This handout picture released on Thursday shows a computer image of the “Burj Dubai” in the United Arab Emirates, which will be the world’s highest building when completed in November 2008.

JEDDAH, 10 December 2004 — The real estate sector in the UAE saw an unprecedented growth in the 90s, attracting most of the liquidity in the market. This marked a big change especially in Dubai, where previously all the public sector investments had been directed to infrastructure and the private sector investments had been highly segregated. In recent times, investment in real estate sector was rendered attractive by the reduction in interest rates, and the lack of other investment opportunities.

Dubai emerging as a major tourist destination further boosted the investment in the sector. In 2003, real estate and associated business services contributed 7.2 percent of the UAE’s GDP, according to a report prepared by the Kuwait-based Global Investment House.

This rapid rise in population being seen can be attributed to the growing influx of expatriates into the country, owing to the business and economic opportunities in the region.

Currently Dubai, the second largest emirate, houses the most number of expatriates. Dubai has much higher population density than Abu Dhabi, the largest emirate, which accounts for almost 87 percent of the country’s area. The population in Abu Dhabi and Dubai in 2003, formed 39 percent and 30 percent of the total population in the UAE respectively, unchanged from 2002.

Dubai with a population of 1.2 million in 2003 rose by 8.3 percent from 1.11 million in 2002. Overall the UAE is a cosmopolitan state, with Dubai leading in terms of level of affluence and high quality lifestyle. The country has a population mix of Arabs, Asians and Europeans, with 70 percent of Dubai’s population constituted by expatriates of European and Asian origin.

The per capita income was $19,765 for 2003 and $18,971 for 2002, indicating substantial buying power in the UAE economy.

Current regulations allow expatriates to buy property into specific projects in the country, clear cut legislation regarding their ownership rights is not yet promulgated. But some of the well-known project developers are promising freehold status and rights. Once that happens the real estate market, especially the residential side should explode, the report said.

The GIH report said that the government is encouraging private sector involvement in the real estate industry and major projects being developed. Private investors have taken the governments lead and now account for a large portion of the planned property development. In order to accommodate the expected growth in population, the government is also developing its civil infrastructure with investments in transportation, sewage, and water and power facilities. Private sector involvement is comparatively high in Dubai, with a growing number of infrastructure expansion projects being financed and managed by local and foreign private firms. Moreover, the city has become a key venue for business and investment in the Gulf, with one of the most liberal business environments in the region. Large real estate companies like Emaar Properties, Al-Ittihad, Al Nakheel and Jumeirah, backed by the government have emerged in the recent past. These companies have increased the construction quality standards in the industry and led to the organized development of the industry. Further, these firms have shown the ability to execute, develop and sell large housing projects in Dubai.

The government’s success in attracting foreign companies through commercial free zones has now spawned the government’s latest strategy to entice tourists and foreign residents as well and ease foreign ownership restrictions in the Emirate. Dubai Internet City, Dubai Media City, Dubai Medical City, Knowledge Village, Navigation City, Aid City, Techno Park, large expansion of the Dubai International Airport are some of the major examples of public-private partnership.

The supply of real estate projects has been bolstered by various forms of government initiatives. First, the establishment and success of industrial and commercial centers such as the Jebel Ali Free Zone and Dubai Media City has provided a range of opportunities for developers to undertake large-scale developments at relatively low risk. The Jebel Ali Gardens, for example, which currently caters for 3,830 residential units, is slated to receive 300,000 sq.m. of retail and leisure outlets by 2005.

Volume and quality of schemes carried out by Dubai’s government and the private sector will help the Emirate to enter a new development era in the coming decade.

The policy change in 2002, has led to expatriates thinking to purchase residential real estate instead of renting, especially because they end up paying almost the same yearly amount. The idea is to give expatriates a greater sense of belonging to Dubai and encourage them to invest their savings and establish new businesses there. However, a conflict of sort has arisen between the UAE law, stating that only nationals may own property.

Ultimately, Dubai government’s plans to apply the policy of selling property to foreigners on a freehold basis. This could have huge implications for the Dubai economy and society in the future.

More and more individuals are investing in freehold property which has led to a burst of growth in mortgage and home finance firms. According to Dubai Lands Department, 389 mortgage land transactions were concluded in 2003, up 81 percent to 2.4 billion dirhams over the previous year. Over 80 mortgage redemption transactions were concluded in the same period, a 7 percent rise over the same period last year, with a total value of 566 million dirhams. It is expected that the real estate financing will exceed 55.5 million dirhams by the end of this decade and there will be continuous growth in this sector.