Obtaining a mortgage in Ras Al Khaimah is becoming easier as more banks have started lending again to customers wishing to buy into projects in the emirate, say real estate agents.

"The mortgage scenario in RAK, while not improving in leaps and bounds, is showing signs of a revival," said Parvees Gafur, Executive Vice-President for Sales at Gowealthy. "Banks such as HSBC, RAK Bank and Noor Islamic Bank are active in this segment – though on a restricted basis.

"The range of properties being financed is extremely limited. Al Hamra Village, for example, is one of the very few developments that are approved for mortgages."

"Finance is slowly becoming available in RAK and banks are funding up to 90 per cent of purchase prices depending on the bank and the development, and subject to case-by-case consideration. Finance is definitely becoming easier to find," said Mohanad Alwadiya, Director of Harbor Real Estate.

Alwadiya said the establishment of escrow accounts in RAK had led banks such as Badr Al Islami – Mashreq, Bank of Baroda, Commercial Bank of Dubai, Abu Dhabi Commercial Bank and Dubai Islamic Bank to offer such accounts for projects in the emirate.

He said financing was vital for RAK as a number of projects were expected to be handed over in ?the next two years.

"RAK will start to take shape in 2011 as most of the Jazeera area with its beachfront developments should be completed then, with about 2,000 units expected to be handed over in the area. Financing will certainly help the real estate market in the emirate."

Gafur said: "Overall prices for freehold properties have dropped from Dh900 to Dh750 per sq ft in the last six months. We recently sold property in the secondary market for approximately Dh500 per sq ft. The asking price in RAK is fairly consistent and does not really vary between small, medium and luxury projects. Most of the developments we are dealing with are towards the higher end.

"With sales and purchases extremely limited and restricted to the completed property segment, there are very few hard facts on property prices to substantiate price points."

He said the number of sales had slowed down since the 2008 peak.

"As an example, in Al Hamra Village the original price of a three-bedroom golf-course townhouse was about Dh1.8 million, but now the going price is about Dh1.2m. This is just an indication of the slowdown in the property market.

"There are, however, positive indications and some developments are bound to loosen these shackles and allow for a more optimistic and profitable future. Various initiatives will, over a period of time, start creating demand for properties and this is bound to peg property prices at optimum levels."

Gowealthy says a four-bedroom villa at Mina Al Arab costs about Dh4.6m. In the Cove, a one-bedroom townhouse is Dh1.5m, a one-bedroom villa is Dh1.1m and a two-bedroom villa is Dh1.8m. Three-bedroom apartments at Bab Al Bahr in Al Marjan Island cost about Dh1.75m, and three-bedroom apartments at Santorini on Al Marjan Island are about Dh3.05m.

Gafur said: "Various marketing campaigns in RAK are offering luxury developments at four-star prices. Prices are expected to increase next year because the emirate has won the right to host the 33rd America's Cup sailing race in February, which is expected to give a boost to the UAE and especially RAK."

Rentals, however, are compensating property owners for the low sales prices.

"Many investors at Al Hamra Village are content to retain their units and rent them out," said Gafur. "For example, a three-bedroom townhouse at Al Hamra Village with an original price tag of Dh1.8m currently commands a rent of about Dh95,000 per year. That equates to a five per cent return, which is comparable to global standards. The investors, mostly UK expats, are quite content with these interest levels."

Kosta Giannopoulos, Sales and Leasing Manager at Better Homes, said: "People are definitely looking to continue renting in RAK rather than buying a property. There is a lot of movement in the rental market due to people upgrading to larger apartments because they are more affordable. People are also downgrading to smaller apartments because their financial situation has deteriorated.

"Prices have not really dropped too much in the past six months as we are facing the same economic situation now as we were facing before. Developers have not dropped the prices of their direct sales stock as they have a bottom line in terms of construction costs that needs to be met.

"Prices on the resale market are more competitive and there are some distressed sales that can offer a great opportunity for buyers looking to pick up well-priced units. There has not been any change in the number of transactions in the Northern Emirates in the past six months – there have been only a few transactions."

Alwadiya said there was a shortage of quality rental properties in RAK.

And Khaldoun Kamal, Manager, Sales and Leasing, for Abu Dhabi and the Northern Emirates at Asteco Property Management, said: "Sales prices in RAK are currently about Dh650 to Dh850 per sq ft. Prices were as much as Dh1,100 per sq ft about six months ago.

