Invest your money in an asset, rather than wasting it on rent. This has so far been the main rationale given for buying a freehold property in Dubai, but Raju Shahani has another – timeshare. In fact, the regional president of RCI, the world’s largest arranger of timeshare ‘swaps’, thinks that Dubai has so much appeal as a destination that up to 10% of its freehold inventory could be put into the timeshare system.
So how does it all work? In Shahani’s hypothetical example, someone buys a villa in Dubai for around Dhs1.1 million (US $300,000.) The owner then hires a timeshare agent to sell ‘entitlements’ on that property.
Each entitlement allows its owner to live in that property for one specific week each year for twenty five years. Shahani is confident that each timeshare week in that $300,000 property could be worth an average of $10,000, with Winter weeks in Dubai obviously fetching more than Summer weeks.
Multiply that $10,000 by the number of weeks in the year and the owner makes a cool $520,000. Plus, at the end of the twenty five years, the owner has full control of the property again.
“You’ve done extremely well because you’re only giving people the right to use. At the end of 25 years, the asset reverts back to the owner, plus capital appreciation. You’re creating wealth,” says Shahani.
The obvious question is whether or not it will be possible to sell every week in a property. Even if a week in the intense heat of August costs far less than one in the peak tourist season of December, will anyone really be interested?
“In Dubai, everything will go. In Summer, weeks in Dubai will go to Arabs,” answers Shahani.
Weeks in timeshare properties, he explains, are divided into three compartments. Peak periods are referred to as ‘red time’, middling periods are known as ‘white time’ and off peak periods are known as ‘blue time.’ Shahani says he would happily assign nine months of the year as red time and the remaining three as white time.
It all sounds too good to be true, but, yes, there is a catch. None of what has been described above is currently legal in Dubai. Then again, it isn’t legal to sell properties on a freehold basis to foreigners, but that hasn’t stopped Emaar, Nakheel or Estithmaar.
There is, however, movement. One developer on the Palm has been given permission to turn up to 40% of its developments there into timeshare.Shahani is also busy lobbying Dubai’s authorities to permit timeshare as part of any future freehold ownership law. “I’ve created financial models that show how quickly timeshare can pay back and how much good it can do for the developer,” he says.
RCI’s interest in all this is that it is the largest company in the world for timeshare swaps, controlling something like 85% of the market. Say, for example, that a person is entitled to spend a week in Orlando, but decides that he doesn’t want to go there this year. He calls RCI and asks it to find him a week in another location, paying the company a fee for the service.
RCI also plays the role of a lobbyist, urging governments to oversee and regulate an industry that has had more than its fair share of negative press over the years. The company entered the Middle East in the 1990s when hotel operators in Egyptian resorts started putting spare room capacity into the timeshare system.
This year, it established a call centre in Internet City to serve timeshare owners in the region with weeks in countries such as Spain and India.
All this gives RCI more than a passing interest in seeing timeshare become legal and develop in the UAE. “I see tremendous potential for this industry here; I just hope and pray that the government will legislate, regulate and recognise the industry,” says Shahani.
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