Gone are the days when expats had to stifle their dreams to own a property in the UAE as wide options are available today for them to invest in plots and apartments across the seven emirates.
Dubai remains a popular choice for majority of expatriates who consider the UAE as their second home and prefer to have an apartment in the emirate. Abu Dhabi, Sharjah and other emirates have also opened up their land parcels to expatriates, allowing them to invest either on lease or freehold terms.
The Dubai government passed a decree this week allowing expatriates to purchase freehold plots in Dubai South, formerly called Dubai World Central. This will open up land parcels to private developers and investors who can capitalise on the anticipated development boom in the run-up to Expo 2020.
For the uninitiated, there are four types of land ownership in the UAE - GCC land, available freehold for UAE nationals only; GCC land for lease, which is open to all nationalities and can range in duration from one year to 99 years; freehold land for all nationalities; and freezone land for lease, which is open to all nationalities and can range in duration from one to 99 years and is renewable.
Plots are available for sale in both freehold and leasehold areas in Dubai. In leasehold communities (designated areas), there will be a tenure attached to the plot, whereas in freehold areas, the owner will own the plot outright. For leasehold plots, after the period expires, the owner has the right for renewal at a certain price.
The main areas in Dubai, where freehold plots are available for sale today, are Dubai South, Business Bay and Pearl Jumeirah and in secondary locations such as Al Furjan, Dubai Sports City and Jumeirah Village South. This excludes older areas such as Bur Dubai, Karama and Qusais.
Buyers usually purchase plots from the master developer or on the secondary market. But property watchers say plots are scarce to come by in the heart of Dubai.
"The plots in higher demand are in the more established and mature areas of Dubai, such as Dubai Marina, Downtown and Jumeirah Lakes Towers [JLT], which are currently quite scarce. However, there is more of a selection in secondary locations such as Al Furjan, Dubai Sports City and Jumeirah Village South," says Edward Macura, partner, Cushman & Wakefield Core.
In the same vein, Hussain Alladin, head of research, GCP Properties, says: "Plots in developed high-end communities such as Emirates Hills and Dubai Marina would be scarce and not easily obtained."
Robust demand also has a direct bearing on prices. However, plot prices can have a huge variance depending on location, zoning and size.
The average price for plots in Dubai can range from Dh60 per sq ft to Dh100 per sq ft in secondary locations such as Dubai Silicon Oasis and Dubai Sports City, informs Macura. It will rise to Dh250 per square foot to Dh350 per square foot in the more mature, prime locations of Dubai, such as Downtown Dubai and Dubai Marina.
Adds Alladin: "In frontier communities such as Majan and Arjan, plot prices for residential buildings will be in the range of Dh90 to Dh130 per square foot, depending on the plot size and number of storeys. In other high-end upcoming communities, such as the Dubai Hills Estate, villa plots will vary from Dh380 to Dh450 per square foot, depending on the location and built-up area."
Historically, land has proven to be a more lucrative asset class compared to ready residential units. However, the value of a plot is dictated by the end product that is built.
"In Dubai, land prices have outperformed ready unit prices by a factor of two since 2003. These superior growth rates are not only seen in Dubai, but as well in other metropolitan cities such as Beijing and Calgary," explains GCP's Alladin.
Appreciation of land value depends on the area you purchase in and the price you buy at.
"If you purchase prior to the infrastructure being complete and neighbouring plots are still under construction, you would expect a more attractive price compared with when the area's infrastructure is completed and the neighbourhood has matured," says Macura.
Traditionally, GCC investors have purchased plots to build high-rise towers in Dubai.
"We are now seeing a number of expats also entering the market. Like we have seen in Emirates Hills and sections in Jumeirah, the buyer profile is varied. However, we see more traction from high net worth investor Indians, Pakistanis and other Arabs [particularly Lebanese], in addition to GCC investors and western European investors. Russian investor interest has dwindled in the past few years," informs Cushman & Wakefield Core Macura.
Purchasers could be owner occupiers looking to build commercial or residential accommodation for themselves or individuals and/or development companies looking to sell to third parties.
Luxury areas have higher rate of plot utilisation compared to mid-income developments.
According to Alladin: "For example, Dubai Marina has a plot utilisation rate of higher than 90 per cent compared to Dubai Silicon Oasis which is at 20 per cent. Using the metric of profitability, we can infer that developers would be more incentivised to build premium projects in order to maximise returns."
A significant number of plots of land are available for sale to construct buildings on Abu Dhabi's Al Reem and Al Saadiyat Island investment zones, where foreigners are allowed to own real estate, says a property adviser.
"There are significant plots of land available to build mid to high-rise towers on Al Reem Island and Saaidiyat Island," says Ben Crompton, managing partner of Abu Dhabi-based property firm Crompton Partners Estate Agents.
"There are not many plots of land available for sale anywhere in Abu Dhabi investment zones, where foreigners are allowed to own property," he said.
The Emirate has 11 investment zones, of them seven have been designated as residential and commercial zones where foreigners can own real estate. These zones include Saadiyat Island, which is being developed by Tourism Development and Investment Company or TDIC, owned by the Abu Dhabi government; Reem Island; Raha Beach; Al Reef; Yas Island; Hydra Village and Al Ghadeer on the Abu Dhabi-Dubai border.
There are four industrial and one financial zone. The Khalifa Industrial Zone or KIZAD is the biggest industrial zone and is part of Khalida Port.
Masdar City is a free zone where clean tech business can only be carried out, while the Abu Dhabi Airport Free Zone offers opportunities for variety of businesses.
Al Maryah Island is the international financial centre where foreigners can own up to 100 per cent of the businesses.
To a question on whether a foreigner can own a plot of land, the real estate advisor said: "Everything that an expat buys is built on a 99-year lease. If you are leasing pure land that will be on a 50-years lease, renewable for another 50 years."
"There are not many options to buy pure lands, its only built assets in Abu Dhabi," he said. "You can buy a plot of land to build a tower anywhere in those investment zones but you build your own villa on Al Saadiyat Island only," he said.
Most populated investment zone is Al Reem Island, which is located 500 meters off the coast of downtown Abu Dhabi and spread over 114 hectors.
The Abu Dhabi Urban Planning Council last year unveiled its new master plan for Al Reem Island, which will have 10,000 hotel rooms, 11 schools, a light rail transit system and will house 210,000 residents on completion.
In April, on the occasion of Cityscape Abu Dhabi, Mubadala Development Company, which owns Al Maryah Island, offered land plots for sale to build commercial towers.
Like Dubai, Northern Emirates have also started to offer freehold or 99-year lease properties to non-GCC nationals in the UAE
Ras Al Khaimah (RAK) was the first Northern Emirate to opene up the real estate market, followed by Ajman and Sharjah, which relaxed rules two years ago.
The RAK government setup its own public joint stock property development company, RAK Properties, which received freehold rights for all its properties in November 2005. It's listed on the Abu Dhabi stock market. RAK Properties' developments include Mina Al Arab, Julphar Towers, RAK Tower, and Julphar Residence.
Ajman has a significant amount of freehold units in the emirate. Its major projects include City Towers Ajman, Corniche Tower, Al Naeemiya Towers, Al Khor Towers, and Al Rashidiya Tower among others.
The Sharjah real estate market has been in the limelight since the emirate opened up the market for non-GCC nationals in late 2014. A couple of big projects have since been announced.
Last year, Sharjah Waterfront City was announced. The new waterfront city is being built at a cost of between Dh18.5 billion and Dh20 billion that will accommodate 200,000 people upon the completion of 10 natural islands, which will be connected by bridges and canals. Comprising 10 islands, Sharjah Waterfront City will be spread across 36km of coastal land on the northeastern coast of the emirate.
The city will have 200 mixed-use towers, 95 apartment buildings, offering affordable luxury apartments, multi-level hotels and service apartments, over 1,100 water-front and park-side villas, marine clubs, a shopping mall, two entertainment centers and mosques, schools, banks, stores, coffee shops and restaurants.
Another big development in Sharjah is Tilal City, which was announced two years ago. Its developer Tilal Properties, has recently announced that it is making "excellent progress" with its Dh2.4 billion Tilal City development in Sharjah.
Al Thuriah, another developer in Sharjah, is building six towers next to Sahara Centre mall. The developer has sold five towers and has started booking for sixth tower. Its completion is expected in September 2019