Although the United Arab Emirates is a federation of seven independent sheikhdoms, it is Dubai that usually hogs the international limelight. Learning from the experiences of city-states such as Singapore, Dubai’s rulers have taken pains to build a brand image for their emirate that is synonymous with success, wealth, quality of life and ambition. “What is good for business is good for Dubai,” affirms Dubai’s visionary crown prince, Sheikh Mohammed bin Rashid Al Maktoum, in a quote posted on, an economic development website that capitalises on the moniker often used to describe the way the city is run as a commercial enterprise.

With over 90% of the UAE’s oil wealth controlled by Abu Dhabi, the largest emirate and federal capital, Dubai’s rulers saw the writing on the wall back in the 1970s. Its oil supplies dwindling, Dubai set about building an economy based on re-exportation using large ports at Jebel Ali and Port Rashid, and in recent years has created a plethora of free zones serving industries as diverse as media, IT, automotives, healthcare and precious metals. Tourism is also big business, and the number of annual visitors is projected to increase from five million last year to 15 million by 2015. Building on its natural advantages of sandy beaches and year-round sunshine, plus its economic advantages of tax-free living and plentiful international flight connections, Dubai wants to be the new Riviera for the Middle East as well as its undisputed trade and services entrepot.


Today Dubai is fast becoming a city of iconic structures. The Burj Al Arab hotel, designed to be reminiscent of a billowing dhow sail, faces stiff competition for attention from two palm tree-shaped resorts emerging from the sea off the coastline at Jumeirah and Jebel Ali. So large are these structures that they’re visible from space, and their fronds will support thousands of residences and hotels due to become ready for occupation from 2005 onwards.

Reaching for the sky

Further inland the cement was poured for the foundations of The Burj Dubai in September, at 800 metres set to be the tallest skyscraper in the world and yet only one component of a development called Downtown Dubai that aims to create a new heart for the city from scratch. Billed as the biggest and most varied entertainment and tourism attraction on the planet, the 185m sq metre Dubailand leisure park will open in phases between 2007 and 2018. From tropical biospheres to roller-coasters and championship athletics tracks, the six themed zones within the park have been designed to satisfy almost every conceivable leisure need.

The success of these ventures is predicated on the attraction of skilled expatriates and investment, while armies of South Asian labourers build the infrastructure required to provide local transportation, power, and water desalination services. Indeed, 70 % of the population is made up of Asian and European expatriates who commonly stay for between two and 10 years, making for strong demand in the property rental market.

Real estate is one of the lynchpins of the local economy, and in total some $30bn worth of construction projects are currently underway in Dubai. According to the calculations of Kuwait’s Global Investment House, the three major developers – Emaar, Nakheel and Estithmaar – are expected to deliver between $2.2bn and $2.7bn worth of property to the market every year for the next five years. Moreover as the local developers are constantly trying to outdo each other with the most dazzling new concept, the list of landmark projects looks set to get ever longer as time goes on.

The scale of Emaar’s developments in the south of the city near the internet and media free zones is simply mind-boggling in terms of both size and the speed at which construction is taking place. What was empty desert surrounding the Emirates Golf Club just a few years ago is now a sea of rooftops, and so quickly is the district’s population growing that the service roads are regularly clogged with commuter traffic queueing to join the Sheikh Zayed Road arterial highway.


Range of budgets

At the top end of the market 19,000 sq ft six-bedroom villas in the landscaped Avalon area of the Emirates Hills cost $2m, while those clustered around the new Montgomerie. Golf Club start at about $400,000 and Hattan Villas at The Lakes weigh in at an average $680,000. From there prices generally scale down through districts that have been designed to suit a range of budgets. At The Springs an attached three-bedroom villa goes for $170,000, while the all-apartment low-rise blocks of The Greens contain studios from $50,000.

In each case Emaar has tried hard to surround the new buildings with green spaces, water features and facilities for sports and shopping. It is also working with the government to try to enhance local road networks to keep up with the pace of expansion.

