Property Development Investment the future

[ProperRon]

.
.
I have recently, with a small group of other investor friends, invested in a “joint venture” concept I stumbled upon 6 weeks ago.

The principle basically works by us as investors investing 15,000,000. The developer invests a small amount to. They then develop the property G+10. The profit is then split evenly between the developer and ourselves. The projected return is a little over 46million Dhs, paid regularly every 6 months.
In the currently climate and the difficulty with flipping, is this the future of property investment ?? I am contemplating investing a lot of my portfolio down this route... thoughts
.
.

 

[dave_in_OZ]

Other considerations include:
What is the land cost % to project cost?
What is the construction cost % to project cost?
What is the project loan amount % to project cost?
What is the % of pre-sale required before funding kicks in?
What percentage of investor funds are being used for the land purchase?
Does the investor entity used have title in the land?
What country are in?

 

[UAE Real Estate]

ProperRon, I am with you - I like the idea of these JVs. The advantage is that someone else does all of the work and you act more like a financier who sits back and waits for the return. The hands-off approach also has the advantage that you do not have to get involved with the sales (or resales) and developers are more likely to push their new, direct units, as opposed to resale properties (I understand that their commissions are far less for resales)

What I have found is that the most important thing to look for is a project that has potential in the medium term. Another important consideration is to ensure that the developer is reputable and the project is not capitalised at a level where it would become the majority of the developers balance sheet (this makes the project quite risky, since the one project would have the potential to take the developer under in the worse possible case scenario).

I have been offered some JVs which I would like to go for, however, they are a little out of my budget without forming a syndicate (around 40-50m AED). If you would like to get involved, PM me and we can discuss.

 

[investor_from_uk]

The problem that you will have is that you will have no control over the investment.
I am not too fond of joint ventures, they usually end with the group falling out.

Iain

May I please add something to the above that the conditions at the moment don't seem too good for off-plan in Dubai. I have got a couple of off-plan flats in dubai, which are due for completion in 2010, and I am trying to sell them. However, I have been told some estate agents, not only in UK, but also in Dubai, that the off-plan market has just gone dead.

A lot of people are saying that this might be temporary, but what if Dubai goes the Singapore route, which means a huge crash.

Any thoughts?

 

[WTF]

what do you guys call high profile???
The reason I ask this is because i have recently been offered a full comemercial floor in the Dubai Pearl at 1'984AED sqft. To my understanding the building looks great and in a great location. This price is cheaper than launch price in the dubai waterfront.

I hear plots in the Dubai waterfront changing hands at 180qed sq ft ! 6 months ago these were prices at 250ish AED sqft

 

[UAE Real Estate]

May I please add something to the above that the conditions at the moment don't seem too good for off-plan in Dubai. I have got a couple of off-plan flats in dubai, which are due for completion in 2010, and I am trying to sell them. However, I have been told some estate agents, not only in UK, but also in Dubai, that the off-plan market has just gone dead.

A lot of people are saying that this might be temporary, but what if Dubai goes the Singapore route, which means a huge crash.

Any thoughts?

I am also hearing that off-plan sales have slowed down massively in the last two months. However, I do not think we will see a crash – instead, I think this is a short-term correction due to investor sentiment being dampened by the global situation. Further, don’t forget that prices have increased by c.40% this year alone (and c.75% from Jan’07) – this hardly looks like a crash. The current situation will help slow growth down to sustainable levels. Colliers are predicting 16% growth in Dubai next year.

Importantly, I am reading that there is a strong commitment from the Dubai authorities to avoid any potential crash. I read an article on PropertyWire this week: "Gulf governments will intervene rather than see property bubble burst" - have a read

 

[WTF]

how do the goverments help a bubble not to burst? They just increase the price further down the line or delay the situation. The Goverments will not lower the purchase price for new buyers, WILL THEY???

 

[UAE Real Estate]

how do the goverments help a bubble not to burst? They just increase the price further down the line or delay the situation. The Goverments will not lower the purchase price for new buyers, WILL THEY???

WTF – the idea is to pump money into the economy (primarily, but not exclusively, through the banking system) to increase liquidity. Also, guaranteeing investor deposits to increase market sentiment. Kuwait have already done this in the last week and the rest of the gulf states are expected to follow suit shortly.

I think it is more macroeconomic policy as opposed to actually getting involved in the nitty-gritty of the property market. However, Dubai has always been more hands-on in their approach with the property industry and I think that they will fair well in this global crisis as a result. Have a read through the article I mentioned above, that should explain things in more detail.

 

[ProperRon]

Just to add to that, the government is also slowing completions and new projects by not/delaying issue of NOC's and escrow. Which is beneficial for the market as a whole (giving the government a large amount of control on growth and supply),but defiantly something to look in to when entering JV's and early off plan...

 

[investor_from_uk]

I am also hearing that off-plan sales have slowed down massively in the last two months. However, I do not think we will see a crash – instead, I think this is a short-term correction due to investor sentiment being dampened by the global situation. Further, don’t forget that prices have increased by c.40% this year alone (and c.75% from Jan’07) – this hardly looks like a crash. The current situation will help slow growth down to sustainable levels. Colliers are predicting 16% growth in Dubai next year.

Importantly, I am reading that there is a strong commitment from the Dubai authorities to avoid any potential crash. I read an article on PropertyWire this week: "Gulf governments will intervene rather than see property bubble burst" - have a read

Apologies about the late reply/posting. Thanks a lot for pointing us to the article. I read the article and I found it quite useful. Whilst it talks about the government stepping in, I think that it indicates in a way that the present market sentiment is quite negative, and everybody wants to 'sell, sell & sell'. And the impression it gave was that the governments will have to step in, if they want to save their back, due to their huge exposures. Where one is talking about the governments being affected hugely, it couldn't possibly be positive.

So, to be honest, I wasn't really comforted by reading the article but thanks anyway.

You aware of any recent survey/analysis in addition to the above?

 

[investor_from_uk]

I am also hearing that off-plan sales have slowed down massively in the last two months. However, I do not think we will see a crash – instead, I think this is a short-term correction due to investor sentiment being dampened by the global situation. Further, don’t forget that prices have increased by c.40% this year alone (and c.75% from Jan’07) – this hardly looks like a crash. The current situation will help slow growth down to sustainable levels. Colliers are predicting 16% growth in Dubai next year.

Importantly, I am reading that there is a strong commitment from the Dubai authorities to avoid any potential crash. I read an article on PropertyWire this week: "Gulf governments will intervene rather than see property bubble burst" - have a read

Another point I must add to the above is that Colliers prediction of 16% was prior to this global financial fiasco. It's all happened quite quickly. I am sure that if they, or anyone else for that matter, were to do another prediction, it won't be talking about a growth next year.