Alternative economy
The impetus for Dubai's ambitious development program was the projected depletion of oil reserves in the near future. The sheikh's family, which considers the emirate more like its own private enterprise, has set the task of finding alternative ways to ensure the economic stability of the state in the future. And the efforts were not wasted – today more than 90% of gross domestic product is no longer directly related to the oil industry, while GDP is growing by 16.9% per year.
The way out was found in massive investments in engineering and transport communications, tourism, recreation and entertainment infrastructure, as well as in creating comfortable conditions for foreign companies to do business. To date, there are more than 270 hotels in Dubai, the existing airport is being modernized and expanded, and at the same time a new one is being built - passenger traffic is expected to double in 2015. In a short time, Dubai has come a long way from a wild desert inhabited by Bedouins to an attractive financial center for investors in the Middle East, which houses the offices of giant multinational corporations such as CNN, NBC, BBC and Microsoft.
With the start of construction in 2002 of The Palm Jumeirah complex - artificial palm-shaped islands with new villas and apartments located on them - Dubai real estate has taken a strong place in international news releases. Since then, housing prices in the emirate have been rising by up to 50% annually. At the same time, in comparison with other markets, the price-quality ratio remains very good. Rental income has also gone up, averaging 7-10% today, and in some cases reaching 15%.
Sports and entertainment future
So, for the fourth year now, Dubai property prices have been rising at an unprecedented rate. Obviously, this process cannot be endless, and the only question is how long? At least two super projects currently being implemented in Dubai suggest that price growth in the emirate is likely to continue.
One of these projects is Dubai Sports City. It will be the world's largest sports and residential complex, which will house several stadiums, the Manchester United football school, two hotels and about 8,000 private homes. The construction of this complex is one of the arguments for Dubai as the capital of the Olympic Games in 2020. Sports stars such as Tiger Woods (golf), Kelly Holmes, Paula Radcliffe (both athletics), and the Williams sisters (tennis) have already invested in this complex.
In general, the sports industry is well developed in Dubai. Numerous competitions of the highest level attract a large number of visitors here. The Dubai Desert Classic Golf Tournament, the Dubai Rugby Sevens Rugby Cup, the Dubai Tennis Open, the Formula One Powerboat Racing Tournament and the Dubai World Cup Horse Race are well known.
The second stunning project is the construction of the world's largest Dubiland entertainment complex, compared to which any of the Disneylands will seem very tiny. "Dubayland will be one of the most amazing complexes ever built in the world," said Tony Sparks of AGS Properties, a company selling apartments in the heart of Dubayland. After the completion of construction, Dubai looks like it will take away the palm of the world championship from Florida in terms of family holidays.
It is assumed that up to 200,000 people will visit Dubai every day, which will require $4 billion to create. The huge complex will consist of six "Worlds" - the World of attractions and leisure, the World of sports, the World of ecotourism, the World of recreation and vacations, the World of shopping and entertainment, as well as the Business World. 55 hotels are being built as part of the project – but it is obvious that many tourists will prefer to rent apartments, thereby supporting the real estate market. In addition, housing is necessary not only for tourists, but also for employees. Now, at an early stage of the project's development, one can only assume how many employees will be required in order for Dubayland to function.
A garden city on the site of a desert
It is worth talking about some of the most famous projects in Dubai. The Villa residential complex is being built on an area of 270 hectares, consisting of four "areas": The Haciendas, The Ponderosa, The Aldea and The Centro. Luxurious gardens and artificial reservoirs will be arranged in each of the areas, and a swimming pool in each villa. Due to the fact that The Villa will be located right in the heart of Dubai, high rental income is expected here. The construction is planned to be completed in 2007.
Emaar Properties has developed a project for the Arabian Ranches residential and sports center, the infrastructure of which includes a golf club and an equestrian center. There are several types of villas in this complex, prices for which start at $250,000 and pump in around $1 million - for a luxury seven-bedroom house.
