UAE: ‘No bubble trouble’

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mr-masood-al-awarTasweek Real Estate Development & Marketing is a UAE-based property company in charge of property management and development as well as real estate consulting and marketing. The company’s CEO Masood Al Awar talked to Property Weekly about his assessment of the UAE real estate market and the opportunities it holds. Interview by Conrad Egbert.

What exactly is Tasweek? And how did you manage to post profits consistently right through the downturn?

Tasweek is a real estate company that was initially formed by 53 shareholders, all of whom are UAE nationals from Abu Dhabi. Ten are high-net-worth individuals. This is a private stock company. When we started in 2009, everything was falling down, so we assessed the situation and decided what needed to be done and how we were going to structure our business. We prepared a business plan and immediately came up with ways to sustain ourselves in this market, because we knew the crisis was upon us.

According to your latest study, the UAE is set to witness “amazing” return on investment of between 9 and 12 per cent per annum. How did you conduct this study and what were the measures used?

We always conduct very detailed studies. We start on a macro level where we look at different sectors of the economy linked to real estate such as infrastructure, tourism, transport, trading and basically anything that touches the household sector. When the hit happened in 2009, we identified five fundamentals that could withhold real estate from falling down. These are the factors that we use in our studies and they have been proven over the years. Once we get our figures from here, we then go and compare it to similar benchmarks of other economies. We looked at the US and Europe and important cities as well. They were all positive for the UAE. But we had to look outside and not in isolation; the real estate market in the UAE is connected to the global market. The five fundamentals that are affecting real estate in the UAE are infrastructure, transport, tourism, retail, as well as services and facility management.

You also said the 9 to 12 per cent figures are a major magnet for local and international investors. Do you not think this encourages flipping?

Flipping is a little bit difficult in the market at the moment because the number of offerings with big amounts is limited. The kind of flipping practices that used to happen before won’t come back any time soon. In fact, I don’t think it will ever return because back then there were hardly any regulations and legislations. Today, this has changed. With registration fees being doubled and many other by-laws being introduced into the market, this is no longer feasible.

Are we heading for another bubble?

I don’t think we’re creating another bubble. Things are being done very differently this time. There is more caution in the market on everyone’s part, the banks, the developers and the investors, too. Yes, some developers are still handing out cars with their projects, but this is a business set up, it doesn’t mean it is lavish spending. There is also less speculation.

You mentioned the “strong fundamentals” in the Abu Dhabi market. What do you mean by this? If anything, the confidence in Abu Dhabi broke down when the emirate removed the 
rent cap.

I think they know where they’re going with this. It’s like a car. One can’t drive in first gear forever; you’ve got to move up those gears. I think removing the rent cap is a good idea because it will let a natural market take over. Yes, it is a risk, but it has to be taken. Whether it is the right or the wrong move, the market will react accordingly and we’ll know either way. I think removing the cap is part of a bigger pricing strategy for the whole of Abu Dhabi. Now that they’ve removed the cap, the prices will adjust naturally according to demand and supply and then they might reintroduce a new cap that is more in tune with market dynamics.

Can you shed some more light on the Dh246 billion developments in the Western Region that you mentioned earlier?

The whole Western Region is an undiscovered jewel that needs to be developed properly and Abu Dhabi is doing just that. They have begun working, doing a lot of infrastructure. The Etihad Rail is coming from there and the Railway headquarters are going to be there, too. The moment you lay down major infrastructure, the whole area is going to boom. People want to live and work in a place that has good infrastructure. There will be a lot of opportunities for investors once the plans are announced and projects go on sale.

What can you tell us about the residential and retail rents in Dubai and Abu Dhabi in the next six months? Which are the top five places in each according to you?

