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Want to make money? Invest in land

According to a report released by Reidin-GCP, the land prices in the first six months of 2017 have increased with 13%, while the housing sector has suffered. Land transactions have witnessed a steady growth since 2016, which led to an appreciation of prices. As the Expo 2020 preparations gather momentum, the land transactional activity will be fast paced, consequently pushing the prices even higher. Land has become the new investment trend in Dubai, with more and more investors being encouraged to buy and sell land, rather than developing properties on their own. The report from Reidin shows a staggering fact: throughout the last 14 years, land-investments in Dubai have surpassed the residential units investments by more than 50%. Dubai issued 38% more construction permits in 2016 than in 2015 and this trend continues to grow, as the government has decided that it is time to manage the scarcity in plots availability and offer new locations for development towards the south and the west areas of the city. The already built-out areas like Downtown, Dubai Marina, Palm Jumeirah or the Sheikh Zayed Road’s main attraction points were becoming extremely difficult to source, thus creating a shortage in land supply, with many owners still holding onto their assets after the last economic crash.

For those unfamiliar, there are four different types of ownership in the UAE:

Leasehold: it allows a tenant to use an already existing property without giving any rights on the piece on the land on which it is built. The tenant does not have the right to sell or transfer lease on his own to another. Leases are issued for 99 years.

Usufruct: this is a type of property that it is usually issued for 50 years and it represent a real property right, which grants a holder to make profits from the property, without being an owner.

Muastaha: to some extent, it is analogous to usufruct, with the addition of granting the holder the right to build a unit on the given land, to earn profits.

Free-hold ownership: a foreigner is allowed to buy and fully own a land in designated free-hold areas, such as: Dubai South, Business Bay and Pearl Jumeirah and in secondary locations such as Al Furjan, Dubai Sports City and Jumeirah Village South.

In the past months, land acquiring has started to top the investors’ list of priorities to the extent that those who do not have the means to purchase plots directly, are choosing to invest by proxy in listed developers with “land banks”, to capitalize on land prices.

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