Dubai: The layoffs and salary slashes are starting to gather momentum in the UAE’s real estate space, with personnel in the sales department facing the worst of it. Another category that is seeing a lot of personnel cuts is the hospitality division of leading developers in Dubai and Abu Dhabi.
Organsiations are laying off 20-30 per cent of field sales staff. Another way businesses are trimming staff strength is by not renewing the tenures of contracted staff, especially in the hotel sector.
Emaar recently saw the departure of its CFO (chief financial officer) and of others filling mid to senior executive positions, according to market sources. It is not known whether the recent changes had to do with the current market situation or something stemming from decisions much earlier.
There was no feedback from Emaar’s corporate communications team whether more changes in headcount are planned, but sources at the company have said that “radical” steps are being taken to cut down on costs. The upcoming first-quarter announcements – particularly that of bell-weather Emaar - will give some indication on what could be in store for the local property market in a COVID-19 influenced sales environment.
As such, there has been just one major offplan launch in Dubai in the first three months. Some of the releases from late last year had not been doing too well even before the COVID-19 struck.
Last week, a note bearing Emaar Chairman, Mohammed Alabbar’s signature was doing the rounds, which spoke of across-the-board salary cuts “until further notice”. For middle and senior managers, it meant 40-50 reductions in the take home packages, effective from April 1. (Alabbar took a 100 per cent cut, as per the circulated note. Emaar has not formally issued any statement to date stating whether this is indeed the case.)
Another leading developer in Dubai is without a CEO, and indications are that the position will remain vacant for the “foreseeable future”. The talk in the market is that the former CEO is looking for a job and willing to take up one even at a 50-60 per cent cut on what he was earning.
The pay cuts may go deeper into the organisation
Tough times will get worse
Pay cuts will become standard practice as businesses across sectors try to get their operations back into some degree of normalcy. There will be “executive pay cuts for three to four months of 20-25 per cent of salary, and pay adjustments for top performers,” said Vijay Gandhi, Regional Managing Director at Korn Ferry Digital, the recruitment firm. “The pay cuts may go deeper into the organisation if the ceasing of commercial activity gets extended.
“There will also be reduce bonus accruals. Companies are reducing bonus and commissions accrual for 2020 performance.” (Organisations accrue bonus every month based on monthly performance and distribute this pool after 12 months.)
So far, the UAE’s retail sector has not reported massive layoffs taking place – businesses could be waiting for malls and high-street shops to open before they make up their mind on staff retention numbers. Retail sector sources say it could take a few more weeks before UAE residents muster courage to be at shopping destinations for anything other than priority purchases.
Construction keeps going
Developers continue to push ahead with ongoing projects, especially those that are somewhere well along the construction cycle.
But once these projects are done with, “Private developers will slow down on new launches in the next 12-18 months and the extended payment plans of the past will dry up,” said Omar Jackson, Partner at Berkeley Assets, a private equity firm. “Because the smaller developers won’t be able to sell enough of offplan units to maintain their cashflow.
“What no one in Dubai wants to see are loads of uncompleted developments like what happened 12 years ago. So, complete what they got going and not launch anything new.”
Sources at some of the bigger private developers agree with Jackson’s thesis. Their priority is to finish off ongoing projects – and make sure they have the funds available to do so.
As for staff requirements, “For construction to keep moving quickly, some staff are still allowed to attend the office - engineers, for example,” said a spokesperson for a leading Dubai based developer. “For those who attend, they are getting full salaries. And for those working from home, there is a temporary salary reduction. But only for as long as they work from home.”
New hiring will go into a deep freeze. That’s a given. Even without the COVID-19 outbreak, businesses in the UAE had been slow in adding to the workforce.
“There will be a freeze on hiring until situation goes back to normal,” said Gandhi. “And we have already seen unpaid leave in hospitality sector.
“In addition, there will be renewal of contract staff on a “need” basis. We are seeing organisations moving staff between divisions to match demand with talent capacity for group businesses.”