Ras Al Khaimah's real estate sector grows contribution to GDP

The property market in Ras Al Khaimah has shown robust growth and resilience to the volatility found elsewhere in the UAE, and is set to benefit from a fresh injection of investment. More than Dh4bn ($1.1bn) is being spent on new housing schemes that will come onto the market by 2017.

Strong fundamentals underpin the emirate’s real estate market, including freehold property ownership for international buyers, and a vibrant economy built on the pillars of industry, manufacturing and tourism. In addition, federal funds have been released to ensure Emiratis are not priced out of the housing market as part of the UAE’s national strategic development plan, Vision 2021.

Economic Importance

RAK’s real estate sector is a significant element of the emirate’s economy. According to RAK’s “2014 Statistical Yearbook”, the real estate and business services sector contributed Dh1.79bn ($487.2m) to GDP in 2013 – 6.9% of the total and 42% more than in 2009, when it generated Dh1.26bn ($343m) – and grew by almost 10% from Dh1.63bn ($443.7m) in 2012.

When measured by gross capital formation, real estate and business is even weightier, and was valued at Dh885m ($240.9m), worth around 13% of the total, making it the third-most-significant sector after mining and quarrying, and manufacturing. The sector’s value in 2013 was 18% higher than in 2009, when it was Dh749m ($203.9m).

The real estate and business sector employed a total of 4899 people in 2013, 2.3% of the overall workforce, and up 40% on the 3510 professionals who worked in the sector in 2009.

Cost Of Housing

According to figures from the National Bureau of Statistics, from 2012 to 2013 the cost of housing, as measured in the consumer price index, was subject to 0.4% inflation, below the general inflation rate of 1.4%, and from 2009 to 2013 the general price of goods, as measured by the same metric, increased by 9.4%, while housing fell by 4.1% from 108 in 2009 to 103.6 in 2013.

Firm Foundations

One of the fundamental strengths of the RAK property market between 2005 and 2015 has been the transparency of its rules on ownership and its openness to international investment. An official decree issued in 2005 permitted freehold ownership of property by expatriates in designated free zone areas, making it the first emirate to follow Dubai’s move in 2002.

Additionally, in 2005 new laws were introduced in RAK, with Decision Number 20 allowing UAE nationals to purchase property in all areas of the emirate. In 2007 Decision Number 12 included further relaxation of the rules, allowing non-UAE nationals and corporate bodies to own freehold title to property in projects owned by RAK Investment Authority (RAKIA), Al Hamra Real Estate Development and Rakeen, which was created in 2006 as the government’s property arm. A year before Rakeen was formed, RAK Properties was created as a joint-stock company with government backing. RAK Properties is listed on the Abu Dhabi Securities Exchange, and owns 26% of Rakeen. Working within RAK’s investor-friendly legal framework, these state-backed entities have been responsible for the master planning of the Al Marjan Island, Al Marjan, Al Hamra and Mina Al Arab communities in the Al Jazirah Al Hamra area, a half-hour drive south of RAK City.

Neighbouring emirates that have been more reluctant to grant freehold property titles have been less fortunate. In its annual report on UAE property published in 2015, Asteco Property Management noted that in Sharjah, legislation had only recently been introduced to allow 100-year leasehold ownership of property. Prior to that, property purchases there were limited to GCC nationals or Arab expatriates. The Asteco report noted that sales transactions were limited in Sharjah in 2014 due to uncertainty over the new regulations. However, in its subsequent report on the first quarter of 2015, Asteco said, “With the change in property ownership laws in Sharjah, developers are eyeing the emirate as a destination for the development of more affordable accommodation for expatriates.” It reported a healthy level of interest in Sharjah’s market in the first three months of the year, but said that price was proving to be a sticking point.


RAK may find a stronger rival in the competition for foreign property investment as a result of Sharjah’s new laws, but the real estate markets in the two emirates are very different. As Dubai’s closest neighbour, Sharjah is much more entwined with the big city’s volatile housing sector.

This was particularly noticeable in the rental market in 2014, according to Asteco, which found that demand for leased accommodation in Sharjah was strong in the first quarter due to high rental rates in Dubai, but slowed in the second half as new regulations helped cool the market in the larger city. In contrast, the report noted, “RAK’s transactional activity was stable throughout the year. Master-planned developments such as Al Hamra, Bab Al Bahr and Mina Al Arab in RAK were in demand and had healthy occupancy levels.”

While RAK may have been hit hard by the UAE property crash in 2009, five years on there are signs that its existing flagship developments have enabled the most northerly emirate to benefit from its independent, separate real estate market, rather than relying on interdependence with the bigger markets of Dubai and Abu Dhabi.

Double Bubble

In 2012 and 2013 Dubai’s real estate sector showed strong growth, but also prompted fears in some quarters that a bubble could be developing again, one that could have a ripple effect across the country. In June 2014 the IMF published a paper entitled “Avoiding Bubbles and Macro Instability”, which warned that mega-projects announced following the successful Expo 2020 bid could “exacerbate risks of potentially disruptive real estate correction”, and said that although some measures had been taken to cool the market, more might be required.

