Sharjah woos property investors with mega projects

The real estate industry in Sharjah, the quiet northern emirate bordering Dubai, has perpetually remained in the shadow of its neighbour. During the recent real estate boom, it was seen as an affordable option for residents priced out of Dubai.

But that could soon change. The local authorities and developers are launching a number of big-ticket projects as they look to tap into the increasingly active sales market in the United Arab Emirates.

One of the major projects taking shape is the Dhs 2.4bn Al Tilal City, a mixed-use development consisting of schools, mosques and a mega mall. Tilal Properties – a joint venture between the emirate’s investment arm Sharjah Asset Management and Eskan Real Estate Development – is developing the 25 million square foot project.

Another project, Sharjah Waterfront City, was launched at Cityscape Global this year following delays. Slated to become the emirate’s largest mixed-use development, the project is estimated to cost a total of Dhs 20bn to build. Officials have revealed it will comprise 200 residential and commercial towers, 95 apartment buildings, a hotel and a hotel apartment tower. It will also include up to 1,500 waterfront villas and a Crystal Lagoon theme park, according to Sharjah Oasis Real Estate Development.

Other property projects include the Dhs 700m Al Rayyan development, comprising two residential towers, a commercial tower and a retail complex.

In all three instances, developers are looking to tap into the growing expat investor pool in the country. But even as the market opens up, questions remain about their appeal to prospective buyers.

Pro-buyer enough?

Unlike Dubai, Sharjah does not offer life- long ownership of properties to expat investors but just a 100-year leasehold.

This could mean that the emirate loses out to Dubai’s pro-buyer regulations, notes Asteco’s managing director John Stevens in a recent report.

But CBRE’s Nicholas Mclean insists that Sharjah’s current ownership rules will not necessarily restrict investors.

“The ownership rules, as I understand, are fixed but well defined. I don’t think that it is a hindrance to the market place,” he says.

Maclean, however, urges developers to maintain good quality stock to attract and retain investors.

“I think what Sharjah needs to improve is the quality of the housing stock and office stock. What we see in the new schemes, and particularly to the west of Sharjah close to the Corniche, is that there are bigger footprints for the commercial buildings and better quality accommodation.”

A lack of quality stock might not be the only worry that the property sector faces. Rents across the northern emirate are directly linked to Dubai and fluctuate when there is a relocation trend.

During the second quarter this year, rents in Sharjah fell three per cent quarter-on-quarter after a stable phase as Dubai became more reasonable for tenants, Asteco notes.

Meanwhile, unrealistic asking prices have dampened sales. According to the firm, many of the units launched for sale – with the exception of plots in Al Tilal City – were difficult to sell due to relatively high prices.

Developers appear to have taken note, emerging with attractive payment schemes to drive up sales. Al Rayyan’s developers, which had discount packages during Cityscape Global, announced that they sold off at least 18 per cent of units in the first phase of the project during the exhibition.

Tourism push

Even as Sharjah works on the competitiveness of its property regulations, what could draw investors might be its renewed focus on tourism.

Earlier this year, Sharjah Commerce and Tourism Development Authority announced a strategy to attract 10 million tourists to the emirate by 2021, building on its cultural appeal to lure more visitors.

The government has announced a number of leisure and cultural projects to realise this goal.

One of these is the 45,470 square metre Al Noor Island. The development will feature a natural butterfly habitat housing over 500 species, a 3,500-metre walkway and floating bridge serving as an entrance, a literature pavilion, children’s playground and an egg-shaped art sculpture.

Officials have also announced plans for another major leisure attraction in Dibba Al Hisn, one of Sharjah’s exclaves located close to Fujairah and Oman. The project will feature a water canal, restaurants and cafes, a cinema, children’s playgrounds and other amenities.

Asteco’s Stevens says that these projects could potentially drive up rental rates in Sharjah, particularly in areas in close proximity like the Corniche.

“The northern emirates real estate market closely follows the Dubai market, with a few months delay between recovery and periods of stabilisation,” he says.

“So new project announcements and the timetabled completion of developments such as Al Noor Island are vital elements in securing investor interest and confidence in the months to come.”

As the UAE’s property market rebounds, Sharjah could emerge as an interesting option to investors; especially those who might want to invest in the residential sector.

Worries that rents might dip too low are misplaced, according to Maclean, despite the emirate’s links to its neighbour. He does not foresee the supply of affordable housing units across the border completely gobbling up Sharjah’s market share.

Indeed, the symbiotic relationship it shares with Dubai’s could eventually prove to Sharjah’s advantage.