Barclays rides high on construction boom
Dubai-based Barclays Real Estate, a subsidiary of Al Der’a Group will enter the real estate market in Abu Dhabi with a Dh500 million residential project at Al Reem Island, a senior executive said.
The company is completing legal paperwork to start the construction process, Managing Director Ibrahim Al Harmoudi told Emirates Business in an interview. Excerpts:
What is your current portfolio and what have you planned for the future?
Our company started working in the real estate market in 2004 in Dubai. We have currently four real estate projects in the emirate, including three residential buildings and a building of hotel apartments.
The total value of the four projects is Dh1.5 billion. The Silicon Gate 1 project alone costs Dh1 billion. The 25-storey building consists of 900 residential units of different sizes and will be finished in March 2009. There are three other buildings. Each consists of eight floors.
What about Abu Dhabi?
We have a big interest in the real estate market in Abu Dhabi. Though this market is less developed compared to Dubai, it has huge and promising opportunities due to the sharp shortage of offered residential units, whether for the 99-year usufruct or even for rent. We plan to enter the market via a residential project at Al Reem Island. Authorities in Abu Dhabi allow the investment in the real estate on lands located outside Abu Dhabi Island through the 99-year usufruct.
Why Abu Dhabi now?
Abu Dhabi, as I said, is coming to a real estate boom similar to the one that was in the beginnings of the capital. We will build on an area of 180,000 square feet, including a 17-storey residential tower. The cost of the project, which has not been named yet, is up to Dh140 million.
What about your latest ventures in Dubai?
We recently bought a piece of land at Jumeirah Village that belongs to Nakheel. Research shows investment revenues there will be very high. We want to be one of the first private firms that contribute to the boom.
How do you finance your projects?
The finance is identical so far. However, at the current time, we will depend partly on banking finance.
When will you start selling?
We will start selling when the construction begins, and this will be soon. As far as the price is concerned it has not been determined yet. But according to the market prices, it will range between Dh750 and Dh1,000 per square foot.
Who are the investors in your projects?
The majority of them are UAE nationals. Some are from the UK – mainly senior employees and owners of small- and medium-size companies.
What about exaggeration in the prices of residential and commercial units that are offered for sale on a freehold basis?
Who said there is exaggeration? I think prices are still cheap. There is a chance prices will increase in the coming period. There is a big gap between the supply and demand, that increases day by day. Many Dubai-based residents invest in real estate and the provision of financing up to 90 per cent of the property’s value is added encouragement for the freehold concept.
Do real estate speculators contribute to the gap between supply and demand?
Speculators do not have big influence. There is exaggeration regarding this issue. The evidence is that the real estate market is as active as the developers market. There is other evidence; just 10 per cent of buyers resort to financing. This means that most clients are serious about buying to use.
Then what is causing the gap?
Do not forget the influx of foreign capital looking for investment opportunities. This is due to the big returns on investment in the UAE real estate market. Revenues are higher than those in other countries.
When will we see demand and supply balance out?
Not before 2015, and maybe even later than that.
What is the percentage of real estate investment revenues for main developers?
This is a difficult question to answer. Let us say it ranges between 50 and 70 per cent.
And for investors?
It might be the same as the former percentages and might go up to 100 per cent or possibly more.
It seems that property developers are seeing their happiest days?
Not really. Building material prices increased by 40 to 50 per cent over the last four years. However, this can be bearable as long as there is demand containing the rise in material prices.
Is there a concentration by property developers on luxury construction? Are medium-income people on your plans?
This is the market. Building for medium- income people is not part of our plans, at least at the current time, because such kind of projects are difficult to market and force the developer to invest more than is necessary.
Al Der’a has specialist subsidiaries working at all aspects of real estate – such as marketing, consulting, contracting – but not financing. Any plans on this?
Yes, we are considering that, but we are waiting for the right time. The value of the group’s assets should reach a certain level first.
What is your evaluation of the performance of real estate finance companies in the UAE?
These companies lead the whole sector. This is reflected by the nature of products offered by them in market, which need more time to develop.
The services offered by mortgage firms are still basic and need more development to be able to attract more clients. However, it seems they are not interested although clients are available, and the companies do not need to make much effort to reach them.
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