The Dubai housing market is currently a tough and competitive one. The property firm Asteco’s recent UAE Real Estate Report reveals that ‘yearly changes (in rental prices) were nominal with decreases of 4 per cent on average across all quality bands’ – a picture of a declining market that is putting more of a squeeze on developers who are building for fewer potential customers.

Adapting to a new reality

So, it’s no surprise that developers there are looking for new and inventive ways to get ahead. An increasingly common phenomenon is the growth of joint development agreements (JDAs). This is where developers band together to bring a project to market quickly. But how do they work – and why are they becoming more popular?

Well, joint development agreements are a great way for developers to finish projects and get them on the market before this rapidly diminishing number of buyers reduces any further. JDAs also represent a relatively low-risk funding method for the developers themselves – one partner will focus funding the building itself, while the other provides the funding for the land under it – without either having to take on the financial burden of the whole project.

Implications for investors

So, what should investors look out for when it comes to projects founded on JDAs? Well, beyond the basics of ensuring that the financials are in place, you’ll need to make sure that there are clear agreements in place to cover everything from leaving the partnership cleanly if you need to, to settling disputes, and covering costs if the development over runs. If you’re looking to get involved as an investor at an early stage of a project like this, then we strongly recommend that you ensure that the joint venture agreement you enter into with your business partners is incorporated. It’s a way of clarifying – right from the start – where everyone stands legally should anything go wrong further down the line and making sure that any changes to statutory legislation will be reflected in the agreement you sign with your partners.

A marriage of convenience

“Anecdotal evidence suggests that in recent months more than 100 JDAs have been signed for projects in the city,” says Sameer Lakhani, one of the experts at Global Capital Partners. “We are seeing it all over the place, with ticket sizes from as low as Dh50 million to as much as Dh500 million. Investors who had ploughed their funds into land as well as smaller developers find that the only way for survival is for them to come together. This is the trend that is now happening at an accelerated pace.”

As the market tightens, developers are looking for new ways to make the situation work for them and, as investors, JDAs offer a real opportunity.