Deyaar to focus on affordable housing abroad

Deyaar Development will focus on the villa and affordable housing segments as it expands abroad and will adopt construction-linked payment plans for all its projects in Dubai, according to a a senior executive.

"We will target villa development and affordable housing in our international expansion plan, for which we have earmarked a significant amount of funding," Markus Giebel, CEO, Deyaar Development, told Emirates Business. "There is no better time than today to look at these opportunities."

Dubai-based Deyaar has until now focused primarily on building towers and recently ventured into developing communities in the emirate. The company is currently investigating 10 to 15 emerging and developing countries and will eventually select five for its expansion programme.

"Opportunities are manifold and they are good," said Giebel. "But we need stringent execution plans and evaluations. We have to investigate 10 to 15 countries and then we can finalise the five right ones. The final selection will be made holistically and only if we have reports from these countries."

Giebel said the decisions would be based on the returns and the risk-reward profile of the ventures.

"It will be a comparative decision and we will take into account the return and risk-reward profile for Deyaar," he said.

When asked why Deyaar was not planning to enter mature countries, Giebel said: "We don't have a unique selling proposition to export to mature countries such as Britain, Germany and the US. What we really have is something for emerging and developing countries. We have a very winning model in Dubai that we have built and can export to other developing countries. The company will follow a 'pitch and catch' strategy whereby the centre of excellence in Dubai will pitch the idea to other nations where it will be caught by country managers who will refine it to meet market needs."

Giebel said Deyaar would prefer to set up a joint venture to execute its overseas expansion plan. "We prefer a joint venture scenario and we need a strong partner when we go international. The identification of a strong partner is the most difficult thing and so the international expansion strategy cannot be executed quickly. You have to mature and have the right partners, risk-reward profiles and opportunities, so there are many things that have to happen before we move," he said.

Asked if acquisitions were an option, Giebel said: "An acquisition always costs a lot of money. If the value is outstanding we are very happy to look at it.

"However a joint venture is a very low-cost option for us when developing large-scale projects, and so it is the preferred model. But we will not rule out acquisitions if the right deal comes along. We will need appropriate board approvals, get people to investigate and then we might move on it."

Explaining why Deyaar was shifting to construction-linked payment plans for all its Dubai projects, Giebel said: "Construction-linked plans are the right thing to do. Most of our projects have been converted to construction-linked payment schedules, we are not 100 per cent there but we are close to it. There is an initiative going to link all payments to construction in the near future."

The company is not currently selling any developments and is instead working on consolidating projects. "We are 100 per cent sold out but we are consolidating. It means we invite investors for personal discussions and assist them to become stronger in order to survive the crisis," he said.

Giebel said many investors had accepted consolidation offers.

"There is a significant uptake. We never said we could consolidate 100 per cent of our customers, that is not possible. Consolidation is an option. We will built what we promised if someone does not opt for consolidation," he added.

The developer has also not foreclosed on any property. "We have not foreclosed on any unit and there is a very good reason for this since we have launched an easy payment plan. What it does is not solve the problem but delays it so we can come up with innovative strategies to help buyers."

Last week Giebel told this newspaper that Deyaar had cancelled the Enclave project after returning 100 per cent of investors' money. Enclave was to consist of nine residential buildings at the International Media Production Zone.

The developer plans to deliver four million sq ft, or 25 per cent of its projects, this year, 25 per cent in 2010 and 2011, and consolidate another 25 per cent of its projects with the rest of its portfolio. A further 25 per cent of its projects are unannounced and unsold.

Meanwhile, on Sunday, Deyaar Chairman Nasser Al Shaikh submitted his resignation to the Board of Directors. The company board will meet to consider its ratification.

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