Regaining momentum: Increased tourism and major development projects stimulate growth

Expanding human and social capital and diversifying the economy into emerging sectors such as tourism and real estate are key planks of Ras Al Khaimah’s development strategy. As a result, tourism and residential properties are expected to continue to be major drivers of growth in the real estate sector.

The number of visitors entering RAK has gone up considerably over the last few years, creating substantial demand for hotels and other tourist facilities. Investments in tourism have been accompanied by spending on infrastructure, which also helps to boost the real estate market. As connectivity between the emirate and the rest of the UAE improves, a number of nationals and GCC citizens are also building holiday homes in RAK.

While the economies of Dubai – and, to a lesser extent, Abu Dhabi – were badly hit by the global financial crisis, the real estate market in RAK remained relatively stable and did not experience capital flight on the scale seen in Dubai. However, prices of properties in freehold segments did fall in the immediate aftermath; for example, some luxury realty offerings dropped by almost 40% from 2008 to 2009. Furthermore, increasing private investments in RAK’s property market is likely to lead to a rise in exposure to the global markets.

Regulating The Sector

A variety of local and federal government departments oversee different aspects of RAK’s real estate sector. The RAK Investment Authority (RAKIA) has significant influence, as the organisation usually plays a major role as a financier in large local developments.

Established in 2005, RAKIA has a mandate that includes, “Building a diverse economy that enjoys strong, sustainable growth, by attracting investments from the domestic and foreign markets that will create wealth and raise the standard of living for the people of Ras Al Khaimah.” Real estate is a cornerstone of this projected growth, and is therefore one of eight key sectors that the authority oversees.

The real estate business unit of RAKIA analyses the feasibility of major projects and provides additional advisory services to real estate companies in the emirate. Al Marjan Island is the biggest project currently under the purview of the authority (see analysis).

Similarly, the RAK Investment and Development Office (RAK IDO) is responsible for managing the financial performance of all government entities. It therefore plays a significant role in determining the evolution of the market, and provides oversight of all major investments into the emirate. The office serves as the government’s corporate finance arm and has supported investments in the sector, including a $25m loan to RAK Properties in 2011.

RAK Municipality oversees several aspects of the sector and houses the RAK Town Planning Department, which is leading the development of a master plan for the region around the city of RAK. This includes zoning for residential, commercial, industrial and mixed-use property. The RAK Public Works and Services Department and the Land Department are also key players in the sector.


The Federal Electricity and Water Authority (FEWA) is responsible for building and managing public utilities including water, sanitation and electricity. FEWA has an important impact on RAK’s real estate sector because developers depend on the authority to connect all new and existing projects to water, sewerage and electricity networks. Power, in particular, has been a weakness in the emirate in the past, though there are plans to boost electricity production and to purchase power from neighbours.

In addition, the Al Qasimi Foundation for Policy Research, set up by RAK’s current ruler, is a think tank that is influential in supporting real estate developments in RAK by informing and shaping relevant public policy. The foundation mainly focuses on education reform, but it is also conducting research into sustainable urban planning.

Property Laws

Until relatively recently, there was minimal development of buildings with mixed, or strata, ownership, where individuals own one apartment or floor within a larger property. One reason for this trend was that guidelines for ownership under the UAE Civil Code did not outline the rights of individual owners in multi-unit buildings.

The government of RAK introduced legislation to support co-ownership in 2003, thereby enabling property investors in the emirate to register individual apartments or floors and giving other owners in a multi-unit building preferential rights of purchase in the case of one unit being put up for sale. This legislation has subsequently facilitated the development of high-rise developments across the emirate.


Since 2005 the government has allowed some forms of foreign ownership within certain areas of the emirate. Decree No. 20 of 2005 stipulated that while UAE nationals can purchase and own property anywhere in RAK, citizens of other countries would not be allowed to own property in their own name. Instead, foreign nationals would be able to invest by establishing a company in the RAK Free Trade Zone or Al Hamra Free Zone and subsequently purchase the property in the company’s name.

Additionally, foreign nationals would only be allowed to own property in designated areas and developments in RAK. While there was not a specific provision for citizens of GCC member states, they were generally treated like UAE nationals and did not have to follow the laws for foreign ownership.

