Sobha Group, the property developer building the $4 billion Sobha Hartland scheme in Dubai’s Mohammed bin Rashid City, and District One with Meydan Group, plans to double its annual sales volume to Dh2.5 billion by mid-2020, as it consolidates its market position with a view to going public in the coming years.
The developer, which registers around Dh1.2bn of sales per annum at present, also hopes to add another project to its pipeline by the end of this year once a land acquisition deal completes, according to the group’s founder and chairman PNC Menon.
"We're embarking on a consolidation exercise until around the middle of 2020," Mr Menon told The National in an interview in Dubai. "I'm looking at reaching a minimum Dh2.5bn of sales per annum – around 1,200 units each year – within the next two-and-a-half to three years. That's our target for Sobha in the UAE, excluding joint ventures," he said.
“We will be better off this year than last,” he added, referring to sluggish conditions in the UAE property market over the last two years, when residential sales prices dipped by up to 10 per cent in some parts of the country.
The market is expected to bottom out by the end of 2018, with the rate of price decline slowing in many Dubai neighbourhoods over the last quarter of 2017 and high-end residential proving relatively stable.
“There has been a fall in prices but I feel that we’re reaching the bottom,” Mr Menon said. “The real estate industry is always cyclical wherever you are, but Dubai is well-located, well-regulated and property sales are consistent. For the next 10 years at least, I think the market will be steady.”
The group has a land bank sufficient in size to support the next 8-10 years of growth, Mr Menon said, as he forecast “strong double digit growth” for the company in 2018.
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The $8.5bn District One scheme near Meydan Racecourse spans a 1,000-acre site and includes more than 600 villas in phases one and two, which are “more or less sold”, the chairman said, adding that phase three could take a further seven or eight years to complete.
The $4bn Sobha Hartland project comprises 344 villas and townhouses over 183 acres, and is due to deliver its first apartment block in June.
Sobha Group is also building the $4bn lifestyle project, Firdaus Sobha, in Umm Al Quwain with the local government and expects to break ground in June.
The developer’s sales target includes a potential fourth UAE scheme that it hopes to bring to market next year. This is a large-scale midmarket scheme in “another area of Dubai” from where Sobha is currently building in Downtown Dubai, though Mr Menon refuses to say where.
He first told media about plans for such a scheme at the end of 2016, revealing the high-end developer’s ambitions to enter the burgeoning affordable housing segment as cost-conscious investors seek cheaper options in a slower market.
“It’s taking a bit of extra time to acquire the land,” he said last week. “We hope to have clarity on this by the end of the year.”
Demand for midmarket residential is bigger than for high-end, Mr Menon explained, and Sobha wants to bring its quality workmanship to smaller-budget buyers.
The potential new scheme will target those with a monthly income of Dh25,000-30,000, whereas existing schemes target earners of at least Dh50,000 per month.
Sobha has no plans to seek further bank financing in 2018. “We are reasonably structured on our finance,” Mr Menon said. However, the group would consider an initial public offering (IPO) in the years ahead to support its growth strategy.
“[IPO] is there are the back of mind,” Mr Menon said. “What is the timeframe, I cannot say, whether it’s three years or five years, as there are certain minimum requirements. It makes sense to hit our sales target first.”
