Real estate in Dubai is supported by both the government and private sector. The government, through various programmes, organises affordable and suitable housing for its citizens.
The Sheikh Zayed Housing Programme, established in 1999, provides interest free loans and non-refundable grants for constructing and buying homes (Dubai Land Department 2013). The recipients have to apply and fulfil some requirements before they are considered.
The Mohammed Bin Rashid Housing Establishment Services organisation, started in 2006, also provides similar services. Agreements with the construction companies help recipients of grants and loans build their homes at a discount (Sheikh Zayed Housing Programme 2013).
To meet the high demand for affordable housing, the Mohammed Bin Rashid Housing Establishment adopted an initiative that involved outsourcing loans to private banks. In particular, the banks lend money and collect the instalments whereas the establishment acts as a guarantor (Mohammed Bin Rashid Housing Establishment 2012).
The major private developers in Dubai include the Dubai Properties Group, DAMAC Properties, Emaar Properties, and Nakheel Properties. However, DAMAC Properties is the largest fully privately owned developer formed in 2002 and having operations in more than 20 countries all over the world (DAMAC 2013).
Dubai Properties specialises in commercial and residential developments. Most of their projects are being launched in the United Arab Emirates although there are plans for regional expansion (Dubai Properties 2013). Nakheel Properties is the property arm of Dubai World, an investment firm that undertakes projects for the Dubai government.
It is known that the Executive Chair of the business, Sultan Ahmed bin Sulayem, intends transferring full control of Nakheel to the government. In addition, it should be kept in mind that Nakheel has operations in 87 countries across the globe (Nakheel Properties 2013).
Emaar Properties is the Gulf Region’s biggest real estate developer. It was established in 1997 and is listed on the Dubai Financial Markets. The Dubai government owns 32% of the business (Emaar Properties 2013).
Dubai Municipality classifies construction projects into three categories.
Table One: Properties Completed
The Global Financial Crisis severely affected the real estate market of Dubai. The boom started in 2002 and peaked between 2006 and 2008. In March 2006, amendments to the Foreign Property Ownership Laws allowed foreigners to own freehold property in the areas designated by the Dubai Land Department.
Fuelled by foreign speculative investors, property prices soared in Dubai. The investors used to buy off-plan or new-build properties and sell them at a profit within short periods. In 2008, with global liquidity drying up, real estate in Dubai experienced a lack of buyers.
The supply of real estate exceeded demand and property values plunged. Developers had no market for their properties. With the reduced cash flows in late 2009, Dubai World asked for a moratorium request on its debt obligations and had to be bailed out by the government. The bail-out allowed this company to pay its contractors and finish short-term projects (Alsukker 2010).
The bail-out explains the increase in properties completed in 2010 and 2011. Those properties were sold at significantly reduced market values. The developments completed during the crisis were also long term projects. Therefore, developers raised capital during the boom period.
However, in the first quarter of 2013, the market started recovering (Dubai Statistics Centre 2013). Despite the global economy experiencing a slump the real estate market in Dubai is still attractive to investors.
Some of the factors driving the recovery of the market include the superior infrastructure, a talented labour pool, and a socially tolerant environment. In addition, it is a ‘haven’ for investors from the troubled countries in the region (Dubai Land Department 2013).
After the crisis, the government introduced measures to stabilise housing prices and prevent a repeat of 2008. Rent caps were introduced to protect tenants from being charged rent above the market rates. The Real Estate Regulatory Agency determines the market values, upon which rents are pegged on.
In October 2013, the government introduced caps on mortgage lending for both expatriates and the UAE citizens. The real estate transaction costs were also increased. These measures were taken to curb speculative buying and selling of properties (Dubai Land Department 2013). This would stabilise the property prices as the market recovers from the 2008 burst.
References
Alsukker, A 2010, Dubai Crisis. Web.
DAMAC Properties 2013, DAMAC Properties – Luxury Living. Web.
Dubai Land Department 2013, Dubai Land Department. Web.
Dubai Properties Group 2013, Property for Sale & Rent-Dubai Properties Group. Web.
Dubai Statistics Centre 2013, Dubai Statistics Centre. Web.
Emaar 2013, Emaar Properties. Web.
Mohammed Bin Rashid Housing Establishment 2013, Mohammed Bin Rashid Housing Establishment. Web.
Nakheel 2013, Nakheel – Where Vision Inspires Humanity. Web.
Sheikh Zayed Housing Programme 2013, Sheikh Zayed Housing Programme. Web.