Investing in the UAE Real Estate in 2024: Advantages and Disadvantages

8:09 pm  |  28.03.2024

With the rapid growth of inflation, the question of how not to lose your savings and where to invest them becomes especially relevant. One of the most popular options for saving money is investing in real estate.

Factors Influencing Investment Choice

The choice between investing in foreign or domestic real estate depends on the individual goals and financial capabilities of the investor. With a competent commercial approach to the use of finance and real estate, you can increase your initial investment, because prices for residential and non-residential properties usually rise over time. 

However, they also come with certain risks, such as political and economic instability of the country, currency fluctuations, and legal aspects.

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Advantages of Investing in Real Estate:

  1. Potential Rental Income: A property can generate regular rental income, which can cover mortgage costs and other expenses, as well as generate a profit. This is especially true for commercial property owners, where long-term leases provide stable income over many years.
  2. Capital Growth: Over time, the value of a property can increase, resulting in additional returns for the investor.
  3. Tax Incentives: Many countries offer tax incentives for real estate investors, such as mortgage interest and depreciation deductions.
  4. Inflation Protection: Property values typically rise with inflation, which helps protect the investment from depreciation.
  5. Portfolio Diversification: Real estate is a different asset class that helps diversify an investment portfolio and reduce overall risk.
  6. Tangible Asset: Unlike stocks or bonds, real estate is a tangible asset that can be seen and valued directly. This gives investors a sense of security and confidence.
Real estate is far from a risk-free investment, and before committing to it, it is crucial to consider the potential downsides and take steps to mitigate them. This may include inspecting the property thoroughly, diversifying your investment portfolio, and building a reserve fund.

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Types of Real Estate

There are several types of real estate in which you can invest profitably:

  • Residential property for rent. Apartments, houses, townhouses, cottages, rooms.
  • Commercial real estate. Office buildings, shopping centers, warehouses, industrial premises, and hotels that can be used in your own business or rented out.
  • Land. Territories for development, agriculture, recreation, and tourism.
  • Accommodation at resorts. Apartments, villas, and hotels are located in popular tourist destinations. However, the cost of such housing is significantly higher than in ordinary cities.
  • Objects for investment in the future. For example, you can buy real estate at the start of sales with the goal of resale in a few years.
  • Premises with investment potential. For example, properties in the city center with the possibility of reconstruction and resale.
  • Real estate with high yield. This includes purchased apartments in prestigious areas with high rents.

In addition to the property, you can invest available funds in real estate investment funds. These are mutual funds or exchange-traded funds that manage investors’ funds and acquire various assets related to the real estate market. This professional approach is suitable for large investments.

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Possible disadvantages of real estate investing could be as follows:

Hidden Defects: Despite a thorough inspection before purchase, there is no guarantee that hidden problems will not arise that may require future costly repairs.

Hidden Liabilities: Properties can occasionally be saddled with outstanding taxes, utility bills, or other debts that may come as a surprise to the new owner.

Force majeure situations: It is impossible to predict where and when a fire, flood, or other disaster will occur that could destroy property, reduce its value, or lead to the need to make repairs. We recommend insuring your property to protect yourself from such problems.

Tenant dishonesty: The human factor can bring many surprises. To minimize losses, draw up a contract correctly. A complete inventory of property and rules of residence will protect the owner.

The decision to invest in real estate abroad in 2024 should be made individually. After carefully weighing the pros and cons and considering your financial goals and circumstances, you can make an informed decision that best suits your needs.

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