New real estate development big even by Dubai's standards

DUBAI - A Government-owned Dubai developer is planning a commercial and residential real estate project that will cost almost US$18 billion ($28.7 billion) and offer foreign investors 100 per cent freehold ownership.

Dubai kicked off a Gulf real estate boom in 2002 by opening its property market to foreign investment and is pouring ten of billions of dollars into construction projects.

The latest mega-project, known as The Lagoons, is huge even by Dubai's standards. Spread over 6.5 million sq m, it will consist of seven islands, with residential units, shopping centres, office space and marinas.

The project would cost 65 billion dirhams ($28.2 billion), said developer Sama Dubai, a subsidiary of Government-owned Dubai Holding. It did not say when construction would begin.

Sama will develop half the plots while the rest will be sold to other investors. "It will offer freehold property with 100 per cent ownership to all nationalities," it said in a statement.

The legal status of foreigners' real estate holdings in Dubai has been ambiguous. Dubai said last month a new law would offer expatriates limited freehold rights and formal 99-year leases for the first time.

Sama said the environmental impact of The Lagoons would be studied thoroughly and it was consulting environmental groups such the World Wildlife Fund (WWF).

Dubai's other mega-projects, including three palm-shaped man-made islands and an archipelago representing the map of the world, have raised environmental fears.

Dubai's giant property developers are facing other pressures.

Swathes of the emirate, home to an estimated 17 per cent of the world's cranes, resemble a building site and construction costs have surged 30 per cent in the past year. Developers have complained about shortages of everything from sand and rocks to cement.

And demand for luxury residential properties is expected to slump as a flood of new units becomes available.

However, demand for commercial real estate and middle-income housing is strong and property in Dubai, where rents soared 40 per cent last year, is still drawing in billions in investment.

Dubai is expected to pour more than 300 billion dirhams into construction over the next decade.

- REUTERS