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Dubai's real estate sector scores high on risk to return profile |
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10/16/2006 9:06:56 AM |
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DUBAI — According to a snap poll of 100 key real estate industry decision makers commissioned by Sama Dubai at Asia's premier property expo MIPIM Asia held in Hong Kong in late September, when balancing risk against returns, 58 per cent chose the GCC in particular Dubai over China and India.
According to the survey, Dubai scored high in the poll primarily because Dubai has been actively wooing investors by continuously rolling out new policies to encourage investment, reduce tax burdens and increase labour laws flexibility.
It is also increasing cooperation with other governments especially in Asia, encouraging greater investment from both sides.
The poll questioned investors, developers, corporate end-users, retailers, hotel group representatives and consultants/analysts from around the world who believed that Asia's level of attractiveness to foreign investors in future would increase as a result of its robust economic growth led by the taking off of China and India and the strong recovery in Japan.
Hong Kong, Singapore, Korea, Malaysia and Taiwan will continue to see solid growth. India was seen as having the greatest growth potential (38 per cent) with the GCC coming a close second (34 per cent) and China coming in third (28 per cent).
India's real estate market is very lucrative with a strong economy, growing demand and a housing shortage of 60 million units in residential alone. Shopping centres and multiplexes covering over 4.3 million square metres are due to be built in the next 24 months. The potential returns from upcoming tier-two cities such as Chandigarh, Chennai and Kolkata will be phenomenal.
Farhan Faraidooni, CEO of Sama Dubai said: “Dubai has excellent logistics and infrastructure and these factors are taken into account when investors make decisions about where to locate their business. According to the snap poll Sama Dubai commissioned at MIPIM Asia 2006, respondents felt returns from India are slightly higher as compared to Dubai, however these accrue over longer periods of investment.”
China with a forecasted economic growth of 9.9 per cent according to the World Bank, also has a very attractive real estate market with demand continuing to rise. The building market has reached new heights with some $200 billion entering this sector in 2005 and 1.4 billion square metres currently under construction. According to the poll, challenges such as language and an over heating economy concerned investors although China is believed to be attracting the most investment (35 per cent) followed by India (33 per cent), Japan and the GCC tied (both at 12 per cent), Australia (6 per cent) and Korea (2 per cent). “When it comes to making an investment the snap poll reveals, out of seven key factors, the three that ranked highest in their order of importance are market conditions, micro and macro economic factors and rental prospects. In the GCC the governments strive to outperform other countries on those very factors by continuously rolling out new policies to encourage investment, which help improve the business environment,” said Faraidooni.
During the past two years, commercial property prices in Dubai have climbed 200 per cent and are forecast to rise a further 50 per cent a year until 2008.
Also 11.6 per cent of Dubai's GDP is invested in tourism, including hotels and holiday homes. Feasibility studies have projected that investment could reach between $41-54 billion. The rate of return on investment is estimated at 20-25 per cent.
The survey results show that all 100 respondents believe that the GCC is an attractive investment destination. “With 60 per cent of respondents only 'somewhat' informed of the investment opportunities in the GCC and 92 per cent wishing to know more, Sama Dubai are delighted to have been able to exhibit exciting new commercial and resort properties in the GCC at MIPIM,” he said.
Sama Dubai is a private company wholly owned by Dubai Holding.
The international real estate investment and development company focuses on leveraging synergies across international, regional and local real estate sectors. |
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