I am about to purchase an investment property and would like to hear your opinion before going ahead. The property I am interested in buying is located in the Jumeirah Village Circle area of Dubai. It is a four-year-old, three-bedroom flat spread over 2,650 square feet. The final selling price, directly from the current owner, is Dh1.6 million and the flat is rented annually for Dh130,000. The total annual service charges and maintenance is about Dh25,000, so the net operating income will be Dh105,000 annually.
Since I will be financing 75 per cent of the property’s purchase price, I will be paying Dh90,000 annually as mortgage repayments for a 20-year loan.
Considering the above, the investment in question has the following:
• Gross rent multiplier = 12.31 per cent
• Return on equity in year one = 3 per cent (based on the Dh480,000 paid as the down payment and the closing fees)
• Break-even ratio = 89 per cent
• Capitalisation rate = 6.6 per cent
Based on the above, is this investment property a good deal? I see potential in JVC but in five years' time. YM, Dubai
Based on the information you have given, the investment return is likely to be heavily based on the future capital appreciation of the area. JVC is a growing community but I do agree with you that the optimum time to allow the community to appreciate sufficiently is five years. That said, I’m sure that after approximately two to three years from now, you will have already seen enough good capital growth to possibly think about selling at that point.
Three-bedroom apartments around this size in JVC are selling for much more than Dh1.6m. In fact, the sale prices should be around Dh1.85m to Dh1.98m. You can therefore see that you have already negotiated a good deal. The current rental income is bringing in a net return on investment of 6.6 per cent but this percentage figure would rise when you look at market rents rather than current rents. JVC is undergoing major construction including road infrastructure and the building of the community mall due for completion next year. These alone will add to the area’s popularity, which in time will then increase the return on investment. So in a nutshell, I do believe this purchase is a good investment.
I own a leasehold apartment in Dubai Silicon Oasis. Yesterday I was approached by an agent who says that his client is Japanese, however the rent is going to be paid (in one cheque) by an Emirati and the tenancy contract will also be signed by the cheque issuer. My question is should I allow a third person to occupy the unit? Is this tantamount to sub-letting? Is there any risk associated? ZK, Dubai
This is not as uncommon as it may seem. What I suggest you do here is get a letter/notification in writing from the person signing the contract and cheque confirming that he is issuing the payment on behalf of the Japanese person who presumably will be residing in the property.
He will also have to acknowledge that he will be responsible for this person and whatever obligations fall on the person living at the property.
It is worth mentioning that sub-leasing as such is not illegal as long as the landlord is aware of it. It is only illegal if he is not aware or has not agreed to it in the first place.
Mario Volpi is the chief sales officer for Kensington Exclusive Properties and has worked in the property industry for over 30 years in London and Dubai. The opinions expressed do not constitute legal advice and is provided for information only. Please send any questions to mario.volpi@kensington.ae
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The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
T20 World Cup Qualifier fixtures
Tuesday, October 29
Qualifier one, 2.10pm – Netherlands v UAE
Qualifier two, 7.30pm – Namibia v Oman
Wednesday, October 30
Qualifier three, 2.10pm – Scotland v loser of qualifier one
Qualifier four, 7.30pm – Hong Kong v loser of qualifier two
Thursday, October 31
Fifth-place playoff, 2.10pm – winner of qualifier three v winner of qualifier four
Friday, November 1
Semi-final one, 2.10pm – Ireland v winner of qualifier one
Semi-final two, 7.30pm – PNG v winner of qualifier two
Saturday, November 2
Third-place playoff, 2.10pm
Final, 7.30pm
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
