Dubai mixed-use feasibility: shared costs and delivery phases

Separate uses before consolidating

Create schedules for residential sales, retail leases and other uses. Record area basis, delivery date, buyer or tenant receipts and operating obligations for each. Obtain the relevant approval evidence for the combined design rather than assuming independent schemes can simply be stacked together.

The FTA’s property FAQ differentiates general commercial and residential VAT treatment. A mixed-use project therefore needs an advised tax attribution and transaction analysis, not a single inherited rate from its residential component.

Sources: UAE Federal Tax Authority: How will real estate be treated?; Dubai Municipality: Building Permit Procedures

Allocate shared costs with a stated driver

Directly assign costs where the scope belongs to one use. For truly common costs, consider a driver such as constructed area, capacity demand or documented usage. The driver for structural cost need not be the driver for utility capacity or leasing management.

Keep an unallocated common-cost ledger and show the allocation reconciliation. Changing the allocation can change reported component margins, but it must not change total project cost or the date cash is paid.

Worked example: shared infrastructure

Assume residential construction area of 8,000 sq m and retail construction area of 2,000 sq m. Common infrastructure costs AED 10m. An illustrative area allocation assigns AED 8m to residential and AED 2m to retail. Direct costs are AED 60m and AED 14m respectively.

With assumed gross residential receipts of AED 90m and a retail disposal value of AED 22m, pre-finance surplus is AED 22m for residential and AED 6m for retail. Total surplus is AED 28m. The retail value is not rent and should enter cash only on its assumed sale date.

Place common works before dependent phases

If the AED 10m infrastructure payment is due before either phase generates usable receipts, it must be financed then. Dividing it between component appraisals does not defer the real invoice. Likewise, a retail sale in year four cannot pay a residential contractor in year two without a separate funding arrangement.

Identify shared completion conditions: access, fire systems, parking, utilities and public areas. A delay to common works can defer both residential handover and retail rent commencement. Model that dependency rather than applying unrelated delays to each component.

Report both contribution and cash

Show component contribution after the stated allocation, total project return and maximum consolidated funding need. Test an alternative defensible allocation to explain component economics, and a separate delivery delay to test liquidity. Do not confuse those two exercises.

Before approval, reconcile shared costs, physical scope, tax assumptions and phase milestones to the same design revision. The combined model should explain exactly which phase requires funding and which future receipts are expected to repay it.