Dubai: The Sobha Group — a name so far associated exclusively with premium developments — has plans to create an “affordable housing” project in Dubai, the details of which could be announced by the third quarter.
Land for the project will not be from the company’s existing portfolio and need to be acquired, according to a top official.
The locational details were not divulged. “The residential property market is ready for the next level of products ... and low to mid-tier housing is a top priority,” said P.N.C. Menon, Chairman. “There’s this confusion among people about lower specifications being the same as lower quality — that’s not the case with what we intend to deliver.
“There are many ways that a developer can create a product for the low end of the market and still maintain quality at a certain high level. One way would be to use specifications lower than the standard, such as cheaper tiles and on the other building materials. There are so many ways to bring the costs down to a point where it is reflected in the selling price.”
But aren’t land costs in Dubai still at levels where they can cut into affordable housing prospects? “We have to sharpen our pencils while making the (project) estimates,” said Menon. “And where needed, we can also look at reducing our margins.”
Creating enough new housing stock in the low to mid-end of the market has been assigned high priority by authorities in Dubai and Abu Dhabi. In Dubai, a mid-range product carries a per square foot price tag of Dh700-Dh900 a square foot.
Last year, some developers did make a determined push into this space, with the MAG Group launching a sprawling community-style development at Dubai South and the Danube Group introducing a series of mid-range apartment blocks at secondary locations in Dubai. Both developers had backed their sales programmes through easy instalment plans stretched well after the handovers.
Another developer with a super-luxury portfolio, Omniyat, last year confirmed it will be taking up a mid-market project at IMPZ.
For the Sobha Group to make an entry into the same space represents a major tweak in strategy. It is currently working on two high-end developments, at the Mohammad Bin Rashid (MBR) City and in Meydan City. On Monday, it launched the third phase of District One at MBR City, where the generously spaced villas start from Dh2,300 a square foot.
“The slowdown in the property market has been there since the second-half of 2014 and extended into 2015,” said Menon. “The sentiments that are visible now are lower than even 2015.
“But that doesn’t mean we should stop selling — there are even now huge possibilities that can be taken up in this market. Dubai is such an established realty product ... and there’s no comparison anywhere else in the region.
“We still have buyers for our products ... and the majority of them are outside investors. They are the ones who are not deterred by currency volatility and market softness.”
According to Menon, the stark difference between the crash of 2009 and the current softness in Dubai realty is that developers are still selling. “It’s so unlike 2009 — if the product is good and developers adopt the right sales methods, they are able to sell.”
The Group also has a growing development pipeline in some prime Tier 1 and Tier 2 cities in India. As of now, revenues from the Dubai operations outdo those from India on a 2.5:1 scale. “It’s the split we had for three years now,” said Menon. “There needs to be further project and market maturity in India before it gets to 1:1. That will take at least another five years.”