ROI is the vaguest useful number in Dubai real estate. Everyone quotes one. Almost nobody defines which ROI they mean.
Return on investment is net profit divided by the amount invested, expressed as a percentage. The ambiguity: “invested” can mean the property’s full value (implying cash purchase), the actual cash deployed (implying the leverage version), or some blend. Brokers default to whichever number flatters the listing — usually gross yield presented as “ROI” because it produces the highest-looking percentage.
A useful discipline: when anyone quotes an ROI, ask three questions. ROI on what — cash deployed or sticker price? Annual or cumulative? Gross or net? A “22% ROI” on an off-plan unit might mean 22% total appreciation over three years of capital deployment (which annualises closer to 7%), or 22% on the 20% down payment (much higher), or anything else the agent finds convenient.
A client last month was pitched an off-plan unit at “18% ROI.” Once we pinned down the definition — cumulative capital appreciation over 30-month build, on contract price, before fees — the annualised net IRR came to 9.4%. Still reasonable. Not 18%.
Define ROI before you accept the number. Or it’s noise.
Related: ROC, ROE, IRR, Margin.
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