Affordable Homes Program Intended to Reduce Volatility in the Dubai Real Estate Market

Credit By: Real Estate

Middle-Class Families in Dubai at a Crossroads

Middle-class households frequently find themselves priced out of Dubai’s real estate market anytime property demand increases and developers maximize profits. A potential “overheating” of the real estate market is indicated by studio flat pricing, which ranges from Dh800,000 to Dh1 million. Market experts and government officials warn that if the market slows in the future, investors buying houses at these levels may find it challenging to sell them for the same price.

Realities of Investment and Rental Returns

If service fees are excluded, the estimated rental revenue for a studio apartment that costs Dh800,000 is at most Dh40,000, yielding a 5% yearly return. When service fees are considered, the return drops to under 4%, raising concerns about the real estate investment’s feasibility compared to other possible channels that can offer higher returns.

Dugasta Properties: Market Rebalancing

The affordable residences offered by Dubai-based Dugasta Properties Development, with a starting price as low as Dh400,000 for a studio flat, aim to alleviate these worries. The company provides an 8% yearly guaranteed return on investment for the first five years for all apartment types, including studios, 1-bedroom, and 2-bedroom units, to balance the real estate market and embrace previously disenfranchised customers.

A Safety Net for Buyers: The Buy-Back Option

With the addition of a buy-back option after five years, Dugasta takes things a step further. The property developer agrees, subject to specific terms and conditions, to repurchase the home from the purchaser at the original sale price, allowing purchasers to return 40% of their initial investment within the first five years.

With 76,119 land and property transactions valued at Dh283 billion registered in the first half of 2023, showing a 76.87% rise from the prior year, Dubai’s real estate market has experienced exceptional growth. The increase in property value and transaction volume highlights the need for sustainable growth methods.

Keeping Cost and Profitability in Check

In line with the UAE’s Year of Sustainability, Tauseef Khan, the founder and chairman of Dugasta Properties, highlights the value of economic sustainability over environmental concerns. According to Khan, even during a market correction, beginning costs for studios as low as Dh400,000 guarantee affordability and long-term market viability.

A Way to Prosper in Balance

Khan’s belief is based on the idea that developers may make money by building inexpensive homes since increased transaction volumes can make up for lower profit margins. Additionally, by enabling more families to switch from renting to buying, affordable housing might lessen the effects of rent-related inflation.

Offering financial stability in a time of uncertainty

Investors can anticipate a consistent revenue stream for the first five years after the handover, independent of market conditions, with an 8% guaranteed return on investment. This plan encourages business growth more steadily while also luring investment.

Market Dynamics in Dubai

The average home price in Dubai increased by 16.9% from June 2022 to June 2023, the fastest growth rate since late 2014. Although this expansion is impressive, worries regarding market stability are raised in light of the city’s previous experiences with property bubbles.

The program by Dugasta Properties stands out as a ray of hope since it aims to close the affordability and sustainability gaps for middle-class families while fostering economic development in line with sustainability ideals.

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