Nakheel, a state-owned construction company, also actively uses the sports trend when creating its projects. Thus, about 14,000 properties will be built in the Jumeirah Golf Estates complex, including apartments, mansions and villas of different price categories. The first facilities that will be located around the golf courses will be named Earth and Fire - they will be put up for sale in early 2006
. Another residential complex being developed by Nakheel, Jumeirah Village, will be built opposite Jumeirah Golf Estates. It will be located at some distance from the city center, and all 7,000 houses will be built in the classic Arab-Mediterranean architectural style.
However, Nakheel's main creation is the already mentioned The Palm project, which has been in the spotlight of investors for several years. It consists of three large artificial islands, named The Palm Jumeirah, The Palm Jebel Ali and The Palm Deira. The total length of the coastline of these islands will be more than 520 km, there will be more than 100 hotels, 10,000 villas, 5,000 apartments, marinas, water parks, restaurants, shopping centers, sports and health infrastructure.
Investors' dreams come true here!
Dubai, where several new construction projects are launched every month, is really an investor's dream. Purchasing real estate here at the zero cycle stage is a great way to get an easily predictable increase in the value of real estate over several years. In addition, if you do not plan to use your property during this time, the management company can rent it out, and you will receive a guaranteed income.
Still doubting investors may be encouraged by the news that by 2010 the number of tourists in Dubai is expected to increase to 15 million (in 2004 - 6 million). By the same time, according to the government's forecast, the population of the emirate, now amounting to approximately 1.1 million, will double. Both of these factors perfectly support the rapidly developing real estate industry. Kamran Mahmood, Director of MiNC Property Enterprises, comments: "We believe that the Dubai market is ready for further growth thanks to people who want to live and work here, as well as thanks to the development of the tourism industry, which is the policy of the government."
The process of purchasing real estate in Dubai is easier than in many countries. Foreigners can purchase real estate only in certain areas, but it is in them that the main facilities are being built. Purchases are made at the construction stage, which usually lasts about two years, and the value of the property increases in the meantime.
There is no stamp duty, capital gains tax, rental income tax, or other taxes related to real estate in Dubai, although there are currently plans to establish a land tax of 1.5%. Mortgages of up to 70% of the real estate value are available, although not for all projects. The main banks issuing loans are HSBC, Dubai Lloyds TSB, Amlak Finance and several local banks.
The East is a delicate matter
But don't let your optimism be excessive! Consider several important factors. Firstly, real estate agents are not licensed and their activities in Dubai are not controlled, so be careful. Secondly, don't forget about the ownership issue. Dubai is not an independent state, but is part of the United Arab Emirates, which means that many political and economic decisions must be coordinated with the other six emirates.
The current regime in Dubai is an autocracy, the country is ruled exclusively by Sheikh, Crown Prince Mohammed bin Rashid Al Maktoum. In 2002, he allowed foreigners to purchase real estate on the condition that the land is not transferred to ownership, but to lease for a period of 99 years. At the same time, the sheikh has repeatedly assured that the UAE federal law willRussian and foreign investors will be granted unconditional ownership of both real estate and land. However, uncertainty persists, and real estate purchase and sale agreements currently indicate that buyers are allowed to live in their property, regardless of whether the law is changed or not. However, since foreigners do not formally own their homes, the legal process and costs of real estate ownership have not yet been determined.
Another problem concerns the interpretation of inheritance rights by Islamic Sharia law, on which Dubai's legislation is based. Any inheritance dispute can be resolved by a religious court, which can interpret the will in a completely different way than is customary in Russian and European legislation. There is also uncertainty surrounding the applicability of Sharia law to foreigners.
And finally, the problem with the visa. The buyer of the property can apply for a residence permit provided that he stays in Dubai for at least one day every six months. In this case, he is given the opportunity to obtain an updated three-year residence permit, which allows both the buyer and his family to stay in the country continuously during this period. However, such a permit does not give the right to work in Dubai. By the way, permission is also required for the purchase of alcohol, which is freely sold only to foreigners working in the Emirates. Perhaps the only way to get around this ban is to shop at duty free every time you arrive in Dubai.
