Gulf Business Real Estate - March 2023

DUBAI IS A MAGNET FOR GLOBAL PROPERTY INVESTORS”

THE BRIEF

An insight into the trends and developments shaping the real estate sector with perceptive commentary and analysis

IN GOOD COMPANY

Banke International Properties’ founder and CEO Porush Jhunjhunwala attributes the firm’s success to his team

Attracted by long-term visas, the lifestyle, attractive tax regime and relative affordability of luxury homes in Dubai, wealthy investors from across the globe have relocated to the emirate”

RICHARD WAIND Group managing director, Betterhomes

MARKET REVIEW:

Key highlights of Saudi Arabia’s real estate performance in 2022

A ONE OF A KIND BOOK THAT OPENS UP THE WORLD OF ISLAMIC FINANCE

ISLAMIC CAPITAL MARKETS

AN INTRODUCTORY AND PRACTICAL GUIDE

QUDEER LATIF

SAFE AND SOUND: The International Code Council is focused on supporting the adoption of building safety standards in the region

GLOBAL TRENDS: We look at the challenges facing international real estate markets in 2023

Editor-in-chief

Obaid Humaid Al Tayer

Managing partner and group editor

Ian Fairservice

Chief commercial officer

Anthony Milne

anthony@motivate.ae

EDITORIAL Editor

Neesha Salian

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Tech editor

Divsha Bhat

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Senior feature writer

Kudakwashe Muzoriwa kudakwashe.muzoriwa@motivate.ae

Art director

Freddie N. Colinares freddie@motivate.ae

PRODUCTION

General manager – production

S Sunil Kumar

Production manager

Binu Purandaran

Production supervisor

Venita Pinto

SALES & MARKETING

Chief commercial officer

Anthony Milne anthony@motivate.ae

Publisher

Manish Chopra

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Digital sales director

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Sales executive

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A poignant tale of destiny and polygamy— and one man’s personal struggle to come to terms with his two wives and two lives.

ALL

‘There I was, leading a daily double life …’

GOING BACKWARD TO GO FORWARD

HOW BACKWARD INTEGRATION CAN ACCELERATE TRANSFORMATION IN THE REAL ESTATE INDUSTRY

P N C Menon, founder and chairman, Sobha Group

intermediaries have their own profit margins, so they increase the prices of the processed raw material. Because of this, developers have no choice but to set the price of their final product higher, in order to make a profit.

On the other hand, if a real estate developer adopts backward integration, with an internally integrated supply chain incorporating all aspects of construction, it can certainly reduce the manufacturing cost and ensure the timely completion of the project. Similarly, it has been proven that using precast construction technology, can reduce the delivery time of end products by close to 30 per cent while also ensuring the quality of materials.

CHALLENGES IN ADOPTION

Over the past few decades, the real estate sector across the globe has undergone major transformations to address the evolving societal, environmental and economic requirements. The industry has been able to increase production, improve quality and safety, and streamline project management and procedures by embracing and utilising a variety of innovative and sustainable market practices. One such practice that has supported the proficient functioning and upward trajectory of the sector is backward integration. By adopting this system, real estate projects have been able to take control of several stages of the construction in projects by having various real estate activities in-house – architecture, design, construction arm, glazing factory and furniture factory – that allows full control on the product quality as well as timely delivery of projects.

COST-EFFECTIVE SUPPLY CHAIN

The supply chain of the real estate sector is highly complicated, which requires a solid linkage between workforce, suppliers, distributors and manufacturing plants, so streamlining these elements for the completion of a project is always challenging. But with the implementation of backward integration, companies have been able to regulate the supply chain, guarantee superior quality, and significantly reduce project lifecycle and manufacturing costs from the beginning to the completion of the project. Going forward, deploying backward integration practices would be certainly beneficial for developers, where they will have a multitude of suppliers for raw materials, and there will be manufacturing plants to convert these raw materials to intermediate products. These

In today’s challenging real estate market, where every developer is on a quest to get an edge over their competitors, backward integration can be an effective strategy to get a competitive advantage. However, the model has not yet been widely adopted, since it requires deep understanding and full control of the supply chain as well as a skilled workforce to execute it. The business model requires time to become fully functional and reaching the industry quality standards can be challenging initially, as the shift from having an external supply chain to manufacturing all of the materials in-house needs time for adapting. Backward integration is also capital-intensive since large investments are required in the early stage itself. However, looking from a long-term perspective, the additional investments may be worthwhile, as they ultimately reduce supply chain costs and manufacturing costs as a whole.

CHECKLIST FOR INCORPORATION

Despite the benefits it could reap, deploying this model is a laborious effort, especially for real estate developers. So, when developers make the decision and take control of their supply chain, they must consider some key elements to avoid future disruptions. The most significant element is the financial ability to take control of the supply chain. Companies should only pursue this model when they have the requisite investment capacity, to result in improved efficiency and cost savings.

In addition, before employing a backward integration model, the companies should make sure that they are equipped with adequate industry professionals and a skilled workforce, who are technically proficient and aware of the evolving market trends, in order to not fall behind competition. In the long run, the backward integration business model will help real estate developers utilise their maximum potential to thrive in changing market conditions, stand out among the competitors and attract more customers.

TRANSFORMING THE FUTURE OF REAL ESTATE

ARTIFICIAL INTELLIGENCE IS CHANGING THE WAY REAL ESTATE AGENTS, DEVELOPERS AND BUYERS INTERACT WITHIN THE REAL ESTATE LANDSCAPE

The artificial intelligence (AI) revolution that has been sweeping across industries is no stranger to the real estate market. The integration of this emerging technology into various aspects of the real estate landscape has been nothing short of revolutionary, with a significant impact on how the industry operates.

In proptech – the application of AI and other advanced technologies in the real estate industry – specifically, is driving innovation and significantly changing the way real estate agents, developers and buyers interact within the complex world of real estate.

From streamlining tedious transactions to automating mundane tasks such as data analysis and customer segmentation, the technology is proving to be an invaluable asset for those looking to succeed in this highly competitive field. Furthermore, AI-driven applications can provide targeted marketing suggestions through predictive analytics and improve transaction speed by eliminating lengthy paperwork processes – all with accuracy and efficiency.

THE FUTURE OF PROPTECH

From virtual property tours to AI-powered chatbots, technology is revolutionising the real estate industry –propelling it into the future of proptech. With AI-enabled technology, real estate professionals are able to make more informed decisions and ultimately benefit from increased productivity and efficiency. Leading property developers are taking advantage of the advancements in this space to gain a competitive edge in the market.

Generative AI technologies such as artificial neural networks, sensors, deep learning algorithms and natural language processing are playing an increasingly important role in the real estate industry. AI-powered solutions

Yousuf Fakhruddin, CEO, Fakhruddin Properties

can be used to automate processes such as sales forecasting, risk management and predictive analytics.

THE BENEFITS

Ultimately, this futuristic technology is proving to be an invaluable asset in the real estate landscape, revolutionising how agents, developers and buyers interact with each other – all for the better. From a developer’s perspective, it is being used to aid the design process. AI-driven software can quickly generate visuals of potential designs with precision. Additionally, generative AI technology can be used to create efficient building designs that are both sustainable and cost-effective in the construction process.

In terms of customer service and support, it is helping developers and agents provide better services, such as automated real estate market analysis and personalised recommendations. With AI-powered chatbots, customers can enjoy instant responses to their inquiries and access tailored options based on their preferences –thereby drastically improving customer satisfaction.

For real estate agents, it has revolutionised how they operate within this field. AI tools can help identify trends in the market, allowing agents to better target their potential clients and optimise leads. Additionally, it can enable real estate agents to make faster decisions based on data-driven insights. The potential of AI in proptech goes beyond customer service and marketing strategies, it is also being used to automate tedious administrative tasks such as record keeping and contract review.

In terms of marketing, it is being used to improve accuracy and efficiency with impressive results. AI-powered algorithms can automatically analyse customer behaviour to understand which strategies work best for particular markets or audiences – thereby significantly increasing ROI from campaigns. AI applications are also providing end users with convenient solutions that offer cost savings by optimising energy and water usage in buildings as well as automating tedious property management tasks. With the technology advancing at a rapid pace, the real estate industry looks set to benefit in numerous ways moving forward.

In addition to improving sustainability goals and saving money on energy costs, these AI-powered solutions can also provide valuable insights into consumer behaviour which can help inform strategic marketing decisions.

ADOPTING CHANGE

By leveraging AI in tandem with proptech, the real estate industry can make strides towards a sustainable future while also reaping the rewards of increased efficiency and profitability. The technology is revolutionising the way we think about energy efficiency, sustainability performance and data-driven decision making, transforming the way we approach real estate in a profound way.

SOAKING IT IN

WHY SPONGE CITIES CAN PROVE BENEFICIAL TO THE UAE IN NATURAL DISASTERS SUCH AS FLOODING

Few natural calamities are as unnerving as flooding. Globally, flooding incidents have been increasing every year.

According to the World Meteorological Organization (WMO), about 44 per cent of all global disasters can be attributed to floods.

In the scientific community, there is broad consensus on the role of climate change in the growing flood recurrence. The impact is such that regions previously without adequate rains are now witnessing flash floods. The UAE exemplifies that phenomenon.

In January, the UAE was reeling from the effects of incessant rainfall. Authorities rescued about 350 people stranded at a tourist spot in Sharjah as the UAE National Centre of Meteorology continued to share videos of flooded areas and alert citizens.

The latest bouts of rain come merely a few months after floods wreaked havoc across the UAE.

FLOODS IN THE UAE REQUIRE MULTI-DIMENSIONAL ASSESSMENT

Incidents of flooding are often followed by discussions related to stormwater management. In the context of the UAE, traditionally, stormwater management wasn’t a primary factor in urban planning because of the lack of rainfall. So, the existing grey infrastructure is under-capacitated to handle floods. The grey infrastructure (canals and sewage networks) aside, flood mitigants or waterdrawing “sponges” such as greenscapes (grasslands, lawns, forests, etc) and bluescapes (lakes, ponds, rivers, etc), too, aren’t the UAE’s strongest areas.

While the presence of sandy soil, which is generally more “spongier” than clay-based soils, works to UAE’s advantage, its effect has been hampered by expansive, impermeable concrete surfaces in urban centres. While policymakers can fortify existing grey/drainage infrastructure, it will not come without exorbitant

Chandra Dake, CEO of Dake Rechsand

costs, more carbon footprint, and collateral damage to existing structures. Instead, the UAE’s flooding should be assessed through the prism of holistic sustainability (social, economic, and environmental sustainability). As often as not, this leads to one plausible solution – a “sponge city”.

SPONGE CITY AS A SUSTAINABLE DRAINAGE SYSTEM

By definition, sustainable drainage systems (SuDS) are a collection of stormwater management practices and solutions that complement – not contradict – bigger goals such as ecological preservation, climate actions, and holistic sustainability. Sponge cities – which, as the name suggests, involves enhancing the “sponginess” of urban surfaces – are a type of SuDS with particular relevance for the UAE because of its water scarcity.  Sponge cities are typically achieved by paving permeable materials on rain-exposed surfaces such as roads, playgrounds, and open parking lots. The expansive “sponge” surfaces absorb large amounts of rainwater runoffs and drain them into appropriate greenscapes,

grey infrastructure, and bluescapes through underground networks. Hence, the overground surface remains free of flooding. Concurrently, sponge cities can also accompany underground reservoirs, where the absorbed rainwater can be stored and redirected to water utilities for community usage. Such possibilities have great implications for the UAE Water Security Strategy 2036 and UAE Net-Zero 2050.

HARVESTING THE PUREST FORM OF NATURAL WATER: RAINWATER

Currently, desalination plants account for the majority of potable water in the UAE. Though seemingly sustainable, the dependence on energy- and carbon-intensive systems is at odds with long-term climate actions and sustainability objectives. The desalination plants should decidedly be part of the UAE’s decarbonisation strategy. Under such a scenario, sponge cities can help reduce the load on desalination plants by making up for the water deficit. Storage isn’t a concern as the “air permeability” function of sponge city materials can keep the harvested water fresh for extended periods without requiring electrical or chemical-based treatment.

Unlike grey infrastructure, which is centralised and accompanies design complexities, sponge cities are actionable anywhere, at any scale, and by anyone – all for one-time investment and implementation, littleto-no maintenance and perennial value. By enabling sustainable stormwater management and efficient rainwater harvesting, sponge cities can turn challenges into opportunities; problems into solutions. Water security, in turn, has a direct bearing on the nation’s agricultural productivity, food systems, and overall socioeconomic prosperity.

Following the recent spate of rain in the UAE, the case for such an interdisciplinary solution is compelling, to say the least. As a solution for both climate adaptation (stormwater management) and mitigation (decarbonisation of water utilities), sponge cities carry immense potential, especially if implemented in the design stages of urban development.

In the UAE, as the developments underway are predominantly “greenfield”, there is scope for sponge cities implementation in the design stages. However, success hinges on multi-stakeholder participation, especially from key stakeholders such as urban master planners and local administrations. If the history of natural calamities taught us anything, it is that one can never be more ready.

Unlike grey infrastructure, which is centralised and accompanies design complexities, sponge cities are actionable anywhere, at any scale, and by anyone – all for one-time investment and implementation, little-to-no maintenance, and perennial value. By enabling sustainable stormwater management and efficient rainwater harvesting, sponge cities can turn challenges into opportunities; problems into solutions”

SPONGE CITIES CAN ACCOMPANY UNDERGROUND RESERVOIRS, WHERE THE ABSORBED RAINWATER CAN BE STORED AND REDIRECTED TO WATER UTILITIES FOR COMMUNITY USAGE

ABOUT 44 PER CENT OF ALL GLOBAL DISASTERS CAN BE ATTRIBUTED TO FLOODS

THE IMPACT OF SUSTAINABLE INFRASTRUCTURE

GREEN BUILDINGS CAN HELP LESSEN GHG EMISSIONS, IMPROVE WATER CONSERVATION AND DECREASE WASTE GENERATED DURING CONSTRUCTION

The UAE has been extensively working towards achieving its sustainable development goals and taking increased steps to transition to a more sustainable society. For instance, the UAE has built the world’s first carbon-neutral city, Masdar City, powered by renewable energy sources such as solar and wind power.

According to the United Nation’s QualityInfrastructure forSustainableDevelopmentIndex, the UAE has secured the top position in the MENA region and ranked 11th globally. The UAE Vision 2021 National Agenda has set goals to enhance air quality, conserve water resources, promote the use of clean energy and implement sustainable development strategies. In addition, the National Agenda emphasises the significance of topnotch infrastructure, positioning the UAE as one of the world’s leaders related to the quality of airport, port, road, and power infrastructure.

Furthermore, the Dubai 2040 Urban Master Plan aims to establish a sustainable urban development strategy for the city. Additionally, the strategy seeks to ensure that nature reserves and rural natural areas account for 60 per cent of the total area of the emirate. Moreover, the National Agenda seeks to elevate the standard of living of its citizens by providing appropriate housing to the residents.

SUSTAINABLE MOBILITY

By prioritising sustainable mobility, cities can reduce air pollution, greenhouse gas emissions, and traffic congestion, while improving public health and reducing energy consumption. It involves designing transportation systems that are integrated, efficient,

and accessible to all and consists of the use of low-carbon transport modes such as cycling, public transport and electric vehicles.

The UAE is investing in sustainable transportation systems, such as the Dubai Metro and Abu Dhabi’s Bus Rapid Transit System, to reduce carbon emissions and encourage public transportation. With sustainability as a key objective of its National Smart Mobility strategy, the UAE aims to be among the world’s leading countries in smart intermodal mobility by 2030.

HARNESSING RENEWABLE ENERGY TO INCORPORATE SUSTAINABILITY

Harnessing renewable energy has economic benefits, and its importance for sustainable infrastructure cannot be overstated. As the technology behind renewable energy sources improves, their costs decrease, making them increasingly competitive with fossil fuels. The UAE has made significant investments in solar and wind power projects, positioning itself as a leading nation in renewable energy. The country aims to achieve a 50 per cent share of renewable energy in its total energy generation by the year 2050.

Green buildings can contribute to reducing greenhouse gas emissions (GHG), improve water conservation and decrease the amount of waste generated during construction. Moreover, by adopting green building practices, the environmental impact of buildings can be reduced while also creating healthier and more comfortable living and working environments for occupants. Therefore, the UAE is implementing green building codes and regulations, such as the Estidama Pearl Rating System, to encourage the construction of energy-efficient and sustainable buildings. Additionally, implementing water conservation measures, such as the use of treated wastewater for irrigation and the promotion of water-efficient technologies and practices is also a significant initiative.

Sustainable infrastructure offers a pathway toward meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. To achieve this goal, governments, businesses and individuals must work together as stakeholders in the creation and implementation of sustainable infrastructure. The government can play a key role by implementing policies that encourage sustainable practices, while businesses can invest in sustainable infrastructure to reduce their environmental impact. It is also imperative that individuals make sustainable choices in their daily lives to create a sustainable infrastructure that benefits both the environment and society, ensuring a better future for generations to come.

Dr Hassam Chaudhry, associate professor, School of Energy, Geoscience, Infrastructure and Society at Heriot-Watt University Dubai

BUYING VERSUS RENTING: WHAT’S THE BEST OPTION?

WHEN CONSIDERING THE LONG-TERM FINANCIAL IMPLICATIONS OF RENTING, TENANTS ULTIMATELY INCUR HIGHER OVERHEAD COSTS. IN CONTRAST, BUYING A PROPERTY COULD LEAD TO HIGHER COST SAVINGS

Dubai is a bustling cosmopolitan city that has attracted many people from all over the world to live and work here. With its modern infrastructure and booming economy, it is no wonder that the city has become a prime destination for real estate investors and global talent.

The question of whether to buy or rent property in Dubai is a common one, and the answer depends on your circumstances and goals. Dubai’s real estate market is dynamic, and residents need to pay attention to the emerging trends and costs that impact it. Understanding these factors is critical to making informed decisions about buying or renting a property in the city.

INCREASE IN DEMAND FOR RENTAL UNITS

and proximity to leisure, entertainment and commercial hubs. When making decisions about buying or renting property, factors such as upfront costs, location and contract period play vital roles.

Upfront costs, such as mortgage deposits, registration fees, real estate brokerage fees, bank mortgage arrangement fees and property valuation fees, can add up to as much as 31 to 32 per cent of the property value. On the other hand, tenants must factor in the possibility of rent hikes when choosing to rent. Landlords and property owners are entitled to increase annual rent by 5 to 20 per cent in a rising market, following the Dubai Land Department’s Rental Index, provided tenants receive a 90-day notice period.

CONSIDER ALL THE FACTORS

Another factor to consider is the duration of stay in the UAE. When considering the long-term financial implications of renting, tenants ultimately incur higher overhead costs. In contrast, buying a property could lead to higher cost savings. For example, buying a three-bedroom villa in The Springs worth Dhs2,800,000 over five years would generate approximately Dhs273,464 in cost savings compared to renting a similar property.

The decision to buy or rent is dependent on your financial position, as homeownership requires a minimum down payment of the principal price of a property – with many not having such a large sum of money available upfront. With an increase in international investors, and rental prices at an all-time high, those who are financially conscious and have substantial savings are recommended to invest by purchasing a property for the best return on investment in the current climate. Attaining a trustworthy real estate broker in the current market is crucial. Find a RERA-certified real estate broker who offers a full suite of property-related services, including competitive mortgage rates, experience, knowledge of the market, and added value to potential customers.

A final key factor is to consider your lifestyle preferences: non-negotiables such as proximity to schools or workplaces, and accessibility to transportation and commercial hubs. Making informed decisions based on these factors can lead to better financial outcomes and greater satisfaction with your living arrangements.

John Lyons, managing director of Espace Real Estate

In conclusion, residents need to do their research, consult with experts, and weigh the pros and cons before deciding whether to rent or buy a property in Dubai. The real estate market is complex, and you want to ensure you make an informed decision that aligns with your goals and needs.

One of the most significant trends we’ve noticed in recent times is the increase in demand for rental units due to new residency and visa policies. This has resulted in rents rising up to as much as 28 per cent in some communities, and varies based on the location’s popularity

If you plan to stay in Dubai for a long period and want to invest in the city’s real estate market, buying a property could be a good option. However, if you are not planning to stay long-term, or want more flexibility and affordability, renting could be the better choice for you.

THE RISE OF RESIDENTIAL HOSPITALITY

CONSUMER DEMAND FOR A HASSLE-FREE AND ENGAGING COMMUNITY-DRIVEN LIVING EXPERIENCE IS DRIVING THE GROWING POPULARITY OF RESIDENTIAL HOSPITALITY

The new generation of consumers want to show up in cities (across the world), start living and connecting with likeminded people within minutes; instead of wasting time and money on traditional rentals or overpriced hotels.

This trend has led to the emergence of a new concept called “residential hospitality”, which property management companies define as offering “new living experiences that make the world everyone’s oyster”.

The market opportunity for this new category is primarily driven by the following trends and factors.

Mohannad Zikra, CEO and co-founder of Stella Stays

The next generation accounts for half of the world’s consumers and they have new needs and behaviours, which are fundamentally changing the way people live, work and consume. Millennials and Generation Z accounted for 46 per cent of the global population as of 2021, making them the most important consumer segment of the present and future.

01. Empowered by technology, younger consumers are increasingly driven by speed, convenience, value and experience (for example Uber, Airbnb, Amazon, Instashop, Deliveroo). They prefer instant access over ownership (for example Netflix, Spotify). They value modern amenities, worldly opportunities, connection and entertainment (for example WeWork). However, their biggest spending – housing, which accounts for about 30 per cent of an individual’s monthly budget – is a painful, inflexible, costly and outdated experience – for them.

02. Traditional home ownership is becoming increasingly inaccessible for the next generation, leading to rentals becoming a permanent housing solution. Existing rental solutions, however, are unfit for the new generation. Current rental solutions require significant upfront costs (rent payment, furniture and other costs), have limited flexibility, usually with a year-long lease term, and provide zero to limited access to services, modern amenities (such as coworking spaces) and social networking.

03. Traditional rental is not only a painful and inflexible process, but also an isolating and lonely experience. Social isolation is the lack of social ties or social contact, while loneliness is the subjective feeling of being lonely or having inadequate social support. These conditions were thrust into the spotlight as the world grappled with the Covid-19 pandemic.

The future of living definitely features residential hospitality. While it is still in its infancy, we are witnessing incredible customer adoption of this concept in the region, as well as selected global markets. A testament to this fact is that our own tech-enabled branded residences, which also provide community-oriented amenities and events, reached 100 per cent occupancy within eight weeks of launching.

A GOOD YEAR

DUBAI’S OFF-PLAN AND LUXURY PROPERTY MARKETS WILL SEE CONTINUED GROWTH, WITH NEW LAUNCHES FILLING THE GAP CREATED BY THE CURRENT LACK OF READY PROPERTY

Dubai’s real estate market has cemented its position as a global hub for real estate investment, attracting investors and buyers worldwide. Its strategic location, business-friendly environment, and world-class infrastructure are key drivers of the city’s economic growth.

The real estate market in Dubai enjoyed a record year in 2022, with 86,490 residential sales transactions, beating the previous record of 80,000 transactions set in 2009, which in my opinion, highlights the strength of Dubai’s economy and its continuous growth.

LEADING THE GROWTH

Apartments led the growth, with a 73 per cent increase

in year-on-year (YoY) sales, while townhouses saw 61 per cent growth. Villas, which had led the real estate recovery in 2020, saw the smallest increase in 2022, up by only 3 per cent YoY, and I believe this is due to a lack of supply, both in the ready and o -plan markets.

A key trend we noticed in the o -plan segment is the sheer growth of up to 80 per cent YoY, as developers increased launches in light of favourable market conditions. I think o -plan transaction numbers have also benefitted from an increase in o -plan “resales”, equating to approximately 6,500 transactions, as investors cash in and capture value growth before handover.

Throughout 2022, prices in Dubai grew by approximately 11 per cent, slower than the 21 per cent growth in 2021. In my opinion, we will witness

continuous price growth throughout 2023, as demand outpaces supply, however, at a much slower pace.

In 2022, Dubai was the number one destination globally for high-net-worth migrants, according to Henley and Partners.

Attracted by long-term visas, the lifestyle, attractive tax regime and relative affordability of luxury homes in Dubai, wealthy investors from across the globe have relocated to the emirate, resulting in the strongest year ever for the luxury real estate market, which is continuing into 2023.

Our luxury real estate division closed three times the number of luxury properties in January this year compared to last year. Palm Jumeirah, Jumeirah Island and Emirates Hills are prevalent areas currently within the luxury market, where I expect continuous demand. Rising interest rates have had a dampening effect on housing markets across the world. The UAE Central Bank matched the Federal Reserve’s hike of rates from near zero in March to 4.25 per cent at the end of December.

Our data suggests the interest rate rises have little impact on underlying demand, with mortgage buyers representing 45 per cent of all transactions, up 5 per cent from 2021. In addition, we registered 39 per cent more new buyers, with a ratio of 19 buyers for every seller, an increase of 22 per cent from 2021. Although demand remains strong, I believe the affordability factors seem to be changing buyer behaviour, increasing the popularity of apartments and townhouses at the expense of villas.

PRIMARY AND SECONDARY MARKET

We saw approximately 34,000 new homes delivered in 2022, which I believe is considerably lower than current market conditions and what the population growth requires. Although developers launched almost 55,000 new units in 2022, I expect inventory to be delivered in late 2024 and 2025 with an expected 60 per cent delivery rate based on past experience.

Supply in the secondary market remains constrained, with Betterhomes recording an 8 per cent increase in new listings compared to 2021. However, we did see new listings at their highest in

the last five years in the final quarter of 2022, suggesting sellers are looking to capitalise on today’s market in larger numbers.

We also saw a 36 per cent increase in rental prices in 2022. By property type, apartments, townhouses, and villas saw price increases of 25, 42 and 61 per cent, respectively. This led to tenants increasingly renewing their contracts rather than seeking new housing, resulting in a 36 per cent decrease in leasing transactions. Occupancy rates in freehold areas remain relatively stable, while there has been a 4 per cent uptick in occupancy rates in leasehold areas, which I believe is indicative of Dubai’s growing population.

A STRONG OUTLOOK

Moving forward, I anticipate the same trends to continue in 2023, with the supply of new and ready property expected to remain constrained. Nevertheless, Dubai is likely to attract new residents and investors, bolstering transaction volumes. Interest rates are projected to remain stable, impacting affordability and keeping sales prices in the secondary market in check.

In my opinion, the off-plan and luxury markets will see continued growth, with new launches filling the gap created by the current lack of ready property. With low rates of transiency and high renewal rates, rental inventories are anticipated to remain low, leading to further rental increases.

In conclusion, Dubai’s real estate market has come a long way since the initial surge in 2021, and its outlook for 2023 is positive.

From affordable housing to high-end luxury properties, the market offers buyers a wide range of options. This bodes well for investors, who have witnessed average yields rise to 6.5 per cent, making it a diverse and exciting market to explore. Nevertheless, it is important to remember that the market is volatile, and investors should stay vigilant and seek expert advice to make informed decisions.

Richard Waind, group managing director at Betterhomes

DUBAI IS LIKELY TO ATTRACT NEW RESIDENTS AND INVESTORS, BOLSTERING TRANSACTION VOLUMES. INTEREST RATES ARE PROJECTED TO REMAIN STABLE, IMPACTING AFFORDABILITY AND KEEPING SALES PRICES IN THE SECONDARY MARKET IN CHECK”

WE SAW APPROXIMATELY 34,000 NEW HOMES DELIVERED IN 2022, WHICH I BELIEVE IS CONSIDERABLY LOWER THAN CURRENT MARKET CONDITIONS AND WHAT THE POPULATION GROWTH REQUIRES

ON A STRONG FOOTING

THE OUTLOOK FOR THE PROPERTY MARKET REMAINS POSITIVE THIS YEAR, WITH A CONTINUED UPTICK IN PRICES, RENTS AND OCCUPANCY LEVELS EXPECTED ACROSS ASSET CLASSES

This year started on a solid note, building on the momentum Dubai’s real estate market gathered in 2022. With record transaction volumes and unprecedented gains across all performance indicators, it is interesting to see Dubai’s resilience given the intensifying global recession concerns and rising interest rates.

As a global city, Dubai isn’t immune to these conditions, however, it has greatly pivoted itself into a preferred global gateway city due to the government’s robust response to the pandemic, pioneering policies and visa reforms, thus attracting and retaining investment and global talent.

This has created upward pressure on the real estate market with sharp rises in capital values and rentals witnessed over 2022. Coupled with a strong take-up across asset classes, we foresee this upward trajectory to continue over 2023, although expected at sustainable levels.

Despite the spike in values, as residential prices remain competitive compared to other global cities along with property-linked visas attracting international buyers to Dubai’s unrivalled lifestyle, tax regime, connectivity and safety, we expect demand for Dubai’s prime residential market to remain strong over 2023.

Furthermore, as the supply-demand imbalance intensifies across the prime residential sector with higher demand and limited stock, we expect a steady increase in sales prices in the near term. However, due to increasing tenant and end-user resistance and comparatively greater levels of supply in this category, we anticipate the mainstream apartment market to experience modest growth.

We remain optimistic on our 2023 outlook as Dubai is expected to see a continued uptick in prices, rents and occupancy levels across asset classes, however, in the backdrop of increasing concerns around a ordability and challenging global economic conditions.

RESIDENTIAL SUPPLY SHOWCASED

Only 29,000 residential units were handed over in 2022, lower than an initial forecasts of over 35,000

units and the lowest number of handovers witnessed in Dubai since 2019, as supply chain issues impacted realisation rates and delivery timelines.

Apartments continue to lead the tally with around 22,000 units and 83 per cent market share while only 5,000 units were delivered in the villa market comprising 17 per cent.

As supply deliveries have dipped compared to previous years, along with a booming transaction market, a supply crunch is being created in a few pockets of the market, particularly the prime villa and waterfront apartment market as demand continues to outstrip supply in these segments.

However, as most of the new and existing stock are in the mainstream and a ordable apartment segment, a large portion of the apartment market is relatively balanced in terms of supply and demand.

RISE OF OFF-PLAN LAUNCHES

We have seen a sharp rise in project launches as developers are keen to capitalise on positive market sentiment. However, most new announcements are skewed towards the apartment segment as apartment launches spiked 120 per cent while new villa project launches saw just a 5 per cent year-on-year increase, albeit expected to exert further upward pressure on villa sales prices.

With lower ticket sizes and higher development returns, most developers continue to focus on the mainstream apartment market. This trend is expected to plateau apartment sales prices, as supply and demand equilibrium is expected to be achieved by the end of 2023.

We have also seen a shi t in o -plan payment plans with most launches now at 60-70 per cent payment during the construction period and only 30-40 per cent post-handover as developers try to capitalise on growing demand.

FACTORS DRIVING THE TRANSACTION MARKET

The year 2022 was the best in Dubai’s residential transaction market with the highest-ever secondary and o -plan market transactions recorded both in terms of volumes and values transacted.

- 2023

Prathyusha Gurrapu, head of Research and Advisory, CORE Real Estate

MARKET REVIEW: DUBAI

Source: REIDIN

VILLA PROJECT LAUNCHES

Significant changes in visa regulations and pro-business sentiment are underpinning strong market performance. With over 151,000 golden visas issued since inception, the introduction of retirement visas and a raft of propertylinked visas are drawing residents and investors alike to consider the UAE a long-term home. With a steady population increase across income segments, in line with the 2040 target of 5.8 million residents, Dubai is driving sustainable demand.

Lowering the property value-linked qualification for visas from Dh1m to Dhs750,000 has also resulted in a strong push, as nearly 39 per cent of all secondary transactions were between Dhs750,000 to Dhs2m, while 49 per cent of all off-plan transactions were between the same range.

Source: REIDIN

APARTMENT PROJECT LAUNCHES

The prime market saw unprecedented demand over 2022, with secondary market transaction volume above Dhs10m witnessing a 62 per cent year-on-year increase (1,593 transactions concluded in 2022 compared to 981 in 2021). This includes the highest villa sale recorded on Palm Jumeirah for a whopping Dhs600m.

While high-ticket purchases were typically focused on the secondary market, prominent luxury off-plan launches in 2022 performed increasingly well with a staggering 113 per cent increase in off-plan transaction volumes compared to 2021 (695 transactions in 2022 compared to 326 in 2021).

The year also broke records for the ultra-prime segment with over 24 residential transactions recorded above the Dhs100m mark compared to the five registered in 2021. With growing ultra-high-net-worth individuals demand for luxury properties, particularly on the waterfront, we foresee this segment to remain insulated from the global recession, interest rate hikes and inflationary pressures as most of these transactions are cash purchases.

In terms of sales prices, most districts are well above pre-pandemic levels with average citywide villa sales prices up by 11 per cent and apartments by 9 per cent year-on-year. However, these prices are still below their 2014 peak values, with villas lagging by -5 per cent and apartments by -22 per cent

With just 5 per cent behind their 2014 peak values, we expect villa sales prices to surpass them by H1 2023, due to sustained demand despite downward pressures from rising interest rates and inflation. While we don’t foresee the sharp rises witnessed in 2022 to continue in 2023, we believe the market will see moderate rises at sustainable levels as the gap between ask and bid prices rises with end-users being priced out of the market along with global recession fears and rising interest rates deterring a segment of buyers.

ESCALATING RESIDENTIAL RENTS IMPACT AFFORDABILITY

The rental market has witnessed the highest-ever yearon-year increases with the citywide villa rental average up by 25 per cent and apartments by 27 per cent yearon-year. Improving at a record pace and as we predicted earlier, villa rents are now 1 per cent higher than 2014 peak values while apartments are lagging by 18 per cent, albeit, expected to recover in the coming months.

RESIDENTIAL MARKET FORECAST 2023

Transaction volumes in both the secondary and off-plan markets are expected to witness a sustained uptick in 2023, as demand continues from local and international buyers

Sales prices to witness a gradual, yet, continued rise, particularly in prime villa and apartment districts,

with most districts expected to surpass 2014 peak values. It is important to note the 2014 values were when there were nearly 200,000 lesser number of units than there are in 2021, therefore the market has fundamentally performed better despite the significant addition in stock

Rental rises and high occupancy levels are expected to continue in 2023, however, with a growing disparity between rents in new leases and renewals

High construction costs and supply chain issues are expected to impact realisation rates

WITH JUST 5 PER CENT BEHIND THEIR 2014 PEAK VALUES, WE EXPECT VILLA SALES PRICES TO SURPASS THEM BY H1 2023, DUE TO SUSTAINED DEMAND DESPITE DOWNWARD PRESSURES FROM RISING INTEREST RATES AND INFLATION”

Source: CORE Research, REIDIN

Source: CORE Research, REIDIN

OFF PLAN MARKET TRANSACTIONS 2022

SECONDARY MARKET TRANSACTIONS 2022

MARKET REVIEW: DUBAI

DUBAI OFFICE MARKET IN NUMBERS

CITYWIDE OCCUPANCY LEVELS ARE NOW HOVERING AT 87 PER CENT COMPARED TO 78 PER CENT IN 2021

nine million square feet of office space over 2022. As a result, there is a scarcity of stock, which is becoming increasingly concerning given the rising demand.

Furthermore, most of the upcoming office supply pipeline is already pre-leased, thus offering very limited availability upon delivery. This high demand has led many single landlords and freezones to activate new office projects. However, as it would involve a twothree year construction cycle, we expect to have an office supply crunch in the near term, creating further upward pressure on rents and occupancy levels.

As office demand intensifies and outstrips supply, citywide office rents spiked by 29 per cent year-on-year with all office districts above pre-pandemic levels and nearly at par with 2014 peak values. With no new major office developments expected in centrally located established office districts, we expect continued upward pressure on office rents over the foreseeable future.

Although from a low base, these drastic rises in rents have caused a significant upheaval in the rental market over the last few quarters with most tenants receiving rental escalation notices. Tenants are preferring to stay in existing units as rental increases during renewals are considerably lower than new leases and are regulated by the RERA rental calculator.

Furthermore, a section of tenants, despite the high sales prices and interest rate hikes, are becoming enduser buyers to avoid frequent renewal negotiations or relocations.

We expect rental rises to continue for new leases in 2023, as high occupancy levels in central locations will exert upward pressure on rents – albeit the rise in rents in renewals will be relatively lower as they are protected through the RERA rental index.

As rents have witnessed a sharper rise compared to sales prices, yields are at a seven-year high, with citywide gross apartment yields at 7.2 per cent and villa yields at 5.7 per cent.

DUBAI’S OFFICE MARKET

Over 2022, Dubai’s office market experienced strong absorption across districts, leading to an unprecedented rise in occupancy levels and rates. Citywide occupancy levels are now hovering at 87 per cent compared to 78 per cent in 2021, resulting in the absorption of nearly

While demand for office spaces remains strong, we cannot ignore global recession fears, hiring freezes and job losses across the international tech and banking sectors and their impact on Dubai’s office market. This is expected to slow international first-phase expansions and potentially bring some secondary market stock back to the market as a few firms may downsize. While regional markets are doing well, they aren’t immune to global conditions, however, the UAE government’s initiatives are offsetting these headwinds by creating a range of demand drivers to sustain economic growth.

OFFICE MARKET FORECAST 2023

Office demand will continue outstripping supply

Developers and freezones are expected to initiate the next phases of new office projects to cater to the rising demand, resulting in a strong pre-leasing activity

Re-purposing existing retail assets and upgrading older office stock to address rising demand

Rising global recession fears and mass lay offs may impact a section of international occupier demand

Source: CORE Research

CAPITAL GAINS

It’s a well documented fact that 2022 was a holistically landmark year for the UAE real estate market and Abu Dhabi, predictably, was no exception. The UAE’s capital city’s real estate market remained buoyant, particularly amongst investors and buyers, with most sectors showing substantial gains throughout 2022. But one booming segment of the capital’s property market really does stand out from the crowd and implore a little more in-depth insight – and that is the exponential growth of Abu Dhabi’s luxury island communities – which has been nothing short of phenomenal in recent years.

WHY ABU DHABI’S LUXURY ISLAND COMMUNITIES ARE ALL THE RAGE

Fibha Ahmed, director of Sales at Bayut & dubizzle

MARKET REVIEW: ABU DHABI

PHOTO: JUBAIL ISLAND / LEAD DEVELOPMENT

MARKET REVIEW: ABU DHABI

PHOTO: JUBAIL ISLAND / LEAD DEVELOPMENT

NO SIGN OF WANING IN POPULARITY

When we look at historic search preferences on Bayut, areas such as Yas Island, Saadiyat Island, Al Reem Island and Al Maryah Island have long been stalwarts of the most searched-for areas category, going back five years and beyond. And it’s fair to say that the appeal of these communities and developments shows no sign of waning, even in the wake of rising prices.

The average price per square foot for both apartments and villas on the highly-revered Saadiyat Island went up by over 12 per cent in 2022. A substantial increase from a regional perspective no doubt, but when the amenities on offer and the lifestyle provided by this popular waterfront community are taken into consideration, the prices on Saadiyat Island are still extremely competitive when compared to global averages.

RENTAL YIELDS

The price per square foot on Saadiyat Island has averaged at $450 (approximately Dhs1,653) in the last year. When you compare this with the average price per square foot of over $5,000 in global hubs such as Monaco, London, Paris, New York and Singapore, the appeal is clearly evident. In addition, the return on investment on Abu Dhabi’s island communities ranges at an average of between 4-6 per cent based on rental yield, which is significantly higher than the 1-3 per cent offered in established global real estate hotspots. Savvy investors have already caught on to this exciting opportunity and are buying up properties on Abu Dhabi’s popular island communities such as the iconic entertainment destination of Yas Island, the culturally diverse Saadiyat and the emerging opulence of Al Maryah Island.

Similar to the trends for prices on Saadiyat Island, the average prices on Yas Island also increased by nearly 14 per cent for villas and 6 per cent for apartments throughout 2022. These positive indicators and continued demand for bespoke developments have led to the launch of a number of highly-anticipated island mega-projects.

SIMILAR TO THE TRENDS FOR PRICES ON SAADIYAT ISLAND, THE AVERAGE PRICES ON YAS ISLAND ALSO INCREASED BY NEARLY 14 PER CENT FOR VILLAS AND 6 PER CENT FOR APARTMENTS THROUGHOUT 2022. THESE POSITIVE INDICATORS AND CONTINUED DEMAND FOR BESPOKE DEVELOPMENTS HAVE LED TO THE LAUNCH OF A NUMBER OF HIGHLY-ANTICIPATED ISLAND MEGA-PROJECTS”

The LEAD Development driven transformation of Jubail Island, a residential community surrounded by a stunningly beautiful and protected natural environment, is nearing completion, and the breathtaking Eagle Hills’ $3.5bn development of neighbouring Ramhan Island was also recently announced.

THE IDEAL PLACE TO LIVE

The competitive pricing of these existing and upcoming communities has helped cement Abu Dhabi’s burgeoning reputation as one of the best global cities in which to live. On the Ipsos City Index, Abu Dhabi has even overtaken traditional favourites such as London and Paris thanks to its unmatched safety, robust infrastructure and advanced city planning. The exciting lifestyle and presence of globally-renowned hospitality brands further enhances the value of the capital’s idyllic island destinations.

With the promise of year-round summer, beautiful beaches, luxury lifestyle experiences and more, it’s safe to say that Abu Dhabi’s island communities are here to stay.

THE PRICE PER SQUARE FOOT ON SAADIYAT ISLAND HAS AVERAGED AT $450 (APPROXIMATELY DHS1,653) IN THE LAST YEAR

PHOTO: SAADIYAT LAGOONS

MARKET REVIEW: SAUDI ARABIA

SAUDI ARABIA’S REAL ESTATE MARKET WITNESSED A FRAGMENTED PERFORMANCE ACROSS CITIES AND ASSET CLASSES IN 2022, WITH A MARKED RISE IN RECOVERY IN THE SECOND HALF OF THE YEAR

In 2022, SAR126.5bn worth of transactions were recorded in Saudi Arabia’s residential sector, this was the result of 175,067 residential transactions. The total value recorded a 3.7 per cent yearon-year fall, at the same time, residential transactions volumes decreased by 24.5 per cent.

This decline was also seen across key administrative regions too, starting with Riyadh, where total transaction volumes fell annually by 33.9 per cent. Moreover, the Dammam Metropolitan Area (DMA) and Jeddah recorded declines in transactions volumes of 20.9 per cent and 16.2 per cent respectively.

In terms of residential performance, average prices in the apartment segment have regressed in Q4 2022 across Dammam, Jeddah and Khobar by 1.1, 0.2 and 4.4 per cent respectively, while Riyadh was the only positive performer in the apartment segment with average prices increasing by 17.4 per cent year-on-year.

In the villa segment, average prices registered positive growth in the three major cities with Dammam villas’ average prices improving the most with a 17.4 per cent rate of growth on an annual basis. This was followed by Jeddah and Riyadh both recording increases of 6.7 per cent and 6.2 per cent, respectively.

RISE IN RENTAL RATES

Saudi Arabia’s office sector saw rental rates continue to increase in 2022, as demand continues to outpace supply materially. This was particularly so in Riyadh, where stock levels remain anemic at best and many upcoming developments are mostly fully pre-leased. Demand in Riyadh has stemmed from government entities, government related entities and international occupiers, where many in the latter category are aiming to conform to the requirements of

Hattan Alsharif, senior research analyst, CBRE Saudi Arabia

MARKET REVIEW: SAUDI ARABIA

GRADE A OFFICES IN RIYADH SAW AVERAGE RENTAL RATES REACH SAR 1,711 PER SQUARE

METRE IN Q4 2022, REPRESENTING A YEARON-YEAR INCREASE OF 5.8 PER CENT

5.8% YEAR-ON-YEAR INCREASE

the “Program HQ” initiative. Grade A offices in Riyadh saw average rental rates reach SAR 1,711 per square metre in Q4 2022, representing a year-on-year increase of 5.8 per cent. Although Grade B rents also saw an increase over this period, it was more marginal at 1.5 per cent, with the average rent now standing at SAR1,286 per square metre.

As for average occupancy rates in 2022, both Grades A and B stock saw occupancy levels improve slightly to 99.2 per cent and 98.7 per cent, marking annual increases of 0.8 and 1.9 percentage points, respectively.

In Jeddah, Grade A office rents increased by 7.4 per cent in the 12 months to December 2022, to reach an average of SAR 1,175 per square metre. In the Eastern Province, Dammam and Khobar’s office markets saw Grade A rents increase over the year to Q4 2022 by 7.9 per cent and 6.2 per cent respectively.

INDUSTRIAL SPACE

Saudi Arabia’s industrial sector has been brought to the forefront as one of the main elements of Vision 2030. As a result, the sector was the subject of a complete overhaul through the adoption of the National Industrial Development and Logistics Program (NIDLP).

This programme ushered in plans with changes to the sector’s regulations, standards as well as its strategic role within cities. Moreover, associated services and facilities have been redesigned and relocated in the efforts to create industrial zones with targeted outputs for the sector that would play a major economic role. Also, developing this emerging sector is expected to attract benefits for multiple sectors throughout the kingdom.

With regards to performance in the industrial sector, Dammam saw the highest increase in average rents in the year to Q4 2022, where rents increased by 6.1 per cent. This was followed by average warehouse rents in Riyadh

increasing by 3.7 per cent in Q4 2021. However, Jeddah and Khobar warehouse rents did not share this growth trend with rents in both cities falling 9.4 per cent and 21.1 per cent respectively in Q4 2022.

Still, the industrial sector is projected to go through major changes, as growing demand for industrial space remains persistent.

Furthermore, while major developments continue, standardised supply will become more accessible. In the meantime, these average rent prices are forecasted to continue their contrasting performances.

HOSPITALITY SEGMENT

In 2022, only two out of the four major cities’ hospitality markets had managed to exceed their prepandemic average daily rates (ADR) and occupancy benchmarks. First, Riyadh’s ADR and occupancy rates stood at 10.9 per cent and 2.1 per cent higher than at the same period in 2019. Resultantly, its revenue per available room (RevPAR) stood 1.3 percentage points higher over this period.

The second city to surpass its pre-Covid baseline was Madinah, where its occupancy, ADR and RevPAR now sit 5.5 percentage points, 4.0 per cent and 13.3 per cent above its 2019 levels, respectively.

Jeddah and Makkah were the two major cities, which sat below their 2019 levels across all KPIs, and as a result their RevPARs were 18.8 per cent and 9 per cent below their 2019 levels. For both cities, although occupancy rates are only marginally lower than 2019, the lack of recovery in ADRs have significantly impacted RevPARs.

MARKED RATE OF RECOVERY

Whilst the recovery has clearly not been uniform across all of Saudi Arabia’s hospitality markets compared to 2019, on a country level we have seen a marked rate of recovery ensue during the second half of 2022.

With religious tourism returning in earnest, festivals and entertainment events in full swing across the kingdom and corporate tourism picking up, almost all KPIs registered stellar growth in 2022. Year-on-year in 2022, Saudi Arabia’s average occupancy rate improved by 17.2 percentage points, while the ADR increased by 17.9 per cent. As a result, over the same period, its average RevPAR recorded an increase of 67.2 per cent.

RIYADH’S ADR AND OCCUPANCY RATES STAND 10.9 PER CENT AND 2.1 PER CENT HIGHER THAN AT THE SAME PERIOD IN 2019

THE SECOND CITY TO SURPASS ITS PRE-COVID BASELINE WAS MADINAH, WHERE ITS OCCUPANCY, ADR AND REVPAR NOW SIT 5.5 PERCENTAGE POINTS, 4 PER CENT AND 13.3 PER CENT ABOVE ITS 2019 LEVELS, RESPECTIVELY”

BUILDING ON A DREAM

WORDS: NEESHA SALIAN

PHOTOS: MARK MATHEW

Porush Jhunjhunwala, founder and CEO of Banke International Properties, shares the growth trajectory of the Dubai-based real estate fi rm – which just turned 10, his most signifi cant asset – his people, and the promising outlook for Dubai’s property sector

Icame to Dubai with big dreams and the city didn’t disappoint me,” says Porush Jhunjhunwala, the founder and CEO of Banke International Properties. The Dubai-based full-service real estate firm has proliferated not just in size, but also in strength, reputation, and reach – all of which have been achieved in a span of 10 years, making it one of the fastest-growing real estate companies in the UAE.

Jhunjhunwala, who was born and raised in Mumbai, India moved to Dubai in 2006. After working for a leading brokerage firm for seven years, he decided to branch out on his own, setting up the firm in 2013 with an initial employee base of four. “It was a risk, but my family encouraged me to follow my dream.”

Cut to 2023, Banke International is celebrating its 10th anniversary this year, a key milestone for the CEO and founder, both professionally and personally. “I am incredibly proud on behalf of my team as well as my family and well-wishers who have believed in my vision and values.”

Today, Banke’s team of 250 employees – who have sold more than 10,000 properties including over 200 projects – work out of offices across Dubai, Abu Dhabi, Ras Al Khaimah and more recently, in Mumbai. The office is focused on enabling secondary and primary real estate sales in the UAE.

Technology has played a great role, making it easy for buyers and sellers. Mobile apps, online banking, property portals and 3D virtual tours allow a buyer to sit in the comfort of their homes and get all the information they need to make and enable the purchase of a home”

— Wasim Ahmed, associate director

The company has two retail boutique outlets in Dubai at Al Furjan and Dubai Creek Harbour, which were set up over the past two years, reflecting Banke’s rapid expansion to meet the increasing demand that the city’s property sector has witnessed since the pandemic. The business has six divisions that cover sales and leasing for residential and commercial properties, off-plan properties, project sales and marketing, property management, and mortgage and finance assistance.

A 360-DEGREE OFFERING

“The key to a successful business is anticipating and delivering everything a customer wants under one roof. Our 360-degree offering has played a significant factor in attracting and sustaining the company’s growing customer base. It was a natural progression that marks our growth and evolution as a company; it’s also a futureforward approach to staying competitive,” adds Jhunjhunwala.

Banke’s agility to pivot and adapt to changing trends in the property market has gained recognition, as has its contribution, consistency and strong performance,

Russians topped Dubai’s list of nonresident property buyers in Q3 2022, marking a 11 per cent increase from the previous quarter. Although British buyers still came in second, they dropped by 43 per cent from Q2 2022. Indian buyers ranked third, followed by German and French investors”

Volha Rastarhuyeva, sales director, Residential Sales

particularly from industry leaders such as Emaar, Aldar, Dubai Holdings, Damac and Danube, among others.

“I believe when you do what you love with dedication and focus, the rewards are bound to follow,” he says, referring to the numerous industry awards that line the walls of the company’s headquarters on Sheikh Zayed Road.

When quizzed on the other factors that have contributed to his success, the so t-spoken CEO credits his “incredible team and supportive wife”, and of course, the opportunities that Dubai has presented over the years.

“I value the meaningful relationships and conversations that I have with team members just as I do with our clients. My people are partners in the company’s success and have continued to drive the business through thick and thin. It has been incredibly gratifying to see many of them who joined us as property consultants succeed and carve a niche for themselves as department heads and even as successful entrepreneurs a ter moving on from the company,” says Jhunjhunwala.

He also expresses his delight at the company being nominated and named a ‘Great Place to Work’ in 2022. “I was pleasantly surprised to hear about the award and touched to know that the team felt so valued and happy to be part of the company. For me, this tops any of the accolades we’ve won so far, because it’s based on the feedback of the team.

“People – be it employees or clients – have always come first for us. In fact, during the pandemic, which severely a ected us, we didn’t lay o a single member of our team. To address the challenge, our senior managers joined hands to create strategies and solutions to handle the situation e ciently and humanely.”

He added: “We made certain to get on video calls with all our employees daily to ask them how they were coping. We made sure to let them know that they could reach us at any time if they required our help.”

Banke is also committed to appreciating and acknowledging the e orts of the team through its annual awards, with the second edition being held this month.

TRUSTING TECH

Coming back to the company’s response to the pandemic,

Jhunjhunwala took the downtime during the pandemic to re-evaluate the company’s own processes; the company built a robust Customer Relationship Management (CRM) system, boosting its technology-backed operations.

He says, “The pandemic revealed the critical role that technology has and will continue to play in our business and the world. It took us six months to organise and store our client database in-house as well as optimise our processes further, but it was well worth the time spent on creating it.

We have developed an in-house ‘Landlord App’. Through this offering, landlords registered with us can manage and grow their real estate investments at the touch of a button, right from the comfort of their home or anywhere else in the world. They get a complete picture of their portfolio performance, net income, wallet balance and expenses across all properties. They can also see all the payments received across all portfolios in terms of cash, cheque and bank transfers”

“The CRM system has enabled us to capture leads from all the