A slowdown will happen eventually, says Al Nafisi




The regional real estate market, which is still in its embryonic stage, will eventually slow down, but not collapse like some predict, said a top official of a leading developer. “The current rate of growth is unsustainable due to the level of selling and re-selling that is happening now, which will continue in the future. Most people are buying for investment purposes and with the intention of reselling later. This attitude, along with the level of construction taking place, will ultimately pull prices down in the coming years,” Rashid Al Nafisi, Chairman, Al Mazaya Holding, told Emirates Business.

You have been a major player in the regional real estate sector. How much have you invested across the region?

We have invested more than Dh10 billion in the region, with Dubai being our mainstay. We have invested Dh8bn in the emirate, followed by Dh750 million in Kuwait; Dh504m in Qatar; Dh330m in Bahrain; Dh289m in Abu Dhabi; Dh147m each in Oman and Saudi Arabia and Dh11m in Lebanon.

Any more plans to invest in the UAE?

We plan to launch new projects across the UAE in the coming years, particularly in Dubai and Abu Dhabi. We will also be looking at other emirates that suit our vision.

Is it difficult to find good contractors? Do you plan to acquire or start your own construction company?

Until now we have been dealing with the best contractors in the market. As to starting our own construction company, we currently have no such plans, as our hands are full with our mainstream business.

Dubai is coming up with new laws and regulations such as escrow account and strata law to regulate real estate development? What impact are they having on the real estate market?

These new laws have made life simpler and safer for everybody concerned with real estate in Dubai. These laws are aimed at increasing investor confidence in the real estate market, particularly from abroad, which, of course, is a good thing. Increased regulation is a good indicator of a maturing market whose government is looking out for the best interests of its investors.

Many developers in the UAE are way behind their scheduled completion dates. Are you set to deliver your projects on time?

Our projects are currently on schedule due to our astute planning. We do not underestimate the importance of accurate planning, due diligence and contingency before embarking on any scheme. Today, too many firms are falling behind schedule due to a lack of planning and they are succumbing to factors that they were not aware of before or failed to sufficiently take into account.

Getting experienced and talented people in the real estate sector is becoming an arduous task. How are you overcoming this challenge?

We are committed to quality and excellence, as we believe that only with the right people on board can our organisation continue to grow.
Although sourcing the best individuals and organisations is an arduous task, there is still an extensive pool of talent available, particularly in the Middle East, which we can team up with.

How much debt are you looking to raise to fund your projects?

Although most of our projects are self-financed from pre-sales, this year we are seriously considering financing our projects through financial tools such as funds.

Is it the right time to borrow from the US market as the Federal Reserve has cut rates?

Borrowing is a somewhat a dicey activity at the moment, especially with the US and European stock markets reeling from the threat of an imminent recession, and fallout from the sub-prime crisis still reverberating around the world. Although local GCC markets are fairing considerably better than the US market, the region’s currencies’ peg to the US dollar will force local central banks to eventually follow suit and cut their interest rates, which inevitably will drive up inflation. We can only benefit in the short run.

Are smart homes just a way to market your products?

Technology is now becoming a mainstay for many high-end developments and even middle-income housing. We have been incorporating smart home technology into our properties for sometime now. Although this did make us somewhat unique for a while, you are now finding many real estate firms following suit.

Has your profit margin been squeezed by surging construction and labour costs?

Rising costs have not affected our bottom line, as we had factored in these elements beforehand after conducting our feasibility studies. Our project, Sky Gardens in DIFC, is ready to be delivered.

Any acquisition plans?

Currently, we are growing primarily on the merits of our own activities. We have recently established our subsidies in Saudi Arabia and Qatar, while in Oman we joined forces with Oman Construction. Along with the Sahara Group, we have established the Al Mazaya Index.

Is there any need to harmonise property laws across the Emirates?

Each emirate has it own characteristics, which are unique to them. Therefore, aspects of a property law that may be applicable to Abu Dhabi may not yet be appropriate for Fujairah, for example. However, in the long term, it may be a sensible option, considering the fact that most developments have been seen in Dubai and Abu Dhabi.

Do you expect the regional property market to cool down in coming years?

Although the market is still in its embryonic stage and is maturing, it will eventually slow down but not collapse like many naysayers predict. Realistically, the current rate of growth is unsustainable.
Many are buying mostly for investment purposes, and this, accompanied with the level of construction taking place, will ultimately pull prices down. However, today there is still a significant disparity between supply and demand, and right now, this is keeping the market hot.

Rashid Al Nafisi

Chairman, Al Mazaya Holding

Al Nafisi has more than 30 years of experience in business and management, most of which has been gained on numerous boards of banks and companies such as the Commercial Bank of Kuwait, Kuwait Real Estate Bank, Bank of Kuwait and Asia, and Kuwait Airways. He is known for his accuracy and professionalism in work, has extensive experience in business management and in leading firms towards garnering greater achievements. Al Nafisi received his bachelor’s degree in business administration from the College of Administration of Business, Economics & Political Science at Kuwait University. He currently chairs the board of Al Mazaya Holding and is a board member of Al Mazaya Real Estate Development and a board member of Kuwait Business Town Real Estate.