Capitalization Rate (Cap Rate)
Cap rate is the ratio of net operating income to property value, expressing annual return independent of financing. It is the fundamental valuation metric for income-producing properties.
| Calculation | Formula |
| Cap rate | (Annual NOI / Property value) times 100 |
| Inverse valuation | Property value = NOI / Cap rate |
| Market cap rate | Derived from comparable sales |
| Required return | Investor's minimum acceptable cap rate |
| Dubai Market Cap Rates | Range |
| Prime apartments Downtown | 4.5% to 5.5% |
| Secondary apartments | 5.5% to 6.5% |
| Older buildings suburban areas | 6.5% to 8% |
| Villas prime locations | 4% to 5% |
| Commercial offices | 6% to 9% |
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