Government-owned Nakheel is the developer of The World, a collection of 300 private islands in the shape of a global map, plus the palm resorts and several onshore developments including Jumeirah Islands, Discovery Gardens and the Lost City. Costing a total $3bn to build, The World’s islands are selling for between $6m and $36m each and over 10% have already been bought by pre-approved investors and development consortia. The 14 islands that make up Australia, for example, have been bought for residential and hotel development by a Kuwaiti group.

Having sold all the villas on its first Palm Jumeirah in just 72 hours, Nahkeel was recently ordered by Sheikh Mohammed to build a third palm off the district of Deira. Describing it as ‘the final chapter’ in the palm series, Nakheel launched The Palm Deira internationally at the World Travel Market held in London this November. “It is the global response to the Palm project that has led to the recent announcement of the third palm-shaped island in Dubai,” said Sultan bin Sulayem, then executive director of Nakheel. “Since it is international investor interest that precipitated the creation of the third island, we believe that several interested audiences will want to interact with the Nakheel delegation while we are in London.”

British buyers

For many of the high-end developments coming onto the market, foreign buying interest from Asians and Europeans, particularly Britons, is reported to be strong. Those considering purchasing property in the UAE do need to consider two potential downsides to the deal, however, the first of which is freehold legislation. Sheikh Mohammed may have started the ball rolling with his 2002 decree permitting foreign land ownership in designated developments, but this has yet to be ratified at a federal level. The constitution of the UAE states that the emirates may determine their own land laws and regulations provided that they do not conflict with federal legislation, yet Abu Dhabi has not granted any freehold rights to expatriates and the wording of federal law on the matter remains unclear.

The international profile of Dubai’s developments leave few in doubt that the federal ratification will eventually be granted, and Abu Dhabi is understood to be considering liberalisation within its own borders. In the mean time local UAE banks and finance companies are building strong mortgage businesses, though international banks are taking a far more cautious approach exacerbated by a lack of laws regarding repossession in the event of a default.

Dubai’s case for the relaxation of the federal freehold laws has also been supported by unilateral moves in several of the northern emirates. Keen to attract foreign investment and long-term residents, Ras Al Khaimah, the northernmost emirate of the UAE, launched the $272m Al Hamra Village project in 2003. Within five months of the first phase of 200 villas and 320 apartments going on sale, a mixture of Europeans and locals had bought 75% of the properties off-plan. Prices ranged from $57,000 to $454,000, and the second phase to be released at the end of 2004 will offer a further 200 villas, 180 apartments and 50 duplexes. When completed at the end of 2006, the Al Hamra resort will contain 1300 residential units along with a marina and 18-hole golf course. It also offers views of the Hajar mountain range in the distance, a unique feature on a coast mainly characterised by flat desert scrub.

Easier travel

Much of the project’s practical appeal rests on the extension of the Emirates Road running to Dubai. A journey to Dubai today can consume the best part of two hours, but by the time Al Hamra is finished planners promise that travel times will be slashed to as little as 40 minutes. Easy access to Dubai is also part of the sales pitch in Ajman, the smallest emirate in the UAE and the third to offer freehold rights to foreigners when plans for the $68m Al Naeemiya Towers were unveiled in June. Close to the Sharjah border and also on the Emirates Road commuter route, the complex will provide a total 470 apartments when completed in November 2005. Prices for two-bedroom apartments at $77,000 and three-bedrooms at $100,000 make for competitive living space relative to Dubai.

Although clear information is hard to come by, estate agents say that villas and undeveloped land can be bought by foreigners elsewhere in the emirate too.

Reports in the local newspapers in October led investors to believe that Sharjah was opening up to foreign residential investment, but at present the government only permits the purchase of land that will be used for commercial enterprises leading to job creation for Sharjah nationals. Sharjah is situated just north of Dubai, and its laws and codes of conduct are more overtly Islamic than those of its liberal neighbour. The remaining two emirates, Fujairah on the east coast and Umm Al Qaiwain between Ajman and Ras Al Khaimah, have not yet spoken out about their plans.

