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Damac pays Dh1.2bn for site overlooking extended Dubai Canal

Damac’s Dh1.2 billion purchase of a prime area of land overlooking Dubai’s still under-construction canal is just the first of what is likely to be a string of deals, with developers looking for ever-popular waterfront sites, according to property experts.

Damac announced that it had bought a 4 million square feet patch of land next to Dubai Canal “on the eastern and western sides of Sheikh Zayed Road at the Safa Park intersection” in a deal worth Dh1.26bn.

“We will see more of these sites along the canal being sold off,” said Craig Plumb, the Mena head of research at the property consultancy JLL.

He said that the deal vindicates Dubai’s decision back in 2013 to invest in the extension of its canal from Business Bay to the Arabian Gulf. This has created a new 3-kilometre stretch of waterway that will pave the way for master-planned projects including a new marina, hotels, shopping and entertainment centres.

“That’s part of the reason for doing it – to create real estate acti­vity along its banks.”

Dubai’s coastal waterfront has already largely been built out from Deira and its historic centre to the emirate’s borders near Jebel Ali, with few prime sites remaining. New schemes such as Meraas Holding’s La Mer and Bluewaters Island are being built on reclaimed land.

The Government has spent almost Dh1.7bn on the three construction contracts required to extend the canal, with the Turkish contractor Gunal leading the Dh500 million phase one works, China State Construction Engineering Corporation carrying out the Dh384m phase two and Besix working on phase three under a Dh802m deal. Work is expected to complete in 2017.

However, the sale of just one plot within the master-planned area – albeit one in a prime loca­tion – has brought in almost three quarters of the construction cost.

Damac’s managing director, Ziad El Chaar, told The National that its development of the site is likely to involve the construction of several towers.

“Most of the projects around Dubai Canal are of this kind,” said Mr El Chaar. “We have some towers facing Sheikh Zayed Road, which is a very tempting view for many, some facing Safa Park and Dubai Canal.”

He said that the site appealed because it is in an area Mr El Chaar called “the golden quadrant”, stretching from Jumeirah Beach Road inland to Downtown Dubai and Business Bay, bordered on one side by the new City Walk scheme and the banks of the canal on the other.

David Godchaux, the chief executive of Core UAE, an associate of the property services company Savills, said that if it were merely for revenue-raising purposes, the construction of a canal would not have been required to cash in on land values in the area.

“The land being developed around the canal is already land that, if you were converting it to freehold today, would be worth a lot of money because it’s in Jumeirah and it’s not far from the beach,” said Mr Godchaux. “Do you need to build a canal to bring value to this land? Probably not.”

Despite this, he believes that the canal project is a good investment for Dubai, a city for which such mega-projects “is in the DNA”.

Mr Godchaux added: “It’s a very nice thing to do as a city, and I think it’s going to be a success.”

Meanwhile, Mr Plumb said that the terms of the deal, which allow Damac to spread payment for the site into five stages over a four-year period, is an example of a trend JLL predicted last month of more generous terms being made available for land purchases in a market where funding for projects has tightened.

“Traditionally, developers had to pay for all of a site upfront. That’s made development unfeasible in some locations,” said Mr Plumb.

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