Developers to play key role in providing low-cost housing
The perception of affordable housing in the UAE has changed over the last few years, with a limited number of developers entering this segment in Dubai.
Over the past year, residential property prices and rents have continued to soar, fuelled by growing demand, supply delays and a degree of incompatibility between supply characteristics and the demand profile.
Average property prices in Dubai are estimated to have increased by 15 to 20 per cent last year and will continue to rise this year, according to experts.
Moreover, Dubai’s population is expected to grow by seven per cent every year, with the population likely to double to more than two million by 2010.
Despite Nakheel playing a key role in meeting the need of middle-income groups, private developers are yet to enter this segment pointing to the rising cost of land and escalating construction costs in Dubai.
However, most developers have ventured into Ajman, where land prices are still low compared to Dubai, and affordable-housing projects look more realistic.
Emirates Business spoke with some developers about their business plans for affordable housing.
How do you classify affordable housing? Do you plan to enter this segment?
O’DONNELL: Nakheel is much more than a property developer; we are responding to Dubai’s rapidly growing population by developing residences for more than three million people over the next 10 to 20 years.
From luxury beachfront living on The Palm Jumeirah to affordable housing at International City and Discovery Gardens, Nakheel is delivering a diverse portfolio of residential projects, providing accommodation options for a cross-section of budgets.
We realise the customer plays an important part in our success and our developments respond to market demands that will benefit the end-user, including those residents of the emirate who have a limited household budget.
International City consists of 387 buildings in nine internationally themed communities and will be home to around 75,000 residents; prices range from Dh40,000 for a studio to Dh52,000 for a large one-bedroom apartment.
Discovery Gardens consists of more than 25,000 apartments in almost 300 buildings, with a range of apartment-type residential housing in the form of studios, one bedroom and two-bedroom units.
Offering some of Dubai’s best value quality accommodation – certainly in “New Dubai” – studio apartments were released at prices starting from Dh350,000.
JUNAID: We consider anything between Dh500 and Dh1,000 per square foot as affordable, and it is basically coming up across the Emirates Road in Dubai. As for Ajman, it is in the sub-Dh500 range.
We are in talks with one master developer for what we consider middle-income housing in Dubai.
However, the government has to make land available at a cheaper rate. As and when they do, we will certainly get into mass housing.
JAVAHERI: Affordable housing is defined as homes that lower middle-income people can afford. Prices range from Dh250,000 to Dh600,000 in Dubai.
We have no plans to enter this market, since we basically focus on commercial towers.
SHROFF: Anything that is available for Dh500 per square foot can be termed as affordable.
Ajman is the only emirate where the affordable housing segment has picked up and we will enter this segment if we get a large piece of land there.
Land and construction costs in Dubai have gone up, which is making it difficult for developers to get into this segment.
Is return on investment more lucrative in the affordable housing segment?
O’DONNELL: The residential sector continues to provide attractive opportunities for investment and development, and this includes development of more affordable accommodation.
There is a demand for accommodation of this type; for example, more than 75 per cent of apartments at Discovery Gardens have been sold out or reserved for sale or leasing, while more than 20,000 people have moved into their homes at International City.
If you want to make returns, there is a need to focus on areas within the markets that have a good prospect for continued growth in the future.
JUNAID: If you consider return on investments, it is not the best thing to get into because margins are thin, prices are low and you need to get into volume business. If you look at our Ajman project, we are doing close to 4,000 units.
However, we don’t want to confine ourselves to one segment of the property development space such as the high-end segment.
We want to be in the middle and lower end as well.
JAVAHERI: A big portion of the expatriate population in the UAE is made up of lower middle-income people, who are the main force behind running and implementing businesses and projects.
Without this group business will come to a halt. Therefore, they should be taken care of by providing affordable homes to live in.
Otherwise, the UAE economy will face a terrifying prospect of not being able to attract such a work force in the future, and consequently it will have serious problems running the economy as planned.
SHROFF: Returns are not that lucrative, as we have to build the property at lower cost and maintain high quality standards. Moreover, construction costs have risen, which squeezes our profit margin.
Is there a need for affordable housing in the UAE as property prices and cost of living increase?
O’DONNELL: There is a deficiency in UAE’s property market for affordable accommodation and the Dubai Government is committed to creating more affordable residential communities to address the shortage of housing for the medium-income group.
Nakheel is playing a important role in meeting this need, providing more than 50 per cent of residential supply in Dubai over the next two decades.
We are also building workforce accommodation at the Waterfront with an emphasis on quality of common spaces, facilities and catering, with the long-term aim of setting a new standard for workforce accommodation in Dubai.
JUNAID: There is an influx of immigrants in the country, and most of them fall in the middle-income segment.
These people need houses and availability of easy mortgages will fuel growth.
JAVAHERI: Absolutely, there is demand for such housing as supply is absolutely non-existent.
There is a great deal of business potential out there that can be capitalised on.
SHROFF: There is a huge demand for affordable housing worldwide. And a section of population in every part of the world needs low-cost housing.
Even in Mumbai, people live in suburban areas. However, these areas flourish if there is an efficient mode of transportation.
Chief Executive, Nakheel
As Chief Executive, O’Donnell oversees company operations and developments. He reports to Nakheel’s chairman.
O’Donnell has more than 30 years of experience in construction, project management, development management, funds management and asset management.
Before joining Nakheel, O’Donnell was managing director of Investa Property Group. In 2004, he was appointed a director of the Green Building Council of Australia and named the Green Globe Ambassador.
Abid A Junaid
Executive Director, ETA Star
Abid Junaid is the Executive Director of ETA Star Property Developers and Ascon Group.
Under his guidance and leadership, ETA Star has made giant strides in the UAE and India.
The company now plans to launch properties in many other regional countries and the Indian Subcontinent. Junaid holds an MA in International Affairs and an MBA in Marketing from Ohio University.
He has been a speaker at several seminars in India, the United Kingdom and the United States.
Abuali Malik Shroff
Managing Director, Sheffield Real Estate
Shroff started his career in the logistics business in India, and later moved to Dubai. In 2003, he entered the real estate sector when the Dubai Government allowed expatriates to buy, own and develop properties.
Currently, his company is developing more than five million square feet of land and has launched projects in International City, Jumeirah Lakes Towers and Dubai Marina.
Chairman, Saba Real Estate
Javaheri established Saba Properties in the middle of 2003 to tap the booming real estate market.
So far, his company has launched four towers, worth Dh2 billion, in Dubai, while he launched Saba Facility Management Company in 2006.
He also owns Saba Cars, a Mercedes Benz dealership, which he established in the late 1990s.
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