Should Land Owners Develop Their Plots?

Many land owners today have made a call today to offer their plots for sale or scrapped their decision to develop their real estate projects. While in many cases these decisions are correct, there is no harm in conducting a fresh feasibility analysis and reconsidering the decision, as in some cases, land owners may be loosing on a great opportunity.

Over the last 2 years, I have been leading and working with several land owners developing real estate projects and have been leading, since 2015, approximately AED 1.5 Billion in projects value all the way from feasibility study, design management, tendering, authority approvals, project financing, project & unit registrations, escrow account set up & management, tendering and construction award, and construction supervision. 

While most large scale contractors remain busy with Expo 2020 projects, and trust me, there are many in planning & execution stage, construction prices remain reasonable. Margins for real estate developers remain healthy. When conducting feasibility analysis for the projects I have been involved with, the worst case scenarios, which are based on the absolute bottom prices of the global financial crisis, result in breakeven. So as a worst case scenario, the capital invested by real estate developers remains “safe’ in principal. 

Land owners today should seriously consider to develop their plots, or at least explore the opportunity, whether their intention is to rent or sell the properties. Banks continue to offer construction financing, even for first time developers, to projects that have been well planned and analyzed. I have assisted in arranging over AED 500 Million in bank funding in the last 18 months and can tell first hand that some bank’s appetite for the right real estate projects remains positive. 

Ofcourse, not every land passes the checklist for development today. A thorough analysis of the location, demand, sell-ability or rent-ability, and exit strategy must be conducted prior to making such decisions. In a project we are currently leading, the projected annual returns, which have been analyzed by multiple professional entities and banks, are 20%. This proves that despite the current market situation, there are projects that remain promising and tick all the boxes.

If you happen to own a plot of land, explore the option of developing it. There are multiple scenarios for land owners to explore if they wish to limit their exposure and minimize their risks. Dubai remains in need for specific types of properties that remain absent, with few developers exploring built-to-suit schemes, and certain unique, not necessarily prime, residential & commercial projects. As a real estate developer, its time to decide not to copy whats already being developed, and to think differently. Unique projects, both on the prime & lower end of the market, have been in historically in demand and healthy. 

 Fadi Nwilat


The above article was published in Property Time on its March 2017 issue. The author of the article is Fadi Nwilati, CPA, CGMA, CEO of KAIZEN AMS. – Feature Article – Fadi Nwilati on Dubai Water Canal

Fadi Nwilati, CEO of KAIZEN Asset Management Services Says: Very few have had the privilege to be born and raised in Dubai. I have grown to witness dream after dream become a reality, starting with Palm Jumeirah. In the recent global recession, which also affected Dubai, many thought it was the permanent end of a city that was, hmm, perhaps still an adolescent. Many projects were on hold, and many had the courage to even go further and claim that some of these projects will never see the light, including the Canal Project. Many of these fellow professionals and people did not have the privilege that I had, to be raised in Dubai.

Being raised in this city, you learn from your youth, that dreams may be delayed, may be affected by many circumstances, but with perseverance and dedication, you continue the walk. While many people, including some international magazine and newspapers, were busy writing articles about the death of the Dubai dreams, the engineers were designing the Dubai Canal, inch for inch. While we were driving along Sheikh Zayed road every day, procurement managers were sourcing contracts to build this canal. And just when the time was right, and Dubai knows when the time is right, Dubai and the World woke up to the news, and a signboard on Sheikh Zayed Road stating “Dubai Water Canal”.

Dubai Water Canal is not just a canal. It creates the second island out of mainland. Yes, island out of mainland. Dubai Water Canal has just made part of Bur Dubai an island, just like Dubai Marina canal made part of Dubai Marina, an island. Dubai Water Canal changed the landscape of the city. For yacht owners, like myself, it meant another nice cruise in Dubai. Soon, I hope to be able sail from Dubai Marina, the Palm, Jumeirah Bay with the upcoming Bulgari Hotel, Nikki Beach, and the sought-after cruise from Jumeirah Beach through the Dubai Water Canal to Gold Souq. For people who enjoy fresh air and cycling, it means a nice walk from Mariott Hotel at Business Bay all the way to Jumeirah Beach. For those who care for marine living, the new Canal will improve the circulation of Dubai Creek and add value to the marine living of the city.

The Canal is not about real estate. It is not about a show. It is a pure, proven, vision of the city beyond bricks and investment. It is an investment in marine, in green, in beauty and in a vision.

Fadi Nwilat