Clusters off MBZ Road and Dubai South offer such opportunities to go mid-market
Dubai: Even though land prices have gone up, developers in Dubai can still create smaller sized residential units at prices of Dh1 million and under in clusters located off Shaikh Mohammad Bin Zayed Road.
“There are restrictions on height of buildings in clusters such as Arjan and Majan in Dubailand – the floor area ratio (FAR) at these locations tend to be between 2-4,” said Sailesh Irani, Director at Sun & Sand Developers, which recently delivered a project in Silicon Oasis and is looking to acquire plots for new ventures.
“That compares to a 6 plus FAR high-rise clusters such as Dubai Marina would have.
“Where FAR is lower, developers can execute low-rise projects at a faster pace, create smaller sized units and offer prices more in tune with the lower mid-market buyers’ budget. But land prices tend to carry a premium.
“The challenge then for developers is not necessarily the land costs, (which would be Dh120-Dh150 a square foot), but how they manage the construction expenses. That will decide much flexibility they have in setting their eventual prices.”
In recent months, a handful of Dubai’s developers have had off-plan launches offering homes much lower than the market average. These include sub-Dh1 million units from Nshama, the joint venture Emaar South and the master-developer Dubai South. Others like Damac are offering plot sales for buyers to decide how much they want to spend on creating the properties.
But these are still isolated instances. According to the latest Phidar Advisory report, “most new developments are affordable only to mid-high and high-income households, so negative and even sluggish growth can impact occupier demand.
Segmented affordability analysis shows that too many developers are building too many premium developments affordable only to mid-high to high income households.
“Developers vary considerably in ability to deliver, which will continue an established trend of quality fragmentation.
“The developer should orient the product around the occupier and then use the underlying occupier research to market to the investor. Investors should demand more substantive marketing material from developers, grounded in credible occupier research that verifies that this home meets demand.”
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