“Careful macroeconomic management and appropriate strategic planning measures will be essential to minimise cost overruns, avoid overheating and mitigate the risk of a real estate bubble,” warned the report. It acknowledged that the authorities in Dubai had taken measures to reduce speculative investment in residential real estate by increasing the transaction fee from 2% to 4%, and insisting that developers own 100% of the land and hold 20% of the construction cost in an escrow account. The authorities were also considering new rules for off-plan purchases.

Dubai Land Department monthly data showed that from the second half of 2012, residential property prices grew by more than 10% year-on-year (y-o-y), and that the growth accelerated to more than 20% from the middle of 2013 to the start of 2014, and remained 27% higher y-o-y in May 2014. The market also saw a 50% increase in the overall volume of transactions. However, the average value of transactions remained well below the peak in 2008. The average transaction was Dh5.6m ($1.52m) in 2008, but Dh2.5m ($681,000) in 2013, according to the IMF report.

The report noted that the volume of transactions slowed in the first quarter of 2014, possibly because of the doubling of transaction fees. While these conditions may have been specific to a property market 50 miles from RAK, measures were taken at a federal level to mitigate against the knock-on effects of a Dubai bubble elsewhere.

New Mortgage Rules

In December 2013 new regulations came into force that were introduced by the Central Bank of the UAE and applied to all seven emirates. The measures were based on loan-to-property-value (LTV) ratios, with variations based on the price of the property and the nationality of the purchaser, according to a briefing from corporate law firm Al Tamimi & Co.

For UAE nationals the LTV was set at 80% for first properties valued at Dh5m ($1.36m) or less, at 70% for first properties worth more than Dh5m ($1.36m) and at 65% for all second or subsequent properties irrespective of their value.

For non-UAE nationals the LTV for first properties was 75% under Dh5m ($1.36m), 65% over Dh5m ($1.36m) and 60% for second or subsequent properties. The LTV ratio for properties bought off-plan was set at 50%, irrespective of the property’s value or the nationality of the purchaser.

Credit Bureau

Another factor that was expected to reduce risk for lenders – but which might also exert downward pressure on real estate transactions in the UAE – was the launch of the federal Al Etihad Credit Bureau (AECB). By November 2014 the bureau was able to report that in the previous 24 months it had received credit records from 43 banks on 2.8m individuals and 6m credit facilities in the UAE, covering 97% of the country’s credit-active population. In a statement, AECB CEO Marwan Lutfi said, “The credit reports will play a key role in helping banks and financial institutions to assess risk accurately, enabling them to make informed lending decisions and lower lending risks.”

Cutting Red Tape

Although these legal measures may have a tendency to mitigate against the risk of speculative flipping – where properties are bought and sold by investors to cash in on rapidly rising prices – the UAE remains one of the most efficient places in the world for property transactions. In the World Bank’s 2015 “Doing Business” report, which tracks how easy it is for an entrepreneur to form and run a company in 189 countries, the UAE is ranked fourth in two measures related to property, dealing with construction permits and registering property. Its fourth place rank for construction permits compares to ranks of seventh, 49th and 21st for Bahrain, Oman and Saudi Arabia, respectively. In the property registration category the UAE is fourth, while Bahrain is 17th, Oman 19th and Saudi Arabia 20th. Overall, the country’s ranking in the 2015 survey improved by three places from 25th in 2014 to the 22nd.

Successful Formula

The strongest-performing residential areas in RAK are the coastal communities of Al Hamra and Mina Al Arab. Built in the last 10 years and combining upscale apartments with villas and townhouses overlooking marinas, lagoons and, in the case of Al Hamra, a championship golf course, both villages have sold or let most of their existing properties, and in each case Dh1bn ($272.2m) expansion plans are under way in 2015 that will add new homes. RAK Properties is also planning a Dh2bn ($544.4m) mixed-use development comprising villas, apartments, hotels, and waterfront retail and food and beverage outlets.

The two settlements have been built 30 minutes away from RAK City along the coastal road towards Dubai. Both residential developments offer owners or tenants a chance to live close to the sea but also within easy reach of work. A dual carriageway heading north connects both Al Hamra and Mina Al Arab to the shopping malls and offices of RAK itself, including RAK Free Trade Zone’s business and industrial zones, which are home to 8000 companies from 106 countries. The same road also gives easy access to the federal highway south to Dubai, which can be reached in 45 minutes from this part of the emirate. Dubai is close enough for commuting, a day of shopping or an evening of entertainment, and both communities are convenient for Dubai International Airport, which became the world’s busiest international airport in 2014. This also means both communities are popular with international clients looking for second homes or holiday residences. However, they are most convenient of all for the people running the 7000 companies located in RAKIA’s industrial zones.