I think in Abu Dhabi it has always been the Corniche Area that is downtown Abu Dhabi. On one side of the road you have the sea and the Emirates Palace and on the other is the city; either side of the road is prime land. Then you have Al Raha Beach, which is close to the Abu Dhabi island exit. Some of the free-zone areas in Sowwah Square on Maryah Island are good as well as Reem Island, which currently has a lot of 
development underway. The areas in Dubai that are attractive are Dubai Marina and the entire neighbouring areas, including The Greens, The Springs etc. Then there’s the land on both sides of Shaikh Zayed Road. This will always remain prime land. On second tier will be The Gardens and neighbouring areas.

Do you think the political instability in the region has contributed in any way to the increased confidence in the market here? And do you think if not for this, the market would be any different?

I think a lot of the unrest around the region has definitely made people look to more secure markets and Dubai is on top of the heap. All this has pushed the real estate and the economy as well. But then again, instability can push people to come here and live, but let’s not forget the reason why Dubai is a good option in the first place: the government has taken great pains to make it this way. The recovery had to come in any case; yes, the instability may have certainly accelerated this recovery. There’s no doubt about that.

Where do you see the new Central Business District in Dubai in the next six years?

The new Central Business District (CBD) will certainly be next to the Dubai World Central, however, it will be focused around Shaikh Zayed Road and will not happen before ten years at least. The current CBDs will not lose their attractiveness; the new CBD will just become more attractive. I’m quite sure that in the next 20 years we will see this shift, but I’m not saying it is 100 per cent, because we first need to see what the area develops into. This shift will happen probably by 2030 or so.

With rentals spiralling to Dh110,000 per year for a one-bedroom in Jumeirah Lake Towers, do you think it’s time to be 
getting worried?

Landlords cannot raise their rents just like that. The Real Estate Regulatory Agency (Rera) has put in place a very strong policy in order to control unwarranted hikes. If this is being violated by landlords or if a loophole has been found and is being taken advantage of, Rera will need to step in and take a closer look at those numbers.

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Reading Time: 5 minutes

Tasweek Real Estate Development & Marketing is a UAE-based property company in charge of property management and development as well as real estate consulting and marketing. The company’s CEO Masood Al Awar talked to Property Weekly about his assessment of the UAE real estate market and the opportunities it holds. Interview by Conrad Egbert.

Reading Time: 5 minutes

mr-masood-al-awarTasweek Real Estate Development & Marketing is a UAE-based property company in charge of property management and development as well as real estate consulting and marketing. The company’s CEO Masood Al Awar talked to Property Weekly about his assessment of the UAE real estate market and the opportunities it holds. Interview by Conrad Egbert.

What exactly is Tasweek? And how did you manage to post profits consistently right through the downturn?

Tasweek is a real estate company that was initially formed by 53 shareholders, all of whom are UAE nationals from Abu Dhabi. Ten are high-net-worth individuals. This is a private stock company. When we started in 2009, everything was falling down, so we assessed the situation and decided what needed to be done and how we were going to structure our business. We prepared a business plan and immediately came up with ways to sustain ourselves in this market, because we knew the crisis was upon us.

According to your latest study, the UAE is set to witness “amazing” return on investment of between 9 and 12 per cent per annum. How did you conduct this study and what were the measures used?

We always conduct very detailed studies. We start on a macro level where we look at different sectors of the economy linked to real estate such as infrastructure, tourism, transport, trading and basically anything that touches the household sector. When the hit happened in 2009, we identified five fundamentals that could withhold real estate from falling down. These are the factors that we use in our studies and they have been proven over the years. Once we get our figures from here, we then go and compare it to similar benchmarks of other economies. We looked at the US and Europe and important cities as well. They were all positive for the UAE. But we had to look outside and not in isolation; the real estate market in the UAE is connected to the global market. The five fundamentals that are affecting real estate in the UAE are infrastructure, transport, tourism, retail, as well as services and facility management.

You also said the 9 to 12 per cent figures are a major magnet for local and international investors. Do you not think this encourages flipping?

