What Affects ROI in Real Estate

TOP 5 Factors Impacting the Real Estate ROI in Dubai

Investment Strategy

– Buy-and-hold

The conservative approach is aimed to save money, and value appreciation over the years.

– Rentals

The buy-to-let offers a regular income and a long-term value appreciation. ROI 5%–10% a year

– Flipping and Resale on Completion

The short-term buy and sell strategy is focused on quick profit. ROI 15%–50%

Location

In Q1 2024 the highest rental ROI was recorded in family-friendly areas situated away from the city centre:

– Apartments

• Dubai Silicon Oasis – 9.3%
• JVC – 8.6%
• Dubai Production City – 8.3%

– Villas

• JVC – 7.2%
• DAMAC Hills – 6.9%
• Dubailand – 6.3%

Size of Property

Investing in smaller units is more lucrative, because an invested capital will be smaller. In the same location in Dubai, the ROI for a studio is on average 1%–1.5% higher than for a 3-bedroom apartment.

ROI for apartments in Dubai Hills Estate:

• Studio – 7.9%
• 3-bedroom – 6.7%

Developer

When selecting a company, an investor should analyse its reputation and track record. Major developers such as Emaar, Sobha Realty or Majid Al Futtaim are recognised by quality construction, timely delivery and high liquidity.

Post-handover Payment Plan

These plans significantly increase the ROI, as there is no need to invest all the sum to resell the unit.

Example:

60% – during construction 40% – within 3 years post-handover

Purchase Price: AED 1,000,000

Sale Price on Completion: AED 1,300,000

ROI with Regular Payment Plan: 300,000/1,000,000 = 30%

ROI with Post-handover Plan: 300,000/600,000 = 50%

ROI is 2/3 higher