A decade after developers broke ground, both Al Hamra and Mina Al Arab have developed into established communities served by restaurants, coffee shops, spas, supermarkets and other amenities. The opening of the Waldorf Astoria at the heart of Al Hamra Village in August 2013 brought a new selection of dining options for people living in the area. “Al Hamra is unique; it’s a real community and it is about the beach lifestyle. There are great long-term prospects for people buying property here,” Aris Kotsomitis, the owner and director of Kotsomitis Real Estate, told OBG.

Affluent Market

Both Mina Al Arab and Al Hamra have also benefitted from the growth that has taken place in other sectors. With 15,000 businesses located in either RAKIA’s industrial parks or RAK Free Trade Zone’s business or industrial centres, the development of industry and manufacturing in RAK has created a demand for homes for executives. Tourist numbers have also grown significantly, with tourism revenues surpassing Dh1bn ($272.2m) in 2014, a year which saw 72% growth in guest nights to 2.14m, according to RAK Tourism Development Authority. The growth in international visitor numbers generates interest among people interested in buying holiday homes and has contributed to the cosmopolitan mix of residents, with Al Hamra Village claiming that properties have been bought by people from 60 different countries.


Another significant attraction for Mina Al Arab and Al Hamra is that, compared to Dubai or Abu Dhabi, RAK’s two most desirable areas offer more room for less money. In its 2014 report on UAE property published in 2015, Asteco compared the different types of property that could be bought for Dh2m ($544,000) across the country. In Abu Dhabi an investor could choose from a one-bedroom flat in Al Bandar, a two-bedroom apartment in Marina Square, or if they wanted three bedrooms, a villa in Al Ghadeer or a town house in Al Reef. In Dubai, Dh2m ($544,000) would buy a flat with one bedroom in Dubai International Financial Centre, a two-bedroom flat in the Greens, a townhouse in The Springs, a three-bedroom townhouse in Jumeirah Village Circle or a villa with four bedrooms bought off-plan in Reem. In RAK buyers could choose from a four-bedroom duplex, a four-bedroom villa at Mina Al Arab or a three-bedroom house with golf course views at Al Hamra.

Room For Expansion

With demand for properties in both Mina Al Arab and Al Hamra strong and supply short, RAK Properties and Al Hamra Real Estate Development are developing new offerings at each community. Al Hamra’s flagship project is Falcon Island, on an island adjacent to the community, which will be turned into a development of 150 mansions built using environmentally friendly materials and powered by photovoltaic installations incorporated into the design. Prices will start at Dh5.7m ($1.6m). “A similar-sized property at Palm Jumeirah in Dubai would cost Dh12m-13m ($3.3m-3.5m), and the quality of homes and lifestyle is also completely different,” Barry Ebrahimy, head of the commercial department at Al Hamra Real Estate Development, told OBG.

Falcon Island’s properties, many of which have been sold off-plan, are due to be handed over by the third quarter of 2017. Al Hamra is also building 162 three- and four-bedroom townhouses in an area of the village that will be called Bayti, and which is due for completion by December 2015. RAK Properties, the master planner of Mina Al Arab, is working on two schemes known as Flamingo and Bermuda. The 124 waterfront villas in the Flamingo development are due to be handed over by the end of 2015, while the 157 villas in the Bermuda scheme should be ready for their new owners by the second quarter of 2016. In the company’s 2014 annual report, RAK Properties revealed it had budgeted Dh1bn ($272.2m) for the two projects and said that, with the exception of a few properties held back for lease purposes, the schemes had sold out.

Attracting Investment

While the mature residential communities of Mina Al Arab and Al Hamra work on expansion plans, the focus for residential development is expected to shift to the four man-made islands of Al Marjan Island. There are already freehold properties at Marjan Island Resort and Spa, while the Bab Al Bahr Residence, built by Rakeen Development, is home to 500 apartments. In addition, Al Hamra Real Estate Development is building 100 waterfront villas on View Island, the furthest from the coast. In addition, Dream Island is due to be turned into a party island with an emphasis on night life, according to local media reports. “We hope that more projects come to the islands,” Roger Tannous, the general manager of Marjan Island Resort and Spa, told OBG. “Four hotel properties do not create a destination and we need a destination to be created.”

According to JLL’s annual investor sentiment survey of 600 MENA property portfolio holders, residential property in the UAE remains the most popular pick for the region’s investors, but within the UAE Dubai is the most popular. However, the report notes that the gradual cooling of the residential market there from the middle of 2014, “could prompt investors to switch out of the residential sector and into other asset classes”.


RAK describes itself as the rising emirate, and the prospects for its real estate market are certainly looking up. New homes coming onto the market from the end of 2015 to 2017 will supply strong demand from both Emirati and international buyers in the vibrant communities to the south of RAK City, while in other parts of the emirate new neighbourhoods are currently taking shape that will provide citizens with new homes, schools, shops and amenities such as leisure facilities.


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The Report: Ras Al Khaimah 2015

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