Dubai-listed Deyaar Development plans to start a new Dh800 million scheme at its Midtown master development at Dubai Production City despite concerns about a slowdown in the property market due to oversupply and weak demand.
Construction of the new project will start in November and is expected to complete in 30 months, Saeed Mohammed Al Qatami, chief executive of the company, said on Tuesday.
“It is part of [the] expansion of Midtown, which is a success story. We have developed 13 buildings as part of phase one, which have all been sold out. We are planning to start the second phase with 11 buildings next month,” he said.
The overall investment in Midtown, through all the construction phases, is expected to touch Dh2.6 billion, he said. The company is planning to finance the project through a mix of debt and equity.
The start of the new project comes despite concerns on the slowdown of the property market due to weak demand and oversupply. The chairman of one of Dubai's biggest privately-owned developers, Hussain Sajwani, called for a one-to-two year pause on new construction projects in an interview with Bloomberg earlier this week as a way of redressing the supply-demand imbalance.
“All we need is just to freeze the supply. Reduce it for a year, maybe 18 months, maybe two years,” he told Bloomberg TV.
Mr Al Qatami said there is still demand in Dubai’s property market and people will buy a good product.
“There is demand, today and there is choice for you to stay," he added. "People who are willing to pay a couple of thousand more than the others, just to have a better life, demand is always there. The demand for me may not be demand for you.”
He also sees the property market improving due to initiatives by the government as well as Dubai’s Expo 2020.
The Dubai government has recently set up a new real estate committee to ensure a better supply balance in the emirate through greater collaboration between government-related entities and private sector companies. The UAE government is also encouraging investment through long-term visas for investors and professionals.
“Things will start improving with more and more government initiatives,” Mr Al Qatami said.
He argued that Deyaar has a low level of debt at Dh400m and is supportive of the Central Bank of the UAE’s proposals to create a new regulatory framework limiting banks' exposure to the real estate sector. Deyaar Development is 41 per cent owned by Dubai Islamic Bank.
In the hospitality sector, Deyaar Development opened three new hotels in Dubai with 950 rooms and it expects a recurring revenue of Dh100m from next year.
“There will be more visitors next year due to Expo 2020 and [this] will benefit the hospitality industry.”
The Dubai-based developer reported a 54 per cent decline in third-quarter net profit last week as revenue decreased and expenses climbed.
Net profit for the three-month period ending September 30 dropped to Dh16.3m, the company said on Thursday, in a statement to the Dubai Financial Market, where its shares trade. Revenue fell 4.1 per cent year-on-year at the end of the third quarter to Dh145.7m, while expenses increased to Dh43.6m.
Property consultancy JLL in its third quarter report published last week said more than 6,300 new homes were completed in Dubai during the three-month period, bringing the total fulfillments so far this year to 23,000. A further 33,000 units are scheduled to complete by the end of the year.