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Time to go plot 'hunting' as Dubai construction costs decline

Fam Properties experts say investors must go land shopping now as prime plot and construction prices reduce in Dubai

Land prices in areas like Downtown Dubai are spurring projects worth "hundreds of millions of dirhams", experts from Fam Properties said.
Land prices in areas like Downtown Dubai are spurring projects worth "hundreds of millions of dirhams", experts from Fam Properties said.

Investors are taking advantage of both lower land and construction costs in Dubai to develop prime areas of real estate in the emirate, the head of Fam Properties argued.

In a statement, Firas Al Mssadi, chief executive officer of the Dubai-based real estate agent, said land prices in areas such as Downtown Dubai and Business Bay are giving rise to a wave of residential and commercial projects worth “hundreds of millions of dirhams”.

READ: Abu Dhabi tower construction costs increase

“Investors are attracted by plots now available for $88.48 (AED325) per sqft compared with $190-$217 (AED700-AED800) persq ft in 2007-2008,” Al Msaddi explained.

“That means huge savings in outlay, and a properly planned development strategy can maximise the return on investment.”

Despite this optimism, the firm warned investors to “study the market in detail”, adding that a lack of a correct development plan "can destroy their profits”.

Lower construction costs are also making now a good time to buy and develop on prime lots in Dubai, the company said.

Tarek Bou Karroum, managing partner of Fam Properties, explained: “This is the ideal time to go hunting for prime plots that are almost impossible to buy when the market is booming, prices are sky high, and contractors and consultants are not as flexible as they are at present.

READ: Amended consultant requirement cuts Dubai construction costs by 12%

“The key for investors is understanding the efficiency aspect of developing land,” he added.

“This is vital for any profitable development. The profit [model] can collapse if it’s not done correctly and is not backed up with an intensive market study.”

According to Turner & Townsend’s International Construction Market 2018, Oman’s capital Muscat and Perth in Australia were the only were the only two surveyed markets to record a decline in the cost of construction, as reported by Construction Week in May.

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Construction Week - Issue 761
Mar 21, 2020