Opting for affordability the way to go in Dubai real estate
DEVELOPERS KEEP THEIR FOCUS ON MID-INCOME SEGMENT TO PITCH THEIR PROJECTS
Get more of Dubai’s tenants to switch over to buying their homes — developers are sharpening their marketing pitch to do so. And coming out with projects aimed at this core audience.
“Dubai’s home rentals are not going to go down — there’s no reason why it should,” said Rizwan Sajan, Chairman of Danube Group. “Official estimates reckon the population will grow from 2.4 million to 6 million by 2020.
“Even if we assume that only 75,000 of these are white-collar professionals with families, that’s still a substantial number that the emirate will have to absorb. But the new residential supply is only averaging 10,000-15,000 new units a year.
“Those new homes will not be able to absorb all of the anticipated population increase. And that’s why there is not much chance of existing apartments remaining vacant and forcing landlords to cut rents.”
Clearly, the current spell is not going to be a repeat of 2009, when both residential sales and rental values fell alarmingly.
Danube’s property arm has just launched its fifth end-user focused project with offer prices at around the Dh1,000 a square foot mark. The ‘Ritz’ features two buildings located in the Al Furjan cluster and close to Discovery Gardens. In all, there will be 446 units that are to be delivered in 2018.
The project cost is Dh300 million and takes Danube’s overall development value to Dh1.5 billion.
“These units are coming fully furnished and will utilise space such a way that a one-bedroom unit can be converted into two bedroom spaces through convertible sofas,” said Sajan. “It’s aimed at the small family wanting to buy rather than rent and still want to have their private spaces.
Creative
“There are many ways that living spaces can be optimally used in the homeowners’ favour. We are getting creative.”
Danube has steadfastly maintained a pricing of around Dh1,000 for its apartment projects, convinced this the sweet spot a mid-income longer term resident will want to get into.
As with its earlier projects, the 1 per cent a month instalment scheme — after the down payments — will be in force. “Even if a buyer wants it as an investment asset, he’s still assured of an 8 per cent yield … even higher,” said Sajan. “When he takes delivery in two-and-a-half years’ time, the rentals he will generate from leasing out will more than take care of his instalments.”
With the Ritz, Danube now has five projects ongoing. It has no spare land bank, sticking to the developer’s strategy of not carrying anything in excess and thus prove a drag on funds.
“if we sell off Ritz in quick time, we will be ready to launch a new project in another three months,” said Sajan. “We will go about buying the plot just before that. There’s no hurry.”
Better response
For those Dubai developers who are now targeting the end-users, the benefits have not been slow in coming. Even though overall transactional activity is still way off from their 2013-early 2014 peaks.
“Affordable segment sales have generally achieved better response than others,” said Declan McNaughton, Managing Director at Chestertons Mena. “There have been a significant number of launches during the first two quarters, nearly half of them have been in the affordable segment, (those by the developer) Nshama being the prominent one. However, investors are in a wait and watch mode.”
The weak secondary market means there has been limited upward movement from the launch prices. This gives developers all the more clout in deciding how much they should offer as incentives to make buyers come to them. “Many developers are readjusting their portfolios to meet the end-user demand,” said McNaughton. “Innovative payment schemes from developers can further encourage buyers to consider the option of owning a property.