Joint ventures: a new driving force in UAE realty development

The recent strategic alliance announced by two of the UAE’s biggest developers has brought the spotlight on a trend that had otherwise swept the real estate industry in the past few years without much fanfare: joint ventures (JVs). Dubai-based Emaar Properties and Abu Dhabi’s Aldar Properties last month signed a deal to develop Dh30 billion worth of UAE and international projects. It is indeed a staggering deal in terms of size and significance in the industry.

JVs as a business strategy are utilised differently from one company to another. For savvy investors who have held plots in Dubai over the past several years, they may now find value in getting into a JV with a capable developer, instead of finding the means to develop the property themselves. For struggling developers, a JV is most beneficial as the Dubai Land Department (DLD) has implemented strict off-plan regulations that have made it tougher for players who do not have firm financial footing to build on their own.

For many smaller and struggling developers, JVs could be the difference between survival and extinction.

Last month, the DLD added an extra layer of protection for buyers purchasing off-plan properties by requiring Dubai property developers to put 20 per cent of the total project value in escrow upfront before they can begin work on their project. The previous regulation required 20 per cent of construction cost as bank guarantee.