Dubai: The race is heating up among developers to acquire large-sized plots in the less developed freehold areas of Dubai and before land values start to firm up again. The locations in and around Dubai World Central are likely to see heightened activity, syncing with the general build-up of the Expo 2020 venue. The Shaikh Mohammad Bin Zayed Road corridor would be the other to see action as developers try to get a lock on plots at current rates.
“Values for undeveloped plots have been holding pretty steady in the last two quarters, with the Mohammad Bin Zayed corridor seeing plot prices of Dh120-Dh140 a square foot, and touching Dh150 closer to the Expo vicinity,” said Sailesh Israni, Managing Director at Sun and Sand Developers, which has just launched a new project at Silicon Oasis offering 2,500 square feet apartment units at Dh2.2 million. “At Silicon Oasis, land values are now around Dh180 a square foot, and there’s a premium attached for plot sizes of 50,000/60,000 square feet to 100,000 square feet. The premium is because projects can be mounted faster and completed sooner on such plots.
“Developers are once again trying to bump up their land holdings, seeing advantages either building their own projects or using it as assets for future transactions.”
It was in 2012 that developers got back into active land acquisitions after the horrors of the downturn. Damac Properties went ahead and launched “Akoya Oxygen” — its second master-development in Dubailand — after acquiring the 55 million square feet spread for $513 million (Dh1.8 billion) in early August. At Cityscape Global, MAG Developers confirmed it could go in for a sprawling community-themed project in Dubai World Central, which could entail a plot size of 3 million square feet.
At the same time, there are many developers still using funds from land disposals to pare down their debts and relaunch delayed or shelved projects.
Vestiges of such transactions are still being recorded as land gets back to being hot asset it once was in Dubai. Interestingly, land value as a percentage of an overall project cost continues to much lower in Dubai compared to many other markets.
“Land prices have on average across the masterplanned communities [in Dubai] reached a period of pricing stability,” said Simon Townsend, Business Development Manager at the consultancy DTZ. In fact, this is throwing up some anomalies as well.
“In some instances, land parcels are available in the secondary market at prices even below market levels,” said Townsend. “The slow down in primary and secondary unit sales, construction costs firming up through an increase in supply of projects, as well as financing constraints are having an impact on scheme viability.”
And which areas have seen the sharpest gains in land values? According to market feedback, the Downtown would be fetching around Dh250-Dh300 a square foot.
“The more established masterplanned developments become — through completion of buildings, but perhaps more importantly infrastructure completion and led by demand — the remaining land parcels start carrying a premium tag,” said Townsend. “More so, if there is limited free land availability.
“Some of the prime land parcels in Burj Khalifa district, for example, remain available at the higher end of the price spectrum. In several instances there is competitive [bidding] tension around this. Prices for these plots have seen some of the strongest growth.”