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Predictions 2018: Danube founder and chairman Rizwan Sajan

Predictions 2018: Danube founder and chairman Rizwan Sajan

Sajan explains why he believes the UAE’s affordable housing market is still undersupplied

Dubai’s real estate sector showed signs of further resilience and maturity in 2017 amid a volatile regional economy, marked by regional conflict, a refugee crisis and low oil prices that dampened investor sentiment to some extent.

However, the property sector in the UAE remained unaffected, stable and showed signs of growth due to the fact that the country remained insulated from all these regional crises. This reflects the quality of the UAE leadership and their determination to protect the country and its economy from all external volatilities and threats.

The real estate transaction report for the first nine months of the year issued by Dubai Land Department (DLD) showed a clear increase in transactions, crossing Dhs204bn ($55.5bn). One of the key factors behind this was an increase in Indian investment, which crossed Dhs20.94bn ($5.7bn) in the first 11 months of 2017, compared to Dhs12bn ($3.2bn) in 2016, according to the DLD.

The UAE’s property sector has also witnessed large-scale investment in the form of major mixed-used projects taking off, especially at Meydan City, Mohammed Bin Rashid City and Dubai Hills Estate in Dubai, Yas Island in Abu Dhabi and some parts of Sharjah, while others are trying to complete projects. The year will also be remembered for new regulations that give developers more power in terminating sales and purchase agreements in the case of a failure by property buyers to make timely payments.

However, another set of regulations by the Dubai Land Department that requires property developers to submit bank guarantees for 50 per cent of the financing of the real estate project before its approval, will have a major impact on the market going forward.

Firstly, this regulation ensures the continuity of construction of the project, even in the worst-case scenario of a lack of sales. Second, this makes the developer more responsible for completing the project, despite a lack of sales proceeds. This means, developers with either deep pockets or that can sell properties will be able to continue business in Dubai. Thirdly, this will make it difficult for inefficient developers to do business in the emirate. In reality, this will make property developers more efficient and responsible.

As a committed real estate developer, Danube Properties marked 2017 with new project launches, construction activities and deliveries of its two projects – Glitz I and Glitz II – while a few others are getting ready for handover.

We announced Resortz and Bayz – two new projects with a combined development value of Dhs750m ($204m) and 875 residential units that are all nearly sold out.

Read: Dubai’s Danube launches $122.5m tower in Business Bay

The company currently has a development portfolio of 3,217 units, including 3,165 residential units with a combined value exceeding Dhs3.15bn ($857.6m). We expect to deliver about 831 units in 2017 and the first quarter of 2018, with a combined sales value of Dhs1bn ($272.2m).

Although there are talks of an oversupply in the market, we feel that the affordable housing sector is grossly under-supplied. Therefore, we see a greater demand in the mid-market and affordable home segment, especially in homes for young couples and smaller families.

That’s why our schemes of 1 per cent monthly payment for studios and one-bedroom apartments have become very popular and affordable to young professionals and couples – who could turn a one-bedroom apartment into two-bedroom flat, using smart furniture that comes along with our package.

The real estate market will tilt more towards affordable homes – a segment that we have championed – and we expect to see more transactions in 2018. Even in Abu Dhabi, Aldar Properties has launched affordable homes that were snapped up by buyers and investors. So, across the UAE’s real estate sector, affordable homes and attractive payment plans should continue to drive the growth of the sector and help more and more tenants to shift from their rented homes to freehold homes.

We have seen this trend to pick up and it will continue to accelerate in the coming years – as the market has become more ‘real’ with real buyers, real developers, real brokers and ‘real’ money.

Going forward, easing requirements for mortgage lending and incentivising affordable housing could make a significant change in the overall real estate market with the potential of people queuing for ‘allotments’ for homes. However, there needs to be greater collaboration between the government, private sector and banks for construction finance and mortgage lenders to help the property buyers.

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