Business & Money | Monday 9 February, 2015 12:48 am |

Chestertons, the international property agency established in 1805, stated that Dubai’s real estate market growth can sustain its growth by introducing more affordable housing projects. Several expats or end-users are currently looking at owning a property in Dubai however; it remains a distant dream for majority of the buyers due to the shortage of affordable properties.

“Property markets across the world are driven by ‘end-users’ or ‘middle class’. Low down payment requirements, job security and social security provisions have created necessary infrastructure for home ownership in most economically developed nations. Lower down payments definitely allows end-users to enter the market and secure long-term commitment. UAE can also benefit tremendously by introducing attractive propositions for this segment as majority of the residents can look at owning a property and create a sustainable market proposition,” said Simon Gray, Managing Director, Chestertons MENA.

As per reports, the housing affordability gap in the world is equivalent to $650 billion per year, which is 1 percent of global GDP. In some of the least affordable cities, the gap exceeds 10 percent of local GDP.

“Affordable properties can be priced in the range of AED 400 – AED 600 per square foot. This can be packed with long-term restrictions on resale so restricts speculative activity in the segment. Innovative payment schemes from developers can also help buyers to surpass bank financing,” added Simon.

“There has been a significant change in the perception of developers with respect to the end-users. Many developers are readjusting their portfolios to meet the end-user demand. However, targeting the end-user presents a couple of challenges for the developers. Supply of affordable units is another issue in the market. Most affordable projects have been developed by private developers who lack credibility in the market and therefore are not considered genuine by end users. On the other hand most large developers in Dubai shy away from catering to this segment particularly due to lower margins,” said Simon.

Globally, affordable housing is an overlooked opportunity for developers, investors, and financial institutions. If current trends in urbanization and income growth persist, the affordable housing gap in the world would grow from 330 million urban households to 440 million by 2025.

“Demand of affordable housing poses its set of opportunities and challenges for the real estate industry and its stakeholders. Developers will have to understand the long-term benefits of investing in the affordable market segment and design and products and prices accordingly. Also Regulators need to identify and relax rules so that prospective buyers can enter the market. Banking infrastructure should be sound and ensure proper risk assessment of prospective buyers based on their personal and financial history,” Robin Teh, Country Manager, Chestertons.

“A small percentage of the resident population can afford mortgages in Dubai, which is quite a challenge for long-term sustainability of the market. There is clearly an issue with demand here which is severely hampered due to regulatory policies. High down-payment requirement make most properties unaffordable for expats, which would otherwise be perfectly affordable,” added Robin.

“Affordable market could be an answer to demand stagnation and thereby encourage genuine buyers to enter the market; however, it would also require strategic changes in regulatory and legal infrastructure as well,” concluded Robin.