The government shifted its stance in 2007, and became the second emirate in the UAE (after Dubai) to allow foreign nationals to purchase property under freehold title in their own name. Furthermore, it allowed companies registered outside the free zones to own freehold titles. However, limits still remain. Foreign individuals and companies are restricted to buying property in designated areas that included the majority of projects overseen by the main local developers, RAK Properties and the Al Hamra Real Estate Development Company.

Off Plan

In 2008 the government issued a decree that enabled the sale of off-plan properties. These are units or buildings sold before they are actually constructed. Real estate developers target off-plan sales to property investors. This allows the developers greater access to finance and usually secures better terms with commercial lenders. Investors also benefit from lower prices for off-plan units. The 2008 law required developers that sell properties off-plan to register with RAKIA to get a licence for such developments. While off-plan sales are a useful tool for the real estate sector, they can lead to speculative investments and can also be risky for investors, particularly if such units are sold to individuals rather than commercial property investors.

La Hoya Bay, for example, is a Dh3bn ($816m) mixed-use development that ran into significant obstacles several years ago due to solvency issues with Khoie Properties, the company behind the development. Investors that had invested money upfront stood to lose it all if the project fell through. The CEO then offered full cash refunds for investors in the project in 2010, and the firm is reportedly working on a strategy to get the development off the ground again. Apartment rental rates, Q3 2012 AL HAMRA: There are two major property developers in RAK that together manage the large-scale projects that are changing the emirate’s real estate landscape. Established by the ruler of RAK in 2003, the Al Hamra Real Estate Development Company (Al Hamra) is one of the oldest developers. The company was responsible for building Al Hamra Village, with an investment of over Dh7bn ($1.9bn). The project is a luxury mixed-use residential and leisure development that includes housing for up to 8000 families with a total of 200 sea-view villas, 1000 townhouses and 4000 luxury apartments. The village also features an 18-hole golf course, a yacht club, a mall, and several beach resorts and hotels. These include the Al Hamra Fort Hotel and the Al Hamra Golf and Beach Resort. The Al Hamra Village got a further boost in luxury capacity when Hilton Worldwide held the “soft” opening for its Waldorf Astoria hotel in August 2013.

Rak Properties

RAK Properties was established as a public joint stock company in 2005 with a share capital of Dh2bn ($544m) to develop RAK’s urban landscape. RAK Properties has a number of local developments, including the Julphar Towers and Mina Al Arab in RAK, and RAK Tower in Abu Dhabi.

Mina Al Arab, the flagship project of RAK Properties, began in 2005. Billed as a luxury resort community, the development is built on more than 2.8m sq metres of land and features beachfront villas, theme parks, dune resorts and a number of other offerings. In the wake of the international economic crisis of 2008-09, the development scale of Mina Al Arab was modified somewhat. In addition, to minimise risks in a subdued investment climate, RAK Properties concentrated on the project’s residential units that were ready for handover to clients.

The group’s annual revenues grew by 12% from Dh530m ($144m) in 2011 to Dh596m ($162m) in 2012, and recorded a net profit of Dh147m ($40m), according to the company’s financial statements. The increase in revenue was the result of the sale and lease of units in Mina Al Arab, Julphar Towers and RAK Tower. According to the company, plans for hotels in the Mina Al Arab development were temporarily put on hold due to the lull in the real estate market, but these are included in the company’s 2013 pipeline.

However, these developments will only take off on the condition that project financing can be secured at affordable rates. The group is in a strong financial position; it was able to repay the first instalment of a $150m loan from the RAK IDO four years before maturity, a track record that puts it in good stead with other potential investors for upcoming projects.

Government Intiatives

As a major contributor to the emirate’s economic output, real estate is a priority growth sector for the government. The RAK Department of Economic Development reports that the real estate and business sector contributed an estimated 7.2% of GDP in 2010. To ensure continued growth, RAK’s government actively encourages the real estate sector by supporting and financing projects carried out by the major local developers.

The local government, in close cooperation with the federal government, is also facilitating sector growth through a number of other reforms. For example, the government recently changed its laws governing visas for foreign real estate investors in the country. According to the new law, foreign citizens who invest in, or currently own, property that is worth more than Dh1m ($272,200) will be entitled to a three-year, multiple-entry visa. The move is aimed at bringing more investment to the UAE real estate market by increasing incentives and easing the process of investing in the country.

