With Dubai’s reputation as a luxury-home market, experts believe fractional ownership can boost the emirate’s prime real estate value.
In Dubai, fractional ownership has been adopted by some developers. A few years ago, the Fairmont Heritage Place on the Palm Jumeirah offered part ownership of some units sold through a company registered in Jebel Ali Free Zone. Investors were offered a one-thirteenth share of each unit and a minimum 21 days usage per year. But it restricted share owners from selling their stake for three years. With Dubai being one of the biggest luxury home markets in the world, experts believe fractional ownership can add tremendously value to the prime real estate market, provided proper regulations are in place.
“Dubai receives a large number of visitors from Saudi Arabia, the UK, Europe, India, etc, who come here for four to eight weeks,” says Sanjay Chimnani, managing director of Raine and Horne Dubai. “They look for a house as they are based out of Dubai, but will not stay more than eight weeks in a year in the city. This is why part ownership in a high-value property like a Signature Villa on the Palm makes a good option. I believe there will be a market if the proper framework is there for part ownership of luxury assets in Dubai.”
Dubai-based Jacob John, 59, from Kerala, India, is among a growing number of small-time investors who have ventured into fractional ownership, having invested in a pricey property in his home country. John owns one-sixth of a Signature Suite in Aiana Munnar — A Moonriver Resort in Munnar Kerala, in an investment model that also gives him up to two weeks per year of free stay in the resort property.
John says the smaller ticket size will make fractional ownership attractive to Dubai investors. “Being a Dubai resident for over 30 years and a keen investor in real estate, I am aware that there are a lot of overseas buyers and residents who would like to invest in hotels in Dubai and other locations in the UAE, seeing the dual benefit of holiday use and rental income — if only it is at a much smaller ticket size,” says John. “This is where I think the fractional ownership model could be implemented in Dubai.”
As part owner of a Signature Suite in Aiana, John gets a title deed in his name and receives rental revenue that is shared among all the owners through a rental pool system. He does not have to pay annual maintenance charges, as these are deducted from the rental income.
“Owning a luxury vacation home is a dream come true for most people, but once it is built, maintenance becomes a mounting and recurring cost. Most often, it will be occupied for just a few days in a year and may not generate any income, although its value as an asset would appreciate.”
When investing under the fractional ownership method, a buyer purchases only a fraction of the value of the property. “Therefore, you invest a much smaller amount and yet get an asset with a title deed in your name,” says John. “Since you [have] a title deed, you can sell, transfer or gift it to your children.”
As part owner, John says he enjoys a host of other privileges apart from free stays every year, including food, beverage and spa discounts, nomination facilities and vouchers.