A rendering of a villa in the Akoya by Damac development near Arabian Ranches in Dubai. There are a total of 2,400 villas within the Akoya project. Courtesy Damac
A rendering of a villa in the Akoya by Damac development near Arabian Ranches in Dubai. There are a total of 2,400 villas within the Akoya project. Courtesy Damac

Dubai property developers try new ways of attracting buyers as market remains in a rut



Dubai property developers are offering increasingly generous terms to clinch sales in a softening market.

Incentives include deferred-­payment plans and guarantees over income and capital values.

Last week, Emaar Properties and Meraas Holding even offered a deal where investors can pay 40 per cent of the purchase price after handover of homes at Sidra villas in Mohammed bin Rashid City.

The developer G&Co announced a similar payment plan for its Dh1 billion Jade at the Fields project, also in Moh­ammed bin Rashid City.

The company, which is owned by the former Menacom chief Joseph Ghossoub, asks investors to pay just 5 per cent of the value of a property, followed by a further 6 per cent every six months during the three-year building programme. A further 15 per cent is payable on completion, totalling just over half of the building’s overall value. The rest can be paid in quarterly instalments for three years after the handover.

The moves follow a highly publicised deal by Damac Properties offering investors a guaranteed annual return on advance payments during construction of 3 per cent a year – twice the amount likely to be received from a bank – until completion.

Damac's managing director Ziad El Chaar said the offer of a guaranteed return of 3 per cent on funds invested during construction is currently a trial, and only available on serviced apartments at its Paramount Hotels and Residences project in Business Bay. e said that the offer was aimed at encouraging reluctant buyers.

“Many people today are thinking ‘maybe I will invest after six months or maybe the right time to go into the market will be after one year’. The main driver is to motivate people to enter the market today.”

Damac also announced a “capital guarantee” offer, which guarantees the value of a home for two years after delivery. Again, this is a trial offer and is currently available only for buyers of villas at its Akoya by Dam­ac scheme. Damac has said that it will pay the difference to investors if the villas, which are due for completion this year, decline in price by the end of 2019.

Mr El Chaar said that the company was not taking unnecessary risks by offering such a guarantee, arguing that Damac took a conservative approach to managing its finances and that it had net cash of close to US$1.5 billion. Moreover, its exposure is only on the remaining villas at its Akoya scheme.

It does not reveal sales figures for individual projects, but there are a total of 2,400 villas within the Akoya project.

“We usually launch such kinds of projects on products where we have a good pot in the escrow accounts, so we are not taking unnecessary risks,” Mr El Chaar said.

Craig Plumb, head of research at JLL’s Dubai office, said: “With the Dubai market softening, developers are thinking up ingenious ways to try to attract buyers.

This is a sign that risk is shifting to developers. It will limit the amount of new projects developers can do.

“I imagine this will make developers themselves slightly less attractive as an investment or slightly riskier but really, extending the payment plan to after hand­over is really just bringing Dubai more into line with other international markets where people would get a mortgage for a property and spread payments over 25 years.”

He points out that the Islamic finance company Amlak, which is partly owned by Emaar Properties, grew out of a similar attempt by Emaar to take on property debt during the Dubai property boom. The lender faced collapse as the housing bust of 2009 came close to wiping out the value of its portfolio but resumed trading on the Dubai Financial Market last year.

“These offers are indeed a sign that the market is getting more competitive, but we believe that it doesn’t have any particular effect on the stock,” said Sanyalak Manibhandu, head of research at NBAD Securities.

“These sort of deals are the sort that only the big developers are able to afford to do. Effectively, what they are doing is pricing smaller Dubai developers out of the market. We don’t expect them to offer these sort of deals on all projects, and if they find that they aren’t working then they will probably not continue with them.”

lbarnard@thenational.ae

mfahy@thenational.ae

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Greenheart Organic Farms 

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Modibodi  

Founded in Australia, Modibodi is now in the UAE with waste-free, reusable underwear that eliminates the litter created by a woman’s monthly cycle, which adds up to approximately 136kgs of sanitary waste over a lifetime.

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The Good Karma Co

From brushes made of plant fibres to eco-friendly storage solutions, this company has planet-friendly alternatives to almost everything we need, including tin foil and toothbrushes. 

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Re:told

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Lush

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Bubble Bro 

Offering filtered, still and sparkling water on tap, Bubble Bro is attempting to ensure we don’t produce plastic or glass waste. Founded in 2017 by Adel Abu-Aysha, the company is on track to exceeding its target of saving one million bottles by the end of the year.

www.bubble-bro.com

Coethical 

This company offers refillable, eco-friendly home cleaning and hygiene products that are all biodegradable, free of chemicals and certifiably not tested on animals.

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Eggs & Soldiers

This bricks-and-mortar shop and e-store, founded by a Dubai mum-of-four, is the place to go for all manner of family products – from reusable cloth diapers to organic skincare and sustainable toys.

www.eggsnsoldiers.com