Pricing problems

Aside from legal clarification, the next most pressing issue in Dubai is the spectre of a price bubble. Estate agents report that speculators have been making profits of between 15% and 100% from buying properties off-plan as soon as they are released on the market, and then selling them on as the delivery date nears. This profiteering has certainly helped to boost interest in new projects, in many cases causing queues to form outside developers’ offices when a new issue is announced, but it does not necessarily help the government’s strategy to double the population by 2010.

Recognising the need for large-scale immigration to sustain economic growth, Sheikh Mohammed wants to see business executives and their families relocating to Dubai. What he doesn’t want is for speculators to snap up vast swathes of property that then lie empty.

The effects of this problem can already be seen in developments such as Emaar’s $10bn Dubai Marina, unsurprisingly the world’s largest man-made marina, which will eventually have capacity for 150,000 people. Over 20 towers under construction are being promoted by Emaar and other private developers, with apartment prices ranging from $60,000 to $1.3m, and all of the finished towers have been sold. But a visit to the marina at night shows that barely 20% of lights in the apartments are on, suggesting that real occupants are still thin on the ground.

Resale limits

Aware of the damage that will be done to their future projects if the ones they’ve already released are not being bought to live in or to rent, the developers agreed to take action in late October. Emaar issued a statement in the local media saying that it and its peers were acting to “ease fears that the market is overheating with partly-paid apartments being treated like shares in an IPO”.

These actions include the imposition of contractual clauses to prevent the resale of financed properties within two years of initial sale, and transfer fees of up to 2%. Finance companies have also been reducing the percentage of a property’s value that can be mortgaged so that a maximum of 70% is now the average, as well as reducing repayment tenures. It is further rumoured that the government itself is considering action to inhibit paper trading, though no official statement has been made.

From its origins in the crowded Deira and Bur Dubai districts straddling the creek, Dubai has rapidly grown southwards along the beach and the Sheikh Zayed Road linking Dubai with Abu Dhabi. From the Fairmont Hotel and World Trade Centre to the Dusit Hotel, the road is lined with high-rise towers. As well as construction preparations for Downtown Dubai and The Burj Dubai, this area is home to what is arguably Dubai’s most ambitious development yet.

More than building

When it issued its first three licences on 20 September, the Dubai International Financial Centre (DIFC) ceased to be just another construction project and became an operational free zone designed to foster a new financial services cluster in the Middle East. Like the financial harbour project in nearby Bahrain, the physical infrastructure of the DIFC will be tantamount to a self-contained city including office space, serviced apartments, hotels, shops and restaurants. Incoming financial institutions will either be able to lease space in buildings such as the signature Gate, or they will be able to buy land freehold on which to build their own premises.

Damac Properties, a local developer, has already started building two 30-storey towers, Park Towers at DIFC, offering 432 one to three bedroom luxury apartments. These properties will be available on a freehold basis, and as with similar developments foreign freeholders will automatically be granted a UAE residency visa on completion of payment.

Overseeing body

What makes the DIFC ambitious is not its buildings, but the independent regulatory body that has been set up to oversee all businesses operating within the centre. Since 2002 a team of bankers and lawyers has synthesised the financial services regulations of jurisdictions such as the UK, US, and Canada to produce DIFC laws that incorporate what is perceived to be international best practice. Armed with this resource and the lure of local access to the estimated $1800bn of Arab wealth, the DIFC and its regulators hope to attract foreign financial services firms into Dubai from where they can service both the Middle East and South Asia markets.

Licences issued

The first three licences went to Julius Baer private bank, Standard Chartered and a GCC energy fund, and a total of 20 licences are due to be issued by the end of the year.

If successful at creating an onshore capital market for banks, insurers and asset management firms, the DIFC will create an economic powerhouse capable of financing much of Dubai’s future growth. Given that Sheikh Mohammed is fond of saying that the world has only seen 10% of his plans for the emirate, that growth can reasonably be expected to be rapid and significant.