Medium, long-term view is the key, but profits can be destroyed by wrong choice of plot, lack of strategic development plan, says fäm Properties

Investors are taking advantage of the current low cost of prime land in Dubai to exploit highly profitable opportunities for strategic development, a real estate expert said today.

Firas Al Msaddi, CEO of fäm Properties, one of Dubai’s largest real estate brokerages, says land prices in key locations such as Downtown Dubai and Business Bay are giving rise to a wave of residential and commercial projects worth hundreds of millions of dirhams.

But the company warns that investors who fail to study the market in detail to ensure they pick the right plot and devise the correct development plan can destroy their profits.

“Investors are attracted by plots now available for AED325 per sq ft compared with AED700-AED800 per sq ft in 2007-2008,” said Al Msaddi. “That means huge savings in outlay, and a properly planned development strategy can maximise the return on investment.”

Tarek Bou Karroum, Managing Partner of fäm Properties, says developers are being rewarded for being more creative and innovative, with the introduction of new products previously unseen in the Dubai market paying off particularly well.

“One very good example of this is Al Wasl Plots by Meraas, a new freehold opportunity in Dubai, where we have sold more than AED600 million worth of plots,” he said.

Meanwhile, a plot sold by Bou Karroum beside the Dubai Water Canal in recent weeks is giving rise to an AED600m residential tower. Another in Business Bay was acquired for a AED235m hotel project.

Currently, fäm Properties is working on a deal for a 200,000 sq ft plot in the Dubailand area which is earmarked for an under supplied product, as well as another for an unlimited heights plot in Downtown.”

“The key for investors is understanding the efficiency aspect of developing land,” said Bou Karram. “This is vital for any profitable development. The profit business module can collapse if it’s not done correctly and is not backed up with an intensive market study.”

Lower constructions costs is another factor making the present time a good one to buy and develop prime Dubai lands. “This is the ideal time to go hunting for prime plots that are almost impossible to buy when the market is booming, prices are sky high, and contractors and consultants are not as flexible as they are at present,” said Bou Karram.

The company’s land development advisory team worked closely with Saudi Arabia’s ARTAR Real Estate Development on the 36-storey Mada Residences, which was the only residential project handed over on schedule in Downtown Dubai this year.

Al Msaddi, who does not expect to see land prices appreciating in the short term, says: “Selling a plot today comes at the cost of taking a hit on the selling price, regardless of its location, and this is creating real opportunities for a new generation of buyers. They are investors who are thinking medium and long-term, or have the appetite to develop as soon as they acquire the plot.”

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