Why HNWIs are flocking to Dubai’s real estate development management sector

Pictured: Firas Al Msaddi, CEO of fäm Properties

In the ever-evolving landscape of Dubai’s real estate market, a new segment is capturing the attention of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs): Real Estate Development Management.

This innovative approach, already a staple in mature markets worldwide, is now offering unprecedented opportunities to savvy investors in Dubai. Leading this emerging segment is fäm Development Management, renowned for its comprehensive in-house capabilities and a track record of over Dhs15bn worth of delivered and ongoing projects.

Dubai’s real estate market has long been defined by two primary segments: property buying and selling, accessible to all investors and managed by brokers, and real estate development, traditionally the domain of established development companies. Both segments have matured with strong regulatory frameworks, best practices, and comprehensive legal structures. However, the emergence of Real Estate Development Management is set to transform the investment landscape.

Managed by specialised real estate development managers, this new segment provides HNWIs and UHNWIs with direct access to high-return development projects. From single-home villas to entire compounds or towers, these projects offer investment tickets starting as low as Dhs10m.

Investors can now achieve profits that can double or even triple those from traditional property transactions, while also benefiting from a substantial buffer against market downturns.

Real estate development managers offer more than just the development of new projects; they handle lucrative renovation projects that unlock significant value from existing assets. These professionals possess a deep understanding of sales, marketing, market research, trend analysis, contracting, and interior design, making them indispensable in this high-stakes industry.

Investment Opportunities and Returns

1. Minimum and Maximum Investment: Investors can start with a minimum of Dhs10m, with no upper limit. Projects range from luxury villa developments to full buildings or towers, with sales revenue starting at Dhs60m. Each investor must invest at least Dhs10m. Unlike crowdfunding, which often incurs high acquisition costs due to multiple fees, fäm’s compensation model is straightforward: a 20 per cent success fee to the Development Manager and 80 per cent of the net profit to the investors.
2. Expected Returns: For a Dhs10m investment, the least conservative ROI is no less than 60 per cent. On recent projects, fäm has managed to achieve a net ROI of 109 per cent after all costs, or an annual IRR of 20 per cent on income-generating projects.
3. Unique Compensation Structure: fäm Development Management charges a straightforward success fee of 20 per cent, with 80 per cent of net profit going to the investors, ensuring alignment of interests. Unlike traditional real estate development agreements, which cap returns at 15 per cent per year without guarantees for profit or capital, fäm offers a more investor-friendly structure.
4. Fundraising Goals: fäm aims to raise Dhs1bn over 2025. Their business model, which includes leveraging bank partnerships, has already garnered significant interest from major UAE banks. These banks consider it a far more attractive product than traditional real estate development offerings for passive investors.
5. Investment Conditions: Investors can contribute land value, liquidity for construction, or both. The project owner(s) receive 80 per cent of the net profit, with fäm receiving a 20 per cent success fee, adjustable based on project size.
6. Security and Guarantees: Investors directly own the actual assets, ensuring their capital is 100 per cent guaranteed by the asset. fäm only leads projects with a minimum of 60 per cent ROI feasibility, providing a strong hedge against risks. This model has been tried and tested since 2014, with no investor losses even during market downturns like the COVID-19 pandemic.
7. Escrow and Transparency: Depending on the project’s nature, fäm ensures full funding availability from day one through liquid cash or a bank guarantee from a reputable bank. The assets, including the land and construction funds, are proportionately owned by the equity investors, ensuring complete transparency and no hidden surprises.
8. Project Focus: fäm specialises in luxury mansions and boutique residential and commercial buildings under the “Nordic by fäm” brand. Current projects include developments in Al Wasl and Meydan worth over Dhs1bn. The first mansion in Al Wasl, delivered earlier this year, sold immediately for Dhs61.5m, a record-breaking price for the area. More projects are due for delivery in 2025 and 2026.
9. Track Record and Expansion: With over $2bn dollars worth of executed projects over the past 10 years, fäm has proven the efficacy of its business model.
10. Geographical Focus: fäm is currently studying a major, unique project in Dubai, details of which will be announced upon completion of land acquisition.
11. Conservative Financial Management: While bank funding may be used, fäm maintains a conservative approach with minimum leverage or no leverage at all, to ensure financial stability.

HNWIs and UHNWIs, often disillusioned with traditional wealth management’s modest returns of 5-7 per cent per year, can achieve significantly better results through property development profit margins. This year alone, global HNWIs are projected to invest over Dhs16bn in Dubai’s property market, with landmark transactions such as a six-bedroom villa on Jumeirah Bay Island fetching Dhs240.5m.

However, Al Msaddi advises caution: “The Dubai real estate market, like other mature markets, can experience fluctuations. The excitement of booms and the losses during slowdowns highlight the need for smarter investment strategies. With Dubai’s prices currently at a high, it’s crucial to rethink strategies to mitigate downside risks while maximising profits during prosperous times.”

Real Estate Development Management is poised to become a preferred strategy for institutional and high-net-worth investors, offering access to more attractive deals in Dubai. “The most lucrative deals, including distressed portfolios and liquidated projects, require substantial capital and deep network connections,” explains Al Msaddi. “Prime opportunities are often exclusive to established developers, requiring specialised expertise and skills for successful development.”

“They say location, location, and location. I say developing the right property in the right location is the key. This is precisely what expert real estate development managers do,” explains Al Msaddi.

At the forefront of this emerging segment is fäm Development Management, leveraging a comprehensive in-house ecosystem and a track record of over Dhs15bn worth of delivered and ongoing projects. fäm Development Management provides a seamless experience, ensuring maximum returns and mitigating risks for its clients. With services spanning property sales, resale, rental, management, conveyancing, mortgage advisory, master agency, development, private equity, holiday homes, RenTech, PropTech, interior design, construction project management, engineered snagging and inspection, project handover, and training, fäm stands out as the go-to company for real estate development management deals.

As this segment continues to evolve, it offers a game-changing investment strategy for those looking to capitalise on Dubai’s dynamic real estate market. For investors ready to navigate this new terrain, the potential rewards are extraordinary.