Real estate developer in UAE

To become a developer in the United Arab Emirates you first need to know what the targeted budget is and which kind of developer you are going to become.

Structure

There are different type of developers - such as single unit development (can be villas or small compounds), single building (JOPD - Jointly Owned Property Development), big player (someone with multiple projects in the market). Considering the high cost and overheads of development licenses and offices, it is not recommended to do all these services by yourself. There are professional companies, such as ours, which can take over most of the administration work on the developers behalf.

Small developers usually buy the land and develop the project by themselves. Single JOPD developers will do the same unless they have completed one or a few projects already. However, the bigger developers can develop the projects for other land owners which requires a team of skilled and professional members. This will probably take years to achieve.

The other factor, to achieve construction milestones and development progress, is to start your development after attaining full design approvals, building permits, concept designs and detailed MEP drawings (Mechanical Electrical and Plumbing). Many developers in Dubai failed purely because of miss management of the above mentioned points.

Funding/Finance

The second most important point is that you do not start any development depending on the future sales income, as Dubai Land Department’s rules and regulations, you would not be able to take the money out your sales/escrow until you complete 50% of the development is complete and the collectible from the sales covers all of the construction costs.However, the developers with a good track record and companies who have done multiple projects successfully, with RERA, can get certain exemptions on this matter.

Also, the marketing cost and the commission are a big factor to take into consideration. Master developers and big companies such as EMAAR, DAMAC, and MERAAS can manage to sell their properties due to their big names and government support, but a privately owned small to medium sized company would be struggling to do successful off-plan sales without offering large commission incentives to agents.

Missing milestones in the design approval and building permit process can result in significant costs. Delays in approvals can lead to extended project timelines, which can cause an increase in labor and material expenses. In addition, if the building permit is not obtained in a timely manner, fines and penalties may be imposed by the local government. Furthermore, if the design does not meet the required standards, it can lead to the need for redesign and resubmission, incurring additional costs. Therefore, it is important to ensure that all necessary approvals and permits are obtained in a timely manner to avoid these added costs and maintain the budget and timeline of a construction project.

If you are planning to obtain construction financing for any development, you have to be aware that UAE banks will only finance fully paid plots with the Title Deed. Also, if you sell any single unit in your development, you would not be able to ask for financing from the banks. Therefore, it is highly recommended to do your cost analysis prior to starting the sales. However, after obtaining financing, you are able to proceed with the sales of the units under the supervision of the bank.

Legal

There are different legal structures in development licensing, mainly regarding the shareholders and type of the company. Fortunately, in the last 2 years, Dubai Government allowed full foreign ownership of Development Companies, provided there will be a local service agent in the licence. The important points which should be considered is that the plot owner should be a partner in the development company or the development company should own the plot partially or whole. This will avoid extra DLD (Dubai Land Department) fees to register the ownership at the end of the project.

Shareholders

If the development company owns the entire plot, then in order to register the project, you do not need any development agreement. However, if there will be any scenarios such as partnership and share split or joint venture in the project, there should be a development agreement in place, which will segregate each party’s ownership and rights. Also, many professional development companies who just give the services of administration and sales to the land owner, should have the development contract defining their role and rights in the agreement.

Type of Company

There are several types of development licenses which a foreigner can obtain. A UAE-based freezone company such as JAZFA, DMCC, , which are allowed to temporarily register a project with the Land Department. Membership fees are AED 150,000 per project and AED 100,000 per year

Alternatively, if the company is incorporated with DED (Dubai Economic Department) it is easier to register with the Land Department to have development activities. Membership fees are AED 150,000 per project but AED 25,000 per year