Flipping is a little bit difficult in the market at the moment because the number of offerings with big amounts is limited. The kind of flipping practices that used to happen before won’t come back any time soon. In fact, I don’t think it will ever return because back then there were hardly any regulations and legislations. Today, this has changed. With registration fees being doubled and many other by-laws being introduced into the market, this is no longer feasible.

Are we heading for another bubble?

I don’t think we’re creating another bubble. Things are being done very differently this time. There is more caution in the market on everyone’s part, the banks, the developers and the investors, too. Yes, some developers are still handing out cars with their projects, but this is a business set up, it doesn’t mean it is lavish spending. There is also less speculation.

You mentioned the “strong fundamentals” in the Abu Dhabi market. What do you mean by this? If anything, the confidence in Abu Dhabi broke down when the emirate removed the 
rent cap.

I think they know where they’re going with this. It’s like a car. One can’t drive in first gear forever; you’ve got to move up those gears. I think removing the rent cap is a good idea because it will let a natural market take over. Yes, it is a risk, but it has to be taken. Whether it is the right or the wrong move, the market will react accordingly and we’ll know either way. I think removing the cap is part of a bigger pricing strategy for the whole of Abu Dhabi. Now that they’ve removed the cap, the prices will adjust naturally according to demand and supply and then they might reintroduce a new cap that is more in tune with market dynamics.

Can you shed some more light on the Dh246 billion developments in the Western Region that you mentioned earlier?

The whole Western Region is an undiscovered jewel that needs to be developed properly and Abu Dhabi is doing just that. They have begun working, doing a lot of infrastructure. The Etihad Rail is coming from there and the Railway headquarters are going to be there, too. The moment you lay down major infrastructure, the whole area is going to boom. People want to live and work in a place that has good infrastructure. There will be a lot of opportunities for investors once the plans are announced and projects go on sale.

What can you tell us about the residential and retail rents in Dubai and Abu Dhabi in the next six months? Which are the top five places in each according to you?

I think in Abu Dhabi it has always been the Corniche Area that is downtown Abu Dhabi. On one side of the road you have the sea and the Emirates Palace and on the other is the city; either side of the road is prime land. Then you have Al Raha Beach, which is close to the Abu Dhabi island exit. Some of the free-zone areas in Sowwah Square on Maryah Island are good as well as Reem Island, which currently has a lot of 
development underway. The areas in Dubai that are attractive are Dubai Marina and the entire neighbouring areas, including The Greens, The Springs etc. Then there’s the land on both sides of Shaikh Zayed Road. This will always remain prime land. On second tier will be The Gardens and neighbouring areas.

Do you think the political instability in the region has contributed in any way to the increased confidence in the market here? And do you think if not for this, the market would be any different?

I think a lot of the unrest around the region has definitely made people look to more secure markets and Dubai is on top of the heap. All this has pushed the real estate and the economy as well. But then again, instability can push people to come here and live, but let’s not forget the reason why Dubai is a good option in the first place: the government has taken great pains to make it this way. The recovery had to come in any case; yes, the instability may have certainly accelerated this recovery. There’s no doubt about that.

Where do you see the new Central Business District in Dubai in the next six years?

The new Central Business District (CBD) will certainly be next to the Dubai World Central, however, it will be focused around Shaikh Zayed Road and will not happen before ten years at least. The current CBDs will not lose their attractiveness; the new CBD will just become more attractive. I’m quite sure that in the next 20 years we will see this shift, but I’m not saying it is 100 per cent, because we first need to see what the area develops into. This shift will happen probably by 2030 or so.

With rentals spiralling to Dh110,000 per year for a one-bedroom in Jumeirah Lake Towers, do you think it’s time to be 
getting worried?

Landlords cannot raise their rents just like that. The Real Estate Regulatory Agency (Rera) has put in place a very strong policy in order to control unwarranted hikes. If this is being violated by landlords or if a loophole has been found and is being taken advantage of, Rera will need to step in and take a closer look at those numbers.

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