Dubai’s "affordable" real estate scene- a "Cinderella" investment opportunity?

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photo credit: mike (el madrileño)

In its efforts to ascend on the international property scene, Dubai has created some truly exciting investment opportunities for international property investors seeking high-end properties. Indeed, it seems like marketing to the wealthy and super-wealthy has been the principle focus of Dubai’s efforts to promote itself to international real estate investors. But as a growing center of international trade and commerce, Dubai requires housing for the rest of us too, and a lot of it. There is a growing recognition that Dubai needs more affordable housing. Middle-income residents of Dubai today face many economic problems, including a high inflation rate and a frustrating escalation of housing costs had has caused many families to struggle, just as Dubai’s luxury housing boom swells.

A neglected property market sector that may soar

The focus may be changing. Many of Dubai’s property developments set out to emulate the most prestigious residential addresses in the world. However, the less glamorous middle-income real estate market is increasingly drawing the attention of savvy investors. Like Cinderella at the ball, the middle-income market may turn out to be the pleasant surprise on Dubai’s property scene. Note, for example, that “affordable” Dubai real estate has even been the focus of some newly established American funds, such as Dubai Affordable Housing Fund One, L.P. established by ZT-TAKtical, Inc., a Houston Texas based Real Estate Investment Advisory firm, and another U.S. based fund, Landmark Real Estate Opportunities Fund 1 L.P.. The subject of funds focusing on affordable Dubai real estate will be a subject for a future blog entry by this writer.

There are, of course, also many opportunities for direct investment in middle-income real estate in this market. This writer will explore the opportunities presenting themselves in Dubai’s affordable housing market in a series of articles over the next several weeks.

Badrah District at Waterfront – a (not-so) poor man’s waterfront dream

On May 17 Dubai government-owned developer Nahkeel Properties unveiled an important entry into the middle-range housing market — Badrah District at Waterfront. The first phase of sales for this project began 25 May 2008 with just over 1,000 apartments and townhouses available. This is a master-planned community (Dubai must be an urban planner’s dream) which will eventually add 45,000 new homes to Dubai’s middle-range housing market. The opening of this project follows the opening of another Waterfront effort, the ultra-high-end Veneto project. This writer has written about the Dubai Waterfront in general and the chic Veneto project specifically in a previous blog entry. The project will be the first “active gateway” to the Waterfront, will be close to the Dubai International Airport, and will be composed of four distinct areas, each with a distinct land use mix. One area will be primarily residential, a second will be comprised mostly of offices, a third will have educational and civic amenities, and a fourth district will consist primarily of leisure and retail uses. The districts will be given the names LIVE, WORK, LEARN, PLAY, respectively.

The Badrah District isn’t going to be the ritzy address that Veneto, with its villas, huge lots and marina berths, will be, but it certainly won’t be an embarrassment to live there. It will be situated in the prestigious Waterfront project. Nahkeel assures that the new Badrah housing will be built to very high construction and environmental standards, including meeting LEED (Leadership in Environmental Design Green Building Rating System) standards. The master-plans for the community emphasize green spaces, and recreational infrastructure aimed at encouraging walking and cycling. The plan for the community also includes public transports links to other parts of the waterfront project.

It may be smarter to aim lower!

Since Dubai appears to be on the road to becoming the Middle-Eastern Hong Kong it aspires to be, investment in middle-income real estate there seems a really attractive prospect. The demand for units such as those in Badrah is clearly already there, and it seems inevitable that it will increase substantially as Dubai grows as an international hub. It may be more glamorous to invest in Dubai properties that try to outclass St. Tropez, but the middle-income market could be the “Cinderella” story that will ultimately outperform the “luxury” real estate market.

[tags]Dubai, Dubai real estate, Dubai properties; properties; real estate; real estate market; apartments; townhouses; real estate investment; property market[/tags]