Dubai: Dubai’s developers are not going to sit out the current weak spell of buying activity in the real estate market.
In fact, where possible, they are taking the longer-term view to start building now and that buyers will start to show up at some point.
In fact, developers believe they can hook in a sizable buyer interest using the affordability hook.
“In today’s marketplace — and it will be the case going forward — developing is going to become a very ‘localised’ business and right down to individual neighbourhoods,” said Tariq Bsharat, Executive Director of Strategy and Operations at MAG PD.
The company will be launching the second phase of its MAG 5 Boulevard mid-tier development located in Dubai South at Cityscape.
Prices would be in the range of Dh400,000 for a studio and Dh500,000-Dh600,000 for a one-bedroom.
“Developers can still do a lot in the outlying neighbourhoods of the city, which are still being built up. And with simultaneous creation of transportation links, commuting will cease to be an issue for buyers. Even the future parking requirements within a community need to be kept in mind and not just the property itself. It’s a similar situation for developments in” the other emirates too.”
Clearly, developers are seeing the value in creating well-defined living spaces with the end-user in mind. Gone is the near obsessing about roping in cash-ready investors looking at a property acquisition in Dubai as an asset play. Today, the focus is on building a ‘home’, and not just a ‘property’.
It’s clear that the next round of projects will push steadfastly into the ‘Dubai South’ corridor, built around the Al Maktoum International Airport and the city-within-a-city that will take shape there in the years to come. Simultaneously, it works to the advantage of clusters such as Jumeirah Village, Jumeirah Golf Estates, IMPZ (International Media Production Zone) and DuBiotech.
According to an advisory from ValuStrat, ‘New affordable developments can greatly benefit from the well-established public transport, particularly the Dubai Metro. Within five years Dubai Metro’s Route 2020 and Etihad Rail will connect Dubai South, and further afield towards the northern emirates and Abu Dhabi.’
Developers are just as determined to think longer term. Bsharat states that too much of noise is being made about the current slowdown — “Developers cannot get distracted by the noise on a quarter-on-quarter basis. They cannot go by what’s happened in the last two or three months.
“The overall vision for the city’s development is absolutely sound — it’s a long-term focus and that’s what developers should buy into.”
There are other factors that are still in favour of a developer looking to get started on a project now. “(Bank financing) rates are still extremely low, and low interest rates also help if a developer wants to provide direct financing to buyers,” said Rizwan Sajan, Chairman of Danube Group, who now has a portfolio of five mid-scale projects under construction. The plan is to add another in the next “three to four months and which would be in the Arjan or Furjan clusters in Dubailand.”
“A developer gets to have much more flexibility if he also handles the financing — the instalment period can be structured in a way where the buyer can pay off the bulk of it post the handover. The developer on his part can also minimise the interest rate or even forego it completely.
“Even in a tightening market, if a developer can offer properly priced projects in a good vicinity and with ready infrastructure availability, he won’t have a problem selling. Back that up with a good payment plan and from a branded developer, he will still have an immediate sell-out.”
In its Dubai market update released on Monday, the consultancy CBRE notes, ‘Developers are incentivising sales by offering flexible payment plans, some of which are back-loaded and provide post-handover payment options.’ The report finds that property sales value have dipped by an average 6 per cent on a year-on-year basis. The drop from the second quarter was by 2 per cent.
‘While global economics have certainly reduced investor sentiment and impacted sales, the slowdown is also attributed to a price correction resulting from market stabilisation. In light of lower activity,’ the report added.
“Unless you are a master-developer, I‘ve always felt developers are better launching a limited number of projects and then seeing them off one by one,” said Sajan. “In Danube’s case, the strategy has been to launch mid-ticket projects in the Dh500 million range.
“That way, even if sales proceeds are slow to come in, I can still be comfortable using a mix of equity and bank funding to see the project through. Sales will eventually follow.”
That is a mantra Dubai’s developer community will find a resonance with.
