Dubai Guide

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The city of Dubai is the main population centre of the Emirate of Dubai, one of seven which joined to form the United Arab Emirates in 1972. Ruled since 1833 by the Al-Maktoum Dynasty, Dubai is located on a sheltered harbour and was already one of the principal ports on the Persian Gulf by the 1870's.

In 1903 it became a major British port of call, and the city remained as a protectorate of Great Britain until the Trucial States were declared independent in 1971.

Dubai was originally a small fishing town and became prosperous through an economy based on pearls and international sea trade. By the beginning of the 20th century the city was famous for having one of the largest souks (markets) in Arabia.

In 1966 the discovery of oil in the region brought a new era of prosperity to Dubai. Today its economy is diversified, with oil taking a back seat to trade and manufacturing. Its free trade policies distinguish it from the other emirates within the nation, making it a special economic zone somewhat like Hong Kong.

Today the city of Dubai is one of the wealthiest and most modern anywhere, boasting the highest skyline in the Middle East including the two of the tallest hotels in the world. It attracts a booming tourist business, drawn in part by major sporting events including horse races, boat races, tennis matches, and air shows. It is also a major shopping destination and an extremely international city, where only one quarter of the population consists of native Emiratis.

Why Invest in Dubai?

Prices in the Dubai real estate market are inexpensive by comparison to other similar trading hubs around the world and have risen by more than 20% in the past two years. There is scope for a substantial further rise in Dubai property, and certain properties have doubled in value already.

Overseas property is a good hedge against inflation which is showing signs of re-emerging in the global economy. At such times the higher cost of debt servicing can usually be past on in additional rent, while the value of the property inflates and its debt is unchanged.

Rental income from overseas property is a stable source of income, and while it might fluctuate, is highly unlikely to vanish altogether. Compare that to interest on deposit accounts or dividends on shares.

Real estate always has a residual value, although prices can certainly fall as well as rise. But property values will never fall to zero unlike shares and hedge funds.

Property is a kind of hybrid asset with the capital appreciation of a stock but the income producing capacity of a bond.
Property investors typically have more control over the nature, timing and size of real estate investments. This is partly because they are tangible and easier to understand, and diversification is readily available in the form of different types of investment property.

The Dubai property is open to any investor from anywhere in the world, unlike the local stock market. This means greater liquidity and more funds in the marketplace.

Demand for property typically picks up during an economic boom such as the one being seen in Dubai now. With massive projects such as the Dubailand theme park, Palm Islands,The World and Dubai International Financial Centre coming to fruition, this looks a wise time to invest in real estate in Dubai.

Real estate is always an excellent collateral security against loans, and allows debt finance to be secured at the best rates.

Property portfolios offer great scope for diversification of risk into different property types, locations and rental levels. This helps to spread the risk of an interruption to income flow.

The Dubai economy enjoys a competitive combination of cost, market and environmental advantages that create an ideal and attractive investment climate for local and expatriate businesses alike. In fact, these advantages not only rank Dubai as the Arabian Gulf’s leading multi-purpose business centre and regional hub city, but they place it at the forefront of the globe’s, dynamic and emerging market economies.

Dubai, with its ancient commercial and seafaring traditions, has long been recognised as the Middle East region’s leading trading hub and has emerged as its key re-export centre. In more recent years, the Emirate has become a major venue for a number of growing, profitable industries and activities such as :

- Meetings, conferences, exhibitions
- Tourism
- Corporate regional headquarters
- Regional transport, distribution and logistics centre
- Banking, finance and insurance
- Business and industrial consulting
- Information and Communications Technology
- Light and medium manufacturing

This all became possible due to Dubai’s warm, welcoming people, world class facilities and infrastructure and farsighted, open and liberal economic policies. Finally, committed to a progressive vision of itself, keen to diversify its economy and diminish its reliance upon shrinking oil revenues, Dubai has begun to develop into the Arabian Gulf’s premier international business centre.

