Dubai formula for affordable housing

Demand for middle- and low-priced property contains huge opportunities for the development of the affordable housing sector in Dubai, analysts say. Read more to find which Dubai areas offer the highest ROI, and what kind of dwelling one can afford having about AED200, 000 of annual income.

There is a sustained demand for affordable housing all over the UAE, not just Dubai. Apartments in areas with lower rents provide owners with higher returns compared to popular elite premium class locations. Real estate consultants from Cavendish Maxwell note that return on investments (ROI) in low-priced apartments in International City can reach up to 9%, and in Discovery Gardens up to 8.85%. Medium-priced residential developments in IMPZ, Barsha Heights, Jumeirah Village Circle and Dubailand also provide about 8 per cent and higher annual ROI.

At the same time, “For apartments, starting prices of AED700, 000 in emerging [detached] locations such as Dubai South and Dubai Sports City are driving demand from first-time buyers,” buying a place for their own stay, rather than for gaining rental returns, Cavendish Maxwell Q2 Dubai report says.

However, the concept of "affordability" is still too widely interpreted on the market, so quite often new real estate offers rather belong to the middle price segment, remaining inaccessible to buyers with lower incomes.

So, what is Dubai formula for affordable housing truly meeting market demands?

To be considered affordable, real estate should stay within reach of low-income groups, given that no more than 30-35 per cent of their income will be spent on housing. In Dubai, the government defines affordable housing as a dwelling for families with income from AED3,000 to AED10,000 per month. A significant part of the emirate’s potential property buyers engaged in service activities, such as accountants, administrative staff, entry-level architects and engineers with income levels of about AED9,000 to AED20,000, fall into this category, which accounts for almost a quarter of the emirate's population.

And with an average income of AED 200,000 per year, the maximum you can afford is a studio or a one-bedroom apartment priced from AED 600,000 to AED 800,000. In this price range, there is a huge shortage in family homes, such as typical villas and townhouses from DAMAC. Therefore, the potential for growth in the low and mid-priced real estate sectors is tremendous, experts say. The same relates to rents and returns on investments.