Developers in Dubai are set to lower their benchmark real estate prices in response to tight market conditions, say leading industry figures.
However, their counterparts in Sharjah are not planning to cut prices.
"Irrational prices in Dubai will fall and developers who set high prices will definitely have to lower them," said Kareem Derbas, CEO of Cayan.
"We are not lowering prices since most of our projects have been handed over and those under construction are 70 per cent sold. However, a correction to the prices charged by developers will definitely happen within 18 months.
"The market is maturing and one may see a further drop in prices. Dubai Marina has dropped around 10 per cent while Waterfront prices have dropped around 40 to 50 per cent."
M Khan, Chairman of Dubai developer Desert Dream, said: "Real estate prices have been dropping worldwide and it is not a surprise if they fall in Dubai as well. This will be a time for stabilisation in Dubai and prices will definitely consolidate. It is hard to say where prices in Dubai are heading now. The real estate market is difficult to sell globally and we in Dubai cannot remain unaffected. Everything will depend on how developers position themselves. Those who were speculative developers and had massive land banks will be affected."
Sharjah's real estate market has experienced a slowdown, says Randa Kamal, CEO, JMS Property Development and Management, which is based in the emirate. But prices there are still firm. "There is no need to lower real estate prices in Sharjah as nobody in the emirate sold at very high prices in the first place," said Kamal. "Sharjah has always been an end-user driven-market rather than a speculative one and we developers do not think there is a need to cut our prices.
"Demand continues to be high as we are seeing considerable interest coming from Dubai from the perspective of rentals and property sales. When the going was good people were buying but now they are not. Today they are panicking and scared to buy in Sharjah.
"The market is very slow and there is practically no movement in the real estate sector. The sales slowdown is harming confidence in the," said Kamal.
Derbas said Cayan had worked on eight projects, of which five had been handed over to buyers and three, worth a total of Dh7 billion, were still under construction. "We have already achieved 70 per cent sales on the three projects that we have under construction," he added. "All the projects are on schedule and Arabtec is the leading contractor."
He dismissed any suggestion that the company would buy back units from customers who were finding it difficult to secure finance or pay instalments.
"We have secured mortgage financing with Amlak and Tamweel for the three projects under construction. Unfortunately, we know that financing from them is on hold and the big question for us is whether or not the people who have bought from us will be able to pay the instalments. What we are doing is extending the grace period from 30 days to two or even three months. We are seeing people struggle to pay."
Derbas welcomed the idea of a unified property law for the UAE, provided it was properly regulated and covered all aspects of he sector. "The law should not seek to change the conditions applying to projects that have already been launched and handed over. You cannot take a new law and retrofit it to existing projects, so how a unified law would fit in is something to think about."
Desert Dream has secured mortgage financing for buyers of its Dream Harbour development from Mashreq Bank and Badr Al Islamia. Half the units have been sold.
Khan said: "We are now revisiting some of our strategies in order to make it easier for customers to pay. We are taking a downpayment of 10 per cent and have reduced the subsequent instalments due from customers from 10 per cent to around 2.5 per cent and sometimes five per cent," said Khan.
"This is a way to return the favour to investors who have shown faith in our projects. We have completely revamped our payment schedule and this move will not affect us as we already have sufficient cash flow. We will also be injecting funds to keep our cash flow going."
But while purchase prices in Sharjah have remained firm, rents have begun to slip after a period of rapid increases. Kamal said rents in The Lagoons area in Sharjah shot up by between 45 and 50 per cent over 12 months from 2007 to 2008 but had since levelled off.
And since the global crisis hit the UAE last year, rents in some parts of the emirate have declined by 10 per cent in just three months. "A four-bedroom apartment with an area of 320sqm in The Lagoons area currently costs between Dh145,000 and Dh165,000 per year," he said.
JMS launched Al Rayyan Towers in December 2007 in Al Nahda. The project consists of three 39-storey towers – two residential and one commercial. The residential buildings will each contain 254 apartments and space in the office tower will be available on an open-floor basis.
Kamal said JMS has secured mortgage lending for buyers of both residential units and office space from Sharjah Islamic Bank. "We will go ahead with the construction of our projects as we truly believe there is a dearth in the market. Sharjah does not allow developers to sell before breaking ground and the foundations for the project have been laid.
"The Al Rayyan Towers were originally expected to be delivered in December 2010 but this has been put back until February 2011."
JMS had planned to launch a Dh1.5bn-development – Sharjah Jewel – this year but has deferred the launch until market sentiment improves.