Dubai developer Sobha Realty is launching two new megaprojects worth Dh24 billion ($6.53 billion) as it taps into a recovery in the UAE’s property market.
The two new projects, named Sobha 1 and Hartland 2, will be built close to the company's Sobha Hartland master development in MBR City, Francis Alfred, managing director of Sobha Realty, told The National in an interview on the sidelines of Cityscape Dubai on Monday.
“The two projects put together will have close to 10,000 apartments in 220 acres and the full-scale construction will begin next year,” Mr Alfred said.
The new developments, which are expected to be completed in five to eight years’ time, will be financed through a mix of debt and equity.
The launch of new projects comes as UAE property continues to recover from the coronavirus pandemic-induced slowdown on the back of government initiatives such as residency permits for retirees and remote workers, as well as the expansion of the 10-year Golden Visa programme and the economic boost generated by Expo 2020 Dubai.
“Dubai market overall is good and we have been doing exceptionally well,” Mr Alfred said.
“We have been delivering all projects on time to the quality standards. It’s been a great journey in 2021 and 2022 is even better … hope it continues into 2023.”
In Dubai, average residential prices in the third quarter grew by 9 per cent annually while average rental rates rose by 25 per cent, with both sales and rentals bolstered by more robust demand and increased buyer activity, according to a recent report from consultancy JLL.
In Abu Dhabi, sale prices during the three-month period climbed 4 per cent while average rents increased by 2 per cent annually, the report said.
This year, the company also launched a residential tower named ‘The S’ with 84 units on Sheikh Zayed Road, and it is “almost sold out”, Mr Alfred said.
The company has been selling its property to different customers from Europe to Asia to Africa and “we have seen more traction from Russia and from the East European belt”, he said.
The company is aiming for Dh9 billion in sales this year and Dh12 billion in 2023 as the market rebounds, according to PNC Menon, chairman of Sobha Realty.
“The advantage with us is we are a totally backward integrated real estate company — we do construction, we do manufacturing, we do design and engineering,” Mr Menon said.
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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.”
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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