Dubai’s Key Advantages

Political and Economic Stability - Dubai is part of the UAE which is a low-crime and politically-stable country. Also, the UAE enjoys financial and monetary stability. Its well-developed, sophisticated banking system features extensive credit facilities and ample liquidity. The Emirate’s emerging capital markets are built on a basis of leading-edge technologies and sound regulatory systems. The government has a long, consistent commitment to pro-business, liberal economic policies including the protection of intellectual property rights. The UAE benefits from stable and harmonious industrial relations.

Finally, there is a well defined, sound legal framework for business and a clear set of ownership rules. Foreigners are permitted ownership rights of up to 49% for limited liability companies established within the Emirate of Dubai and up to 100% for professional companies, branches and representative offices of foreign companies and free zones enterprises. All of these factors reflect positively in Dubai’s being assigned an investment grade rating for fixed income investment by Moody’s Investors Service.

Open And Free Economic System : Dubai’s economy has been kept open and free to attract investors and business. Government control and regulation of private sector activities has been kept to a minimum. There are no direct taxes on corporate profits or personal income (except for oil companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on net profit generated within Dubai). Customs duties are low at 4% with many exemptions, 100% repatriation of capital and profits is permitted, there are no foreign exchange controls, trade quotas or barriers and a stable exchange rate exists between the US Dollar and the UAE Dirham (US$1.00=AED 3.678). Liberal visa policies permit easy importation of expatriate labor of various skill levels from almost all over the world.

Strategic Location : Dubai is a time zone bridge between the Far East and Europe on the East-West axis and the CIS and Africa on the north-south axis. It is a gateway to a market that can be characterised as:

Large - well established trading links exist with the greater than 1.5 billion people in the neighboring region covering the Gulf, Middle East/Eastern Mediterranean, CIS, Central Asia, Africa and the Asian sub-continent;

Growing - Dubai’s total international trade has grown on average by over 11% per year since 1988 and regional economic growth and liberalization should boost demand further;

Prosperous - a buoyant local economy strategically located in the midst of one of the world’s richest regions and well endowed with ample supplies of cheap energy and primary aluminum; also adjacent to major regional suppliers of vital agro-export commodities;

Diversified - varied and significant import requirements generate opportunities for product suppliers and re-exporters;

Accessible - served by over 120 shipping lines and linked via 85 airlines to over 130 global destinations;

Open - no exchange controls, quotas or trade barriers.

World Class Infrastructure and Service Sector : Dubai’s deliberate policy of investing heavily in transport, telecommunications, energy and industrial infrastructure has enabled it to have one of the best infrastructure facilities in the world; it also contributed significantly both to its ongoing prosperity and attractiveness to international business. The Emirate features a network of seven industrial areas, one business park and three highly successful, specialised free zones of international distinction, two world class seaports, a major international airport and cargo village, a modern highway network, state-of-the-art telecommunications and reliable power and utilities all of which deliver efficiency, flexibility, reliability, reasonable cost and size.

Complementing its world class infrastructure is a sophisticated service sector that features leading regional and international freight forwarders, shipping companies, insurers plus major international hotels, banks and financial service firms, lawyers, accounting firms, consultants, advertising agencies, top international exhibition and conference facilities, high quality office and residential accommodation, first class hospitals, schools, shopping centers and recreational facilities.

Competitive Cost Structure : International companies setting up in Dubai can obtain significant cost advantages not generally available internationally.

The major factors are:

- No foreign exchange controls,
- No trade barriers or quotas,
- Competitive import duties (4% with many exemptions),
- Competitive labor costs – labour force is multi-lingual and skilled,
- Competitive energy costs,
- Competitive real estate costs,
- Competitive financing costs and high levels of liquidity,
- No corporate profit or personal income taxes (except for oil companies and branches of foreign banks).

High Quality of Life, Excellent Living Conditions : Dubai’s private sector has invested heavily in real estate such as hotels, residential and commercial properties, recreational and leisure facilities. In addition, a number of factors have contributed to the Emirate’s high quality of life and superior living conditions making it a model location for many to emulate. Those factors include excellent infrastructural facilities, low crime, clean environment, tolerance and cultural diversity, cosmopolitan life style, modern public administration, availability of a wide range of consumer goods and services, mild winters and clean, palm fringed beaches.