Dubai: It’s good to buy even in a market that is down. Developer-investors are again seeking out opportunities to pick up distressed or shelved projects in Dubai while market conditions are still soft and the current owners want to cash out at any cost.
The Select Group — which has nine high-rises of its own in Dubai Marina, both complete and under construction — is all set to pick up another land parcel — albeit from another developer — in the cluster. “We are in the final stages of acquiring ownership, which will be for a G+29 residential building that will be announced in Q3-2016,” said Rahail Islam, Group CEO at Select. “Since it was a distressed project, the buying out process involves Rera (Real Estate Regulatory Agency), Dubai Land Department, the Liquidation Committee and Dubai Courts.
“The property market has been in a soft cycle since Q3-14, and there’s no reason why cannot use these circumstances to negotiate better terms.
“A similar set of circumstances were also there in 2010-12 when no one in Dubai was building or selling property.”
Islam did not reveal how much Select was paying for the plot. But the developer has already initiated the design work for the new project. Select also has the three-tower Marina Gate under development at Dubai Marina. (Another tower in the Select portfolio is the Torch, which was hit by a fire in February last year.)
There is talk in the market about other cash-rich investors coming together to pick up projects or properties caught in a similar distress. Much depends on the extent of the seller’s desire to make an exit at a time when everything seems loaded in the buyer’s favour. Moreover, the seller’s choices may be limited with master-developers insistent that plot owners should start on their projects within a stipulated time or risk facing penalties.
“Right now, there are fewer buyers around and more of the sellers — from a buyer’s perspective a down market is the time to buy,” said Islam. “All of the inflated costs will be removed from the transaction.
“For the latest Dubai Marina project, we can also get better commercial terms from the contractors because so many of them have excess capacity they need to utilise. It’s a great time to design, develop and deliver on projects by the time the market’s cycle heads back into positive territory in the next 12-18 months.”
Select, meanwhile, hopes to keep itself busy with other launches. A mid-market offering is high on its priority list. But Islam is quite certain about what sort of pricing these properties should have.
“I don’ think mid-market in Dubai is about Dh700 a square foot and lower … my reckoning is more in the Dh900-Dh1,400 range to make it worth the while of a developer,” he said. “But there are many ways that such a property can be made accessible to a buyer in the mid-market space. The Dubai realty market is underserved in mid-income products.
“This creates dynamic opportunities for developers — it’s a question of finding the right location. It will be silly for us not to get into space.
“We have more or less decided on where it should be — it will be where the infrastructure is ready. This way there is no master-developer specific risk involved from not having an infrastructure.