Deyaar Development guarantees returns for Dubai project

Dubai-based Deyaar Development has made an unusual promise to investors on its serviced-apartments project in The Atria: The company is guaranteeing annual returns of 7 percent over the next two years.

The Atria is an upcoming 30-story tower in Dubai’s Business Bay that will be managed by Millennium & Copthorne Hotels when the building opens in the fourth quarter of 2017.

Other benefits for potential buyers include stays of up to 20 nights at the property, discounted room rates for friends and family and money off at the restaurants in the tower. 

Saeed Al Qatami, Deyaar’s chief executive, said that its offer was “unrivalled” in the market. "The package offers investors the opportunity to own a serviced apartment in one of Dubai’s most cosmopolitan quarters, with 14 percent guaranteed returns over two years," he said.

According to the National, guaranteeing a return is becoming a popular selling tool among developers of serviced apartments in Dubai. Earlier this month, Schon Properties announced that it would offer investors in its iSuites development of 2,700 serviced apartments in Dubai Investments Park "guaranteed annual returns" of 12 percent, although it did not specify the length of the guarantee period. Seven Tides had also previously offered a guaranteed return of 10 percent per year for investors who bought serviced apartments at its Dukes Dubai project at Palm Jumeirah.

Myles Bush, CEO of Dubai-based brokerage PH Real Estate, said that guaranteeing returns can be a “great idea,” for developers…but only “in principle.” On the plus side, a guarantee brings in more potential buyers. On the other hand, buyers need to look closely at the track record of the developers offering the returns and at prices for comparable serviced apartments.

“They need to look at the developer—have they done this before? Have they succeeded in delivering what’s promised?” Bush said. “The second thing is to do a comprehensive market analysis to make sure that the developer is not loading that price on top of the selling price.” Investors have “fallen victim” to unrealistic expectations before, he said. “They get very excited and think it’s fantastic but ultimately they are paying more on the initial asking price than the property is worth.”