What is Return on Equity (ROE)?
Equity investment पर होने वाले annual net profit का percentage।
Description
Return on Equity (ROE) measures how effectively your own invested capital is generating returns. In real estate, ROE accounts for mortgage debt financing, if you borrow to buy, you calculate returns only on the cash you actually put in, not the total property value.
You buy a Dubai apartment for AED 1,000,000. You put down AED 250,000 (25%) and borrow AED 750,000. Annual net rental income after mortgage payments and expenses is AED 25,000. ROE = 25,000 / 250,000 = 10%. Without debt financing, buying fully with cash, the same property might yield only 5 to 6% on the full AED 1,000,000.
फ़ॉर्मूला
ROE = (Annual Net Income after Debt Service / Equity Invested) × 100Oliva इसे कैसे उपयोग करता है
Oliva's financial projections show both unleveraged returns and estimated ROE based on typical UAE mortgage terms, helping investors understand the impact of financing on their returns.
How to interpret
ROE rises with debt financing, which is why heavily mortgaged investors often report impressive equity returns during bull markets. The discipline is to stress-test ROE under adverse conditions: if rent drops 20% or vacancy extends to three months, does your net income after debt service remain positive? An ROE that collapses or turns negative under moderate stress indicates dangerous debt financing.
Compare ROE across your portfolio rather than in isolation. A lower ROE on a conservative, unlevered property may represent better risk-adjusted value than a high ROE on a heavily leveraged one exposed to the same market fluctuations.
दुबई मार्केट संदर्भ
ROE is higher than rental yield when debt financing is used and the property generates positive cash flow after mortgage payments. However, debt financing also amplifies losses if rental income drops or property values decline. UAE Central Bank caps LTV at 80% for residents and 60-70% for non-residents on first properties.
Frequently asked questions
The annual return generated on the investor's own capital (equity) invested in a property, expressed as a percentage, excluding the portion financed by debt.
The standard formula is: ROE = (Annual Net Income after Debt Service / Equity Invested) × 100. Applying it consistently lets you compare projects on a like-for-like basis, which is the point of the metric.
ROE rises with debt financing, which is why heavily mortgaged investors often report impressive equity returns during bull markets. The discipline is to stress-test ROE under adverse conditions: if rent drops 20% or vacancy extends to three months, does your net income after debt service remain positive?
ROE is higher than rental yield when debt financing is used and the property generates positive cash flow after mortgage payments. However, debt financing also amplifies losses if rental income drops or property values decline.
Oliva's financial projections show both unleveraged returns and estimated ROE based on typical UAE mortgage terms, helping investors understand the impact of financing on their returns.
ROE = 25,000 / 250,000 = 10%. Without debt financing, buying fully with cash, the same property might yield only 5 to 6% on the full AED 1,000,000.
Stop reading theory. See return on equity (roe) on real Dubai projects.
Oliva shows this metric live on 1,000+ Dubai projects, alongside 7 other data points that actually predict returns. DLD and RERA licensed, free to browse.
This content is for educational purposes only and does not constitute investment, financial, legal, or tax advice. Yields, returns, and market data referenced are historical or estimated and are not guaranteed. Capital is at risk. Seek independent professional advice before making investment decisions. Oliva is a licensed Dubai real estate advisor (DLD Broker Card: 92025, RERA BRN: 1573501). Read our Key Risks Disclosure and Disclaimer.