A certain degree of risk Essay Example
A certain degree of risk Essay Example

A certain degree of risk Essay Example

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  • Pages: 3 (666 words)
  • Published: October 30, 2018
  • Type: Case Study
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Before investing, it is important for investors to thoroughly evaluate factors such as historical, current, and future performance of the asset in order to mitigate the potential risk of losing their initial investment.

To determine the required earnings and investment return for customers, it is important to assess the rate of return. Wise investment choices require consideration of the state of the economy and its potential for growth. Investors should evaluate future prospects and potential risks in the business environment, including market risks. The increase in real estate prices in Dubai can be attributed to changes made after Sheikh Zayed's death and new chattel laws established in August 2005 that allowed citizens to acquire land for negotiation instead of receiving it only as gifts for personal use.

The legislation on real estate underwent significant changes, allowing GCC nationals to acquire freehold


properties in designated areas and granting immigrants the opportunity to invest in long-term rental contracts, which could last up to 99 years and were renewable. To aid in this transition, new real estate companies were established with access to these restricted zones. The Sorough and Aldar Properties IPOs proved particularly successful, reminiscent of Dubai's Emaar Properties IPO after Sheikh Mohammed's 2002 decision on foreign land acquisition. Dubai's expanding economy led to an ambitious venture program promoting tourism. Finally, the development of a 300-square-kilometre industrial cluster zone was seen as a push for industrial growth.

With its flourishing tourism industry and establishment of free zones, Dubai remains a shining example of success. Its real estate sector is particularly noteworthy, offering investors high rates of return on investment. The National Bank of Dubai's European Real Estate Fund (2007)

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even exceeded their projected annual return of 15% in terms of Internal Rate of Return. According to the NDB Report, commercial property investment in Europe experienced significant growth in 2006, with shares rising up to 50%, making up 41 to 46% of global trade.

Increased investor interest and favorable potential returns on investment have been caused by higher prices and lower yields as noted by NDB. The Dubai Investment Fund, which is a partnership between Investors Provident and Caledonian Investments Ltd., serves as proof of a good rate of return.

(Source: investorsprovident.com, 2005) The investment fund's objective was to extend its investments into Dubai and the Gulf Region's residential, commercial, and industrial projects. It aimed for an annual rise in capital growth rate between 15 to 20 percent with past endeavors resulting in a return rate of 30%.

Over the next four years, Dubai's real estate sector is projected to grow by 15-20%. The low tax rates of Dubai's tax system are particularly attractive to foreign investors seeking to increase their profits. This can be seen in cases where certain investors are able to save up to $100,000 on a two-bedroom apartment due to these favorable tax rates.

Nicholas Marr (2006), director of Marr International Ltd, noted that Dubai provides a favorable tax environment for investors, resulting in substantial savings. Moreover, compared to other major cities, property prices in Dubai are comparatively inexpensive. For example, while London's Docklands area charges around $5,000 per square meter for an apartment, purchasing a villa in Dubai only costs approximately $1,000 per square meter. Henceforth, depending upon their preferences for property type and location, investors can choose between acquiring a villa in Dubai

at $1,000 or an apartment in London at $5,000 per square meter.

When it comes to quality properties in Dubai, villas are seen as more luxurious than apartments. The city boasts high economic growth and plenty of opportunities. In fact, the country's impressive economic progress has been covered in the paper's economy section. As a result, investing in Dubai is becoming increasingly attractive due to improved economic conditions. Smart investors always take into account the economic climate of a location before committing their funds and with Dubai's economy on an upswing, there is potential for greater returns on investments.

Dubai's economy has grown continuously for twenty years, presenting foreign investors with a favorable prospect.

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