A reclassification from hotel apartments to residential does make sense
A Reclassification From Hotel Apartments in Dubai to Residential Does Make Sense?
Reclassification of hotel apartments in Dubai to residential apartments may not necessarily be a terrible idea. With the current expansion of the economy (before COVID-19) and the rise of the Vacation home & Holiday homes sector, residential apartments have gained considerable momentum over the years.
To begin with, a developer’s good faith smart move of reclassification from hotel apartments in Dubai to residential apartments is in great favor of the buyer as vacation homes/holiday homes returns are higher than Hotel apartment units individually owned. If a developer is handing over a project with finishing as good as Hotel apartments, Investors can easily save property upgrade or renovation cost required for Holidays home units. In general, it will cost investors between 10% to 15% of the property purchase price to upgrade it for Holiday homes use.
Residential & Hotel apartments in Dubai ensure a constant and steady ROI variable
Operations cost for hotel apartments is between 35-45% while the same is done by vacation homes between 20-25%. In general, a higher operational charge or leverage results in lower profits therefore you end up spending more on maintenance and whatnot instead of generating more income which is the case for hotel apartments in Dubai. Residential apartments ensure a constant and steady ROI variable to different rental seasons and buyers or investors could later enjoy some good capital growth when the buyer wants to sell in the future. Developers in the UAE are trying to deliver what is in the good interest of the buyers, especially developers with successfully handed over projects.
How to avoid loss in ROI concurrently especially for a new business?
Also, we need mature brokers who will work towards generating solutions in the buyer’s/investors’ best interest rather than dragging them to make forceful decisions to accept a major loss on ROI. Investors/Buyers should put money into experienced and knowledgeable brokers who will help in avoiding loss in ROI concurrently especially for a new business. Consequently, it should not be used as a base for deciding.
Not to forget, talking of delay of project intentions in the presence of an Escrow account is like misleading and confusing investors of any future investments. Dubai’s land department has increased trust to investors with the Escrow system which is seen in several projects completed between 2012 and 2019. It is no brainer that after 2012 there was a huge demand for more residential and hotel apartment units in Dubai.
Why would developers delay projects intentionally?
A developer usually expects a profit of up to 30% from a project upon completion and over the years we have seen most of the cases on completion payments are between 20-30%. With that being said, we should appreciate every developer completing projects with a high-quality finish.
We should also promote and focus on the positive aspects of the Real estate to keep investors and developers motivated to help each other attain the very best and also support more developments in the country.
Dubai Land Department wing Real Estate Regulatory Authority has done a great job in the last 10 years to ensure confidence in investors, developers, and brokers. This system needs more appreciation, not further confusion. See more on Gulf News