Demand for well-positioned, affordable luxury offplan properties will continue to drive growth in Dubai’s real estate market - contrary to popular belief.
Despite the market situation aggravated by the COVID-19 pandemic, we see opportunities in this housing segment. There are good reasons why I say this.
First, the UAE is a land of opportunities – it has been, is and it will be – especially with the new reform measures. That factor is never going to change. The opportunities will continue to widen, resulting in more people entering the market that will add to demand for homes.
Second, about 70-80 percent of the expatriates in Dubai and northern emirates still lives in rented homes. Many would love to move in to their freehold homes – if developers and the financial community can offer a good value proposition.
Not out of reach
A family could buy a freehold apartment if they can invest their 10 years’ rent on the existing flat in instalments through a ‘rent-to-own’ scheme. Our research shows that a family with a household income of Dh15,000-Dh20,000 could easily pay for a two-bedroom apartment in instalments, while living in a rented home and paying both for the rented apartment and their future freehold homes.
Do these sums
If a family’s current monthly rental expenses come to Dh5,000 and the Equated Monthly Installment (EMI) for a freehold apartment is between Dh4,000-Dh5,000 per month, for an affordable home, the total cost of rent and home acquisition comes to Dh9,000 to Dh10,000. In two to three years, if the freehold apartment is delivered, it frees up Dh5,000 in rental expenses that could be added to the family’s savings.
This is very much possible… and over the last six years, we have demonstrated it – to more than 3,800 homeowners, most of whom were tenants. In the affordable segment, demand for quality freehold homes outpaces supplies. And the gap is big.
There is a large captive market for developers if they can extend their helping hands to salaried families. The onus in many ways is on the developer and financial communities to come up with a value proposition.
To give you an example, we launched our last project, Lawnz, on March 11, 2020 – just before the lockdown. The project was sold out right after the lockdown was lifted, in the third quarter of last year.
Right now, we do not have new properties to sell – although our sales teams are getting calls from buyers inquiring for the new properties.
Third, the unique selling points of Dubai remains intact – regardless of the global economic situation and other challenges. A world-class infrastructure, safety, security, good quality life and connectivity with the rest of the world makes it the most attractive place to live, work and enjoy life.
Here's why they will buy
You can’t get the best of both the worlds in one place the same way these are offered in the UAE. So, people will continue to invest in the UAE economy, regardless.
COVID-19 is a short-term challenge – although it might have shattered public confidence in many parts of the world due to high infection and death rates.
However, we have seen many wanting to relocate to Dubai during pandemic – due to these factors. Wealthy individuals who do not feel safe in their countries have relocated to the UAE due to the country’s good record in handling the pandemic.
Fourth, global events like the Expo usually leaves a good legacy. Among those who will come to the UAE for the Expo, many will opt to stay back and perhaps buy property – which will trigger demand once again. We need to prepare for that.
Lastly, the new reforms announced by the UAE Government, offering 10-year visa and granting of citizenship to foreigners who could add value to the UAE economy and society will attract new talents and investors. It will add to the country’s growing attractiveness.
Credible developers who have made launch, selling, developing and delivering on time a habit, should continue with the good works.
I therefore see no reason for not launching properties that we are confident of selling out, developing and delivering. Real estate is a long-term business that should not be affected by short-term challenges.
As entrepreneurs, it is our job to overcome those short-term challenges. How we do is our call. But it should not stop us from delivering quality affordable homes and helping buyers pay what they agreed to pay.
- Rizwan Sajan is Chairman of Danube Group.