To foster home ownership among citizens, the federal government also operates the Sheikh Zayed Housing Programme, which provides housing loans for UAE nationals. The programme approved some 417 applications in January 2013 and will allocate a total of Dh208m ($56m) in loans and grants across the UAE. The initiative has so far lent more than Dh13bn ($3.5bn) to help 28,207 families build homes.

Rental Market

The emirate’s residential property market remained relatively strong throughout the Sheikh Zayed Housing Programme assistance in RAK, 2007-11 global financial crisis. Though prices of apartment rentals in the emirate dropped dramatically between 2008 and 2009, they began stabilising by mid-2010. The drop, however, was preceded by several years of tremendous growth.

According to reports by the Asteco Property Management group, a studio apartment that cost Dh28,000 ($7621) a year in the second quarter of 2008 was priced at Dh33,000 ($8982) by the third quarter, only three months later. The price of the same apartment then dipped to Dh26,000 ($7077) by the first quarter of 2009. After stabilising in 2010, apartment costs dropped by 8% in the first quarter of 2011. This was due to a large number of new apartments and office buildings coming onto the market at the same time.

The data from the third quarter of 2012 shows that a studio apartment in RAK will now rent for between Dh13,000 ($3538) and Dh18,000 ($4899) a year, while rent for a three-bedroom house is in the range of Dh30,000-45,000 ($8166-12,249). This is roughly comparable to prices in other Northern EmiAverage apartment rental trends, 2008-12 rates, excluding Sharjah, where rent for a studio apartment ranges from Dh10,000-24,000 ($ 2722-6532) and a three-bedroom home from Dh28, 000-63,000 ($7621-17,148).

The Mortgage Market

The mortgage market in the UAE is largely centred on Dubai and Abu Dhabi. RAK, however, has seen some activity in this area, with at least four financial institutions offering finance to investors in selected developments, including Al Hamra Village and Mina Al Arab.

RAK Properties, for example, signed a memorandum of understanding with United Arab Bank in 2011 that gives its customers access to competitive mortgages with a 3.99% interest rate under both conventional and sharia-compliant loans.

This followed an earlier deal signed with Commercial Bank International for several properties in the Mina Al Arab development. Under the deal, clients could take out mortgages for up to 90% of the property value. HSBC, RAK Bank and Noor Islamic Bank are other institutions that are active in this segment. These deals are important for RAK’s real estate sector because the mortgage market improves liquidity and helps encourage investors and homeowners to tap into the housing market. Furthermore, the willingness of banks to lend is largely seen as a positive sign of a strong real estate sector.

However, the housing finance sector is still young in RAK and requires further reforms by the local and federal governments. One challenge is that buyers who cannot afford their mortgage payments cannot declare bankruptcy in the UAE. Instead, non-payment on mortgages opens borrowers to criminal prosecution. To avoid legal battles in civil courts, banks are more likely to try to renegotiate the loans rather than foreclose on properties.

Another challenge for the sector is that there is not currently a secondary mortgage market in RAK. The emergence of mortgage-backed securities would lower interest rates and increase liquidity. The government is looking into these issues and is currently studying a bankruptcy law.


RAK’s real estate sector has shown significant resilience in the aftermath of the global financial crisis of 2008-09. However, the sector’s exposure to economic trends in foreign markets is only likely to increase as international investors take on a growing role locally.

The developments on Al Marjan Island, Mina Al Arab and Al Hamra Village are adding a significant number of residential and commercial units over the next few years. Barring other shifts in the financial and real estate sectors, this is likely to result in lower prices in response to increased supply.

At the time same, the tourism sector should continue to anchor RAK’s real estate market, drawing potential clients into the emirate and driving sales. The sector is therefore poised to continue growing at a rapid pace, as the number of tourists coming into the emirate grew from approximately 600,000 visitors in 2010 to around 1.1m in December 2012.


You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Ras Al Khaimah 2013

Construction & Real Estate chapter from The Report: Ras Al Khaimah 2013

Cover of The Report: Ras Al Khaimah 2013

The Report

This article is from the Construction & Real Estate chapter of The Report: Ras Al Khaimah 2013. Explore other chapters from this report.

Choose a chapter from The Report: Ras Al Khaimah 2013

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart