They confirmed that the 2020 facility could be canceled as the markets move
Developers: Reduced profit margin by up to 70% to drive sales
The facilities provided by the real estate developer are according to the state of the real estate market.
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Real estate developers confirmed that the repercussions of the "Corona" crisis affected the performance of real estate development companies, and imposed challenges on them related to preserving their market shares, which forced some of them to drop by a profit margin of 70%, to preserve those shares.
In statements to Emirates Today, they confirmed that they had made a lot of facilities and offers to stimulate sales, pointing out that these facilities could be reduced or withdrawn in 2021 as market conditions improve.
prices drop
In detail, the CEO of the «Azizi Real Estate Development», Farhad Azizi, said that «in conjunction with the effects of (Corona), prices decreased, and it was natural for the real estate developer to reduce his profit margin, but some insisted on fixing his profits, which made the developer Who gives up a part of these profits, the one who has the preference in preserving his market share, especially since the elements of the property price equation are the same for all developers, and are made up in total from land costs, construction costs, administrative and operational costs, and the profit margin, which are the elements that determine the price of the property. ».
He added: “The real estate market in the UAE is very competitive, so the profit margins must be realistic for the developer, and in proportion to the market situation, especially in conjunction with the effects of Corona, as all the company's projects have been priced, from (Al Furjan) to (Mohammed bin Rashid City), And (Dubai Healthcare City), and (Palm Jumeirah), in a very reasonable way.
While this differs for some other developers, as their profit margins reach 100% or more, while we have stabilized our profit margin during the last period at levels ranging between 15% to 25% as a maximum.
Dear pointed out, that the company presented a variety of offers, including exemption from Dubai Land Department fees, service fees, in addition to appropriate post-handover payment plans and guaranteed investment returns, expecting that in the event of the market recovery, it is expected that Some offers such as post-handover flexible payment plans are reduced or withdrawn.
Construction cost
For his part, CEO of "MAG Real Estate Development", Talal Muwafaq Al-Gaddah, said that "prices have reached the bottom, and have reached less than the cost of construction," indicating that some real estate projects in the "Meydan" area are sold for 800 dirhams per square foot. It is less than the cost of construction, stressing that the real estate investor should compare between one project and another with the price per foot.
He added that the facilities provided by the real estate developer are made according to the state of the real estate market, pointing out that the current year is an opportunity for the investor to buy the appropriate property.
As for reducing the profit margin, Al-Gaddah pointed out that this is due to the company's financial solvency, as there are companies that are established with bank loans, which makes them raise the profit margin, and there are companies that have their own liquidity, which makes them reduce the profit margin, and these companies have already reduced the profit margin, Which made it able to maintain its market share.
Investment opportunities
For his part, CEO of "Binghatti Real Estate Development", Mohamed Bin Ghatti, said, "The real estate market in the UAE currently offers multiple investment opportunities, especially in light of the attractive offers and unprecedented facilities offered to investors and reductions in the profit margin of more than 75% ».
He added that his company provided discounts of up to 25% of the price of the property in distinct areas, in which there were no discounts in general, such as the Dubai Water Canal, Business Bay and Downtown Dubai, near the Burj Khalifa, and a proposal was made in the project «Millennium Binghatti Residences» In Business Bay, in addition to a similar offer in the "Binghatti Avenue" project in Al Jadaf, which contributed to a significant increase in sales.
Binghatti pointed out that «the general feature of buying now is the acquisition in areas that were difficult to buy in before, where the buyer can own a property in a luxury area at an attractive price, and there is a big difference in the price, which represents an exceptional opportunity to own, and the matter also applies to The rent market, in a phenomenon known as (internal movement due to price change), which means moving to better areas due to price change.
And he indicated that the facilities may end with the end of the price correction period, so that price discounts, flexibility in payment plans and promotional campaigns may be canceled, foot prices reduced and unprecedented leniency with the buyer, pointing out that prices have reached the bottom, and have become tempting to buy, and it is difficult to retreat them to more than current rates. As the reduction in some areas reached more than 50% per foot, stressing that 2020 was the year of seizing opportunities for the investor.
He explained that the developer is affected by the decline in prices as he bears many costs, including the cost of land, designs, construction and contracting works, in addition to administrative, marketing and employment costs.
Buyer's market
In the same context, Director General of Operations at DAMAC, Ali Sajwani, said, “The real estate market is currently a (buyer's market) thanks to the options and plans available to dealers, including flexible payment plans and attractive mortgage plans provided by banks.”
He added, "The prices have reached a low level. However, we also believe that high-quality products with prime and important locations will always maintain their value."
He stressed that this year is definitely the “year of the investor”, as the real estate market has been negatively affected by “Covid-19” in addition to the current challenges of accumulated surplus supply from past years, at a time when prices have decreased and developers are in competition to attract dealers who have the best offers and payment plans. Elastic.
Sajwani added: “We expect a slight increase in sales over the next year, with the approaching Expo 2020 Dubai, and prices are expected to rise steadily, so it is time to buy, and this is what we are actually seeing.
According to the Dubai Land Department, there was an increase in the number of investors, for the first time, this year, as they constituted 70% of the buyers.
He added: “The market has suffered greatly due to the epidemic and the challenges surrounding the supply and demand drive, and many companies have had to unite in order to survive, and here we are talking about big names in the market, as affected (DAMAC), and this appeared in our results for the third quarter. However, we have strong liquidity that has allowed us to handle and stand up to market shocks better than others.
We have registered steady and continuous progress this year, despite challenges. ”
Zero equation
In a related context, the Chairman of the Board of Directors of "Al-Waleed Investment Company", Muhammad Al-Mutawa, said that "the profit margin of the developer has decreased significantly at the present time, exceeding 70%, as profits for some developers have reached a zero equation, or some make losses."
He pointed out that liquidity is controlling the market in the current period, so the real estate investor who has liquidity is the one who controls the market now, so he is able to buy a property at a lower cost than the investor who buys it in installments.
Lootah: The trend in Dubai is to move from rent to own
The CEO of Lootah Real Estate Development Company, Saleh Abdullah Lootah, said that “There are reports dealing with the real estate situation, including a report issued by ValuStrat, a real estate consultancy, indicating that residential values have decreased by 10.3% in early 2020 compared to the previous year.
The volume of ready-to-home sales in the emirate has also decreased, which has affected prices.
In ready-made villas, the average asking price is now 876 dirhams per square foot, while in ready-made apartments, prices per square foot are at 1,178 dirhams.
Lootah pointed out that the trend in Dubai has been moving from rent to ownership for some time, because interest rates are low during this period, but the economy will soon recover completely, and it is likely that current real estate prices will increase and individual investments are now turning into fixed assets in the future.
He added: «This period is the ideal time for those wishing to invest in real estate.
Interest rates and real estate values are at their lowest levels, while loan-to-property ratios are at their highest levels, with banks paying 80% of the amount.
Prices are attractive to buy, and it is difficult to drop them more than current rates.
The Coronavirus pandemic affected companies, and imposed challenges on them related to preserving market shares.
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