"In Yasmine Village, prices average Dh550 per sq ft; in Al Hamra Village, prices are about Dh700 per sq ft; and units at the Cove cost Dh950 per sq ft."

Alwadiya said agents were mainly selling luxury developments rather than medium-size or small projects located in the downtown area of RAK.

"This is because the freehold market is centred on the Jazeera area with major projects such as Al Marjan, Bab Al Bahr, La Hoya Bay, Mina Al Arab and Al Hamra Village. Al Hamra Village is 90 per cent completed with a golf course, a five-star hotel, beach clubs and yacht clubs."

Al Hamra Village is the only project in RAK that has reached this level of completion and has achieved an occupancy level of 80 per cent.

"Bab Al Bahr on Al Marjan Island, a sister development of Al Hamra Village being built by Rakeen Properties – a government entity – is also on schedule. The infrastructure for phase one and two is completed and the infrastructure for phase three and four is expected to be completed by December 2009," said Alwadiya.

"Brokerage firms are becoming more active in selling RAK projects because of the America's Cup. Sales generally take longer to complete and there are fewer of them compared with the rest of the emirates. More inquiries are coming in but there has been no real change in the number of sales in the past six months."

He said most buyers in RAK were end-users looking for permanent residential properties or holiday homes – a view confirmed by Kamal.

"Occasionally, investors purchase units to turn over within a year of buying because they are still achieving premiums of about 20 per cent. On the other hand end-users and smaller investors are looking for long-term capital investments and are buying to let. This was seen at Al Hamra Village where all the completed products are achieving a good rental yield," said Alwadiya.

Investors in RAK were expatriates from the UK and Subcontinent when the projects were launched, according to Gowealthy.

Gafur said: "These investors saw the emirate as the easiest and most viable point of entry into the UAE's growing freehold market. Following the slowdown, these investors have disappeared from the market and the handful of purchasers or prospective buyers seem to be end-users. With off-plan sales and trade coming almost to a standstill, the interest levels are visible only on ready properties such as those at Al Hamra Village."

Meanwhile, several developers have already registered their projects with the RAK Investment Authority's Real Estate Regulatory Agency (Rakia Rera), which now monitors Rakia-supervised real estate developments with a collective value of Dh6bn.

"Developers may only register with Rakia Rera when the project's concept design has been approved, which will allow them to open an escrow account and start selling properties," said Gafur. "Rakia Rera will also oversee the proper conduct of construction by sending out a team of engineers to inspect projects and make sure that the emirate's construction policy and the key points in the contract are strictly followed."

Developments under review

The construction of a number of projects in Ras Al Khaimah is progressing at a slow pace, according to Gowealthy – and some developments are under review.

"RAK Properties, the developer behind projects such as Mina Al Arab, Julfar Tower and RAK Tower, recently announced a scaling back of developments that will affect projects worth almost $1bn (Dh3.67bn)," said Parvees Gafur, adding that RAK had a reasonably advanced freehold market with many projects being announced over the last few years.

"Some of them are Al Hamra Village, the Cove, Julfar Towers, Saraya Islands, Mina Al Arab, Al Marjan Island, Yasmin Village, La Hoya Bay, Mangrove Island, Al Noor Project and Hulaya Island," said Gafur.

Projects in Ras Al Khaimah

- Julfar Towers is a residential and commercial freehold development project. The project is being developed at a cost of $109 million (Dh400m) and will comprise two 40-storey towers, one for residential use and the other for commercial use.

The residential tower will have 349 apartments ranging from studios to four-bedroom deluxe flats and a limited number of duplexes. The commercial tower will have 469 office units of varying sizes.

- Bab Al Bahr is the Dh1 billion flagship project on Al Marjan Island, off the coast of RAK. Upon completion, Bab Al Bahr will comprise 136 studio apartments, 356 one-bedroom apartments, 236 two-bedroom apartments and 104 three-bedroom apartments.

- Al Hamra Village, covering five million sq m, comprises two residential towers – Royal Breeze and Oceana – plus Al Hamra Palace Hotel, a luxury seaside resort.

Royal Breeze consists of townhouses, villas, penthouses and apartments built in a traditional Arabian style.

Approximately 350 apartments and 200 villas and townhouses have been handed over at Al Hamra, which is the only project that is witnessing trading and sales – though not at a premium to the original prices.

Mina Al Arab has been delayed and work will not commence until market conditions improve.