Mega projects back, but take realistic approach

04.09.2014
One real estate expert points out that there are marked differences between the approaches taken by major developers before and after the recession with a shifting focus on market needs. Development activity has returned to Dubai in full swing but there are some clear-cut differences between large-scale projects before and after the financial crisis, says Deepak Jain, regional director, head of strategic consulting, JLL MENA.
In an article in Gulf News, Jain says, "Before the global financial crisis of 2008-09, there was undue reliance on land sales to fund large-scale projects which required master-developers to rely on small-scale developers and investors with limited experience and track record. This was one of the main reasons the Dubai property market suffered as these investors would buy land by putting a minimal down payment then sell off-plan property based on a concept design and use the proceeds to buy more land instead of investing in the project." He explains that the approach taken focused on targeting short-term investors rather than end-users.
However, Jain points out that recently, the developers of large-scale projects are reluctant to sell land as a means of cross-funding development. "Slowly but surely developers and investors are realising the importance of land, particularly in Dubai, and are more interested in setting up joint ventures rather than selling."
A number of real estate industry experts, including JLL, had raised the issue of unsustainable price rises and irrational exuberance during the latter part of 2013 and first quarter of 2014. Jain notes that thankfully, measures have been taken by the authorities and resulted in some cooling down of the market with reduced growth in sale and rental values, as per JLL’s recent Dubai Q2 Market Report.

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