Dubai: Access to land and funds are no longer enough to make a mark as a developer in Dubai. For that, the developer has to come up with a niche offering.
With almost 50,000 residential units likely to be handed over this year, developers need to be reasonably sure there are gaps in the market. “A lot of developers have looked at the numbers… and they are more cautious,” said Zhann Jochinke, Chief Operating Officer at Property Monitor.
“Emaar dominated the market last year, and even this year they have been the only ones to push forward. We have not seen much movement from smaller developers.”
Where are those niches?
Affordability is a theme that continues to work well, while some developers have managed to convince that they can deliver a quality build at certain accessible price points. Even sustainability is finding some traction with buyers.
“The double effect of an increased supply and a decline in prices has led to an overall softening,” said Sean McCauley, CEO at DevMark. “Due to this shift, developers are becoming more competitive in terms of their value offerings and more aggressive in their awareness and marketing campaigns in order to maintain turnover momentum.”
He points to “payment plans that have moved away from the traditional 10x10 per cent instalments to 50 per cent during construction and 50 per cent on handover, and now mostly to post-handover.
“We’ve also seen a trend towards reducing price points rather than rate per square foot. Developers are also increasing their marketing spend and embarking on multi-million dirham international campaigns through roadshows, exhibitions and retail stands,” said McCauley.
“Down payments have also been slashed by developers, from 20 per cent to a norm of 10 per cent, with some even going as low 5 per cent. We have seen developers waiving Dubai Land Department registration fees and service charges.”
Have that ‘differentiation’
“Ultimately, it’s offering differentiated products and services,” said McCauley. “The result is a business model that is more resilient to market turbulence and delivers consistent levels of profitability by creating a product that customers want. And (thus) establishing a reputation as a developer who delivers on promises.”
According to Atif Rehman, Director and Partner at Danube Properties, coming up with a modular design and tight control over supply chain should keep a developer comfortable even in a weak market. Ad in “strong negotiations and optimum economies of scale, then you can bring down the cost.”
Danube introduced the concept of a low-burden payment plan - the 1 per cent was rolled out late 2014. “The idea was inspired by the UAE Central Bank’s cap on offplan funding, which required a 50 per cent payment towards an offplan property and only then would a bank offer a mortgage,” he added.
Land is a piece of liability. It transforms into an asset only when we complete the project
“But to expect buyers to fund large downpayments was in conflict with our affordable housing plans. So we looked at this gap and created an opportunity for the affordable housing segment. The consumer was expected to put in a down payment, followed by a monthly instalment of 1 per cent. We take it to 50 per cent, which is ensuring that construction costs are covered and the balance we recover post-handover.”
“It opened up a big market segment where people could take possession and continue paying the balance.”
Rehman is not worried about surviving in a slow market. “We have been focused on delivery - that’s the actual business we hold. More than our new projects, more than the pipeline we have, it’s about the units already launched.
“Land is a piece of liability. It transforms into an asset only when we complete the project. Moving from liability to an asset is the only way to move forward.”