UAE’s master-developers trying to enforce the build contract under these times face the classic Catch-22 situation.
On the one hand, they have spent hundreds of millions of dirhams in infrastructure for communities where open plots and/or semi-built structures are an eyesore and devalue the area. On the other hand, the lack of demand as well as the dearth of liquidity available in the real estate space in the COVID-19 era implies the weakest of developers are the ones affected the most.
This, thereby dents confidence in an environment that is already fragile. Individual developers that have their backs against the wall will be forced to either liquidate their holdings or build in an environment where demand is scarce.
Even as rents continue to fall (mirroring the fall in the population), the end result would be to throw out the baby with the bathwater.
To be sure, most master-developers have reacted with a sophisticated level of understanding, aiding developers in their time of need. But there is always this tension present in the ecosystem, whereby master-developers have to distinguish between land speculators and small developers who have been caught in a vice as a result of the pandemic fallout.
There have been encouraging signs recently with public speculation about revival of a few stalled projects. But the reality is that the landscape is replete with such cases, with each individual case having sufficiently nuanced differences that necessitates a careful approach towards resolution of the issues for confidence to be rebuilt.
Worth the time lapse
This tailor-made approach guarantees delays, but what it also does is allow for the creativity and risk-taking that the UAE has been known for to be nurtured and reinstated. Smaller developers in the real estate space, just like the SME sector throughout the world, have faced the brunt of COVID-19.
But it is these entities that define the variety and volition of creation and consciousness of the country.
Like the television and movie figures that we happen upon, so much of what we live upon and what defines us has been imported, trucked in, sailed in, modified upon, and nipped and tucked into its creation. Modernity changes the ecosystem and the landscape - none of it is ours yet all of it is us.
The UAE has been a bouquet of languages that sometimes merged, and the building boom that sparked off with the advent of freehold in 2002 is imbibed into the very fabric of this country. This itself is a magnet for drawing the best talent from across the world and a beacon that highlights to the rest of what the very best can be when people come together to create.
Perhaps what is needed is a collaborative approach where some sort of “sifting” can take place, giving genuine developers the space they need to recalibrate and rebuild. Oversight committees that involve an active interaction between master- and individual developers - and offplan buyers unable to pay their dues - can work out solutions as was the case in the downturn of 2008-09.
This would be a further form of stimulus that could be provided, where contractual obligations can be mutually extended on an individualized basis. And without the threat of penalties or punitive action, taking into cognizance both market realities as well as developer-specific issues.
Create new purpose
This would allow for a new ecosystem to rise, not one defined by the building frenzy of the past but one that looks at realities on the ground that would necessitate a new thought process to emerge. One that is not a replica model, but a customized solution offered on a holistic level, benefiting the end-user, investor, developer, and the community.
While this may sound idealistic in the extreme, these have been the very ideals that defined the spirit of the country. What’s needed are bespoke solutions and not just in this instance, which would allow for a re-infusion of confidence and lead to value creation in the medium term.
To do otherwise would be a disservice to the legacy of this great nation.
- Sameer Lakhani is Managing Director at Global Capital Partners.