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Thu, Nov 21, 2024 | Jumada al-Awwal 19, 1446 | DXB
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Dubai: Developers compete to buy land plots as prices soar
In order to cash in on unprecedented demand, most local developers in Dubai have launched multiple projects
Photo: AFP
Competition is growing among Dubai developers to buy more plots amidst fast-reducing land banks.
Development in some of the most prime areas in the emirate such as Downtown and Business Bay has almost reached their peak and there are very few residential plots left for the development, hence, pushing the prices of plots and apartments also higher in such areas, going forward.
There are “fast-reducing land banks for Dubai-based developers and (they) need to purchase new land parcels at high costs,” said Tatjana Lescova, associate director at S&P Global, and Sapna Jagtiani, director at S&P Global.
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In order to cash in on unprecedented demand, most local developers in Dubai have launched multiple projects and have increased their land bank. Leading private developer Danube Properties launched over Dh10 billion of residential projects in 2023 alone in key locations such as Business Bay, Jumeirah Village Circle, Maritime City and others.
Binghatti Properties recently revealed that it spent Dh1 billion to acquire plots in Dubai ahead of even issuing its $300 million sukuk which was listed on the Nasdaq Dubai earlier this month.
“As a developer, we like to have flexibility in terms of cash injections into the company. Today, we already have in the Escrow account more than 3 times the Sukuk we issued. This is a form of financing where we will have the flexibility to utilise these funds as growth working capital and also working capital for existing projects that we have sold because the gestation period of these large uber-luxury projects is 2.5-3 years, and some of them are almost sold out. So, it makes sense only to build these quickly and hand them over. The more liquidity you have, the faster you build,” said Muhammad Binghatti, CEO of Binghatti.
In addition to local developers, many foreign developers also forayed into the emirate’s property market in the past year, driving the demand for plots even higher.
In addition to Business Bay and Downtown, fast-growing areas such as Maritime City, Jumeirah Village Circle, Meydan City, Arjan and others have also been a focus of the developers to grab plots for the developments.
As a result prices of plots have jumped over 50 per cent in Dubai in the past couple of years. Rizwan Sajan, chairman of Danube Properties, recently told Khaleej Times in an interview that prices in Maritime City have increased by almost 50 per cent. But prices in some other hot areas increased even at a higher rate than in Maritime City.
S&P analysts said that the Dubai developers’ financial health is improving “due to record pre-sales and faster cash collections.” However, they warned that oversupply risks “could precipitate a cyclical reversal.”
“Dubai's residential property market to cool over the next 12-18 months due to increased supply and global economic pressures that could affect the demand. Dubai developers beefed up their cash balances due to record pre-sales over the past 3 years, improving their credit health ahead of the next cyclical slowdown,” it said.
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Waheed Abbas
Waheed Abbas is Assistant Editor, covering real estate, aviation and other business stories that directly affect the lives of UAE consumers. He frequently reports human interest stories, too.
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