DUBAI- Emaar Properties expects to sell a 20 percent stake in its real estate development business next month in an initial public offering, it said on Sunday, with the smaller than anticipated sale sending its shares down by more than 2 percent.

Dubai's largest listed developer said in a bourse statement that it had received shareholder approval to sell up to 30 percent of Emaar Development on the Dubai exchange, the first major listing in three years.

Emaar Development was valued at 24.1 billion dirhams ($6.56 billion) as of September by JLL, Emaar said in a separate bourse statement, confirming a Oct. 2 Reuters report.

Sunday's announcement was "slightly disappointing for the market," said SICO Bahrain senior analyst Ayub Ansari. "The implied yield is now much lower."

The market expected Emaar Properties to distribute a one-off dividend of 1 dirham per share, but a 20 percent sale would mean a dividend distribution of 0.67 dirhams per share based on the 24 billon dirhams valuation, Ansari added.

The development business plans to pay out $1.7 billion in dividends in the three years to Dec. 31, 2020, Emaar said.

Emaar had previously said it was considering listing up to 30 percent of the business and that proceeds could be distributed to Emaar Properties shareholders.

Emaar Development has delivered more than 34,500 homes in Dubai since 2002, including in Downtown Dubai and Arabian Ranches.

Retail investors can subscribe to the offering between Nov. 2 and Nov. 13, and institutional or high-net-worth investors from Nov. 2 to Nov. 15, Emaar said. ($1 = 3.6727 UAE dirham)

(Reporting by and Alexander Cornwell and Saeed Azhar; Editing by David Goodman) ((Saeed.Azhar@thomsonreuters.com; +971 44536787; Reuters Messaging: saeed.azhar.reuters.com@reuters.net))