There are several factors as to why investors must do business in the country. In this area of the paper, the author would be discussing the business potential of investing in a real estate property of Dubai. It would further explain the reasons why an investor must invest in Dubai. Rate of Return in real estate The Rate of Return on Investment in Dubai is considered to be high. The National Bank of Dubai’s European Real Estate Fund (2007) had announced to the public that its performance had exceeded the projected total return of 15% per annum (Internal Rate of Return).
Based on the Report of the National Bank of Dubai, the year 2006 had shown a rise in commercial Real Estate Investment with Europe. Increase shares had grown up to 50% which represents 41 to 46% of share in the global trade. As a result of this increases, National Bank stated that there had been higher prices and lower yields. This had increased the investors and shows an excellent potential in terms of the rate of return for investments. Evidence on a good rate of return is the Dubai Investment Fund.
The Dubai Investment Fund is a joint venture of the Investors Provident and Caledonian Investments Ltd. According the investorsprovident. com, this investment fund had seek to diversify investment in the areas of residential, commercial and industrial projects in Dubai and within the Gulf Region. The fund aims for a capital growth rate of between 15 to 20% per annum. Previous projects have shown a 30% rate of return. Projections have been made for the first four years and the fund had used a rate of 15 to 20% per annum.
According to the website of International Citizen, Dubai would be having new properties. Paul Turner, the manager of Asteco Property Management, stated that there would be around 38,000 to 40,000 apartments being built in Dubai and 4,000 luxury villas that would soon become available. These apartments and Villas are a good opportunity for foreign investors to invest in. Since there is much available real estate for investment in the country, there would be enough supply for the foreign investors.
However, this is a double edged sword; if there are no more foreign investors to come in the country then chances are this real estate properties would be put to waste. As per the spokesperson of Emaar, the freehold owned properties are essentially a property where the investors would have full ownership of the property that they buy. The investors would have the right to sell, lease or rent the units freely and any time. As stated in the Taxation system, Low tax is being implemented in Dubai. Foreign Investors are attracted to the situation because the investors would be able to gain more income.
For example, a two-bedroom flat might cost $100,000. This amount could have been saved by some investors in tax. Investors could save a large amount of money because of the low tax situation in the country. Cheap Prices of Real Estate As compared to other major cities in the world, property is cheap. According to Nicholas Marr (2006), the director of Marr International Ltd, Dubai Villas cost around $1,000 per square meter. On the other hand, London Apartments in Docklands costs at around $5,000 square meter. In terms of price, there is a very huge difference between the two.
Comparing the kind of property being compared, a person can have a villa in Dubai costing a thousand dollars and a person can have an apartment in London with the cost of $5,000 per square meter. Villas are more luxurious than an apartment, so there is also a quality property comparison. High Economic Growth in real estate Dubai can be considered as a city of opportunities and has a high economic growth. As stated in the economy portion of the paper, the country has a very high economic growth in the recent years.
A high economic growth means that the economic situation in Dubai is improving. A good investor always thinks about the situation in the place that he is investing in. If a place has an improving economy then this means that it is favourable to invest in that particular area because chances are, the rate of return on investment could become higher. Dubai is also known for its twenty-year record of economic growth. Based on that information, the foreign investors can note that the country’s economy had a constant growth. On-going future plans of the government regarding real estate
The government is planning on the development of the largest mall in the area and other standard infrastructures that would further improve the current state of the country. The plans of the government are another guarantee that there are more improvements coming in the emirate of Dubai. Being able to sustain the high economic growth is important to a country. If investors would have information that the country is giving it all to sustain the economic growth of the country then it is only logical to think that investors would be attracted in the country.
In this case, the government of UAE has been transparent about its plans in the future. Investors would be able to estimate the economy of the country for the next few years. Nicholas Marr (2006) pointed out in his article that Dubai is in the process of creating an international property market from scratch. Foreign investors are given a good deal to encourage the foreigners to be pioneers of the market with very low deposits. Existing High Standard Infrastructures
For real estate investors it is important to learn that a country has a good communication and that the country is keeping up its pace in the modern world. The country has many infrastructures that have good communication in the international market and good transportation ports for travelling from the city of origin to Dubai. Infrastructures of the country had also attracted several people in the country. Dubai Internet City and Jebel International Airport are examples of the infrastructures that could contribute to the factors of an investor to place their businesses in the country.