the emirate and Air Arabia named as the emirate's official carrier.
Al Qadi says the emirate of 500,000 residents has long been the summer playground of other emirates, not only due to its natural beauty but also because of the cooler temperatures high in the mountains.
''Ras Al Khaimah has a unique topography. We have mountains meeting the water, we have beautiful sand dunes, which are close to the city,'' he says.
''We have beautiful sand dunes that meet the sea, and we have a little bit of greenery as well.''
Al Qadi also points out the emirate's track record. He says prudent leadership steered the emirate and many of its major business enterprises, including Al Qadi's publicly traded company, out of the hot water during the recession.
''Since we started, we established Mina Al Arab, Jaffa Towers, RAK Towers. All the projects were sold and handed over, [and] people are living an active life in those areas.''
Of course the emirate was not immune from the crisis and time frames have had to change. The initial completion date of Mina Al Arab, a 165-million-sq-ft development built around a marina, has been moved from this year to 2020.
''I tell everybody I'm conservative with my management, I'm not aggressive, I calculate everything, like I calculate my words,'' says Al Qadi, who demonstrated his cautious ways at last month's Cityscape Global in Dubai where he held off on confirming to journalists a tie-up with luxury resort Anantara for the Mina Al Arab development until the papers were signed.
This is the attitude in the emirate, he asserts. ''We see a lot of future and vision [in Ras Al Khaimah], why? Our government and our ruler supports and encourages all local and international companies to come and visit Ras Al Khaimah. If there are any issues he's [there] to support them. If there are any problems, he's accessible.''
While the property market is cooling in Dubai and in Abu Dhabi as a result of flat-lining oil prices, the smaller emirate is strongly positioned to deal with the challenges, says Barry Ebrahimy, Head of Commercial at Al Hamra Real Estate Development.
''It seems like there's a correction taking place, especially with the Dubai market,'' says Ebrahimy. ''We haven't seen that yet in Ras Al Khaimah, but we feel that any correction is healthy and a natural part of a good market. It cannot be booming ten years continuously. In Ras Al Khaimah we're very sustainable, we're not prone to oversupply or heated market pricing.''
The private company, owned by the ruling family, announced phased launches at Cityscape of villas in its upmarket Falcon Island development, where 150 villas set on a private island are selling for upwards of Dh5.7 million, and the more modest Bayti development, where villas are priced from Dh1.89 million.
Ebrahimy points to concrete measures Al Hamra has taken to ensure long term value and confidence in its developments, which have attracted the highest platinum rating from leading green building accreditation LEED.
''We have taken initiatives on our own part to avoid over-speculation on the market on the supply side,'' says Ebrahimy. ''For example we've avoided selling bulk units, we want to promote end users, we want to promote community and the sustainability of the community itself. No one wants to build a massive project and have it empty. We all want a community that lives, breathes and is coherent.''
Buyers are restricted to purchasing two units and can only resell once 70 per cent of the value has been paid off, to prevent flipping. While to many it is a developer's dream, Ebrahimy says he would feel ''uncomfortable'' if a client does not see the project before purchasing property. ''I want [buyers] to come and see the product and ask us questions, and feel how credible we are. We want a long-term relationship,'' he says.
Confident in the success of their projects and interest in Ras Al Khaimah, Al Hamra is even guaranteeing a 9 per cent return on investment for two years in its Bab Al Bahr apartments on Murjan Island.
''That shows the confidence in the market, in the rental income, and the investment proposition of RAK,'' says Ebrahimy.
The emirate has a number of opportunities for business, Ebrahimy reveals. More and more people are discovering Ras Al Khaimah through tourism, as Ebrahimy claims the emirate is one of the fastest-growing niche markets in the world. Tourism numbers went from 1.3 million in 2013 to 2.1 million in 2014.
Then there is also the emirate's growing industrial infrastructure. ''There is the manufacturing sector, we have five ports, we have free zones that are home to thousands of companies in the UAE.,'' he says. ''But we are not ignorant that a lot of people have major businesses in the major business hubs such as Dubai.''
The quality of the villas, which have almost 100 per cent occupancy rates for those already handed over, is such that Ebrahimy believes people won't mind the commute time.
''I don't know of other communities that have quite what Al Hamra offers,'' he says. ''I don't know [of a similar project] in Dubai and in other communities. A golf course, seafront, marina, five hotels — there is no single community that has all of these things combined.
''Price-wise it is half the price of any other waterfront [development] in the UAE.''
In its recent Northern Emirates Q2 2015 real estate report, Asteco compares the prices of villas with a ''similar waterfront lifestyle'' at Al Hamra (Dh1,100-Dh1,500 per square foot) and the Palm Jumei rah (Dh1,600-Dh3,500). The research showed two-bedroom homes in the emirate were being rented on average between Dh50,000 and Dh65,000, compared to Dh110,000-Dh160,000 in Dubai.
However, Ebrahimy says Ras Al Khaimah is not all about affordability.
''[Customers] can see value beyond the ticket price,'' he says. ''We have our own market, people are buying in Ras Al Khaimah because first and foremost they want to live or invest there and the price of course becomes an added bonus. We think a lot of people are seeing opportunity for growth as opposed to some of the other cities where they feel the market has matured.''
Asteco's Valuation and Advisory Director John Allen says the emirate is comparatively more ''resort driven'', though increasingly more buyers are also working there.
''They have the free zone there, which has generated a lot of employment and has fuelled [the influx of] long term residents in Al Hamra,'' says Allen. ''There's no question there's a lot of property there. Now you're seeing some good-quality villa projects. RAK Properties' Mina Al Arab sold very well; occupancy levels are very high.''
But home ownership in the emirate still tends to be a second home, and there is a limit to what people will pay.
''I know personally a number of people who have retired there and they use it as a winter base and they have a European place as well,'' says Allen. ''That means the price point has to be right for Ras Al Khaimah developments to hit the sweet spot.
''[People] are not going to go and pay prices equivalent to the Palm, but for something with a sensitive price and all the facilities and amenities, there is a market.''
That may well change as more demand comes from free zone workers, but there is also a catch given the size and capacity of the emirate. ''There's some nice stuff there, but they're going to face competition now,'' says Allen. ''Ajman is producing a lot of product across different price points [and] you've got the Sharjah waterfront and other stuff in Sharjah that's now coming on stream, so it's getting quite competitive.
''It's like any market, there will come a point where there's too much product.'' He acknowledges that point could come a lot sooner than in a market like Dubai.
Source: Amanda Fisher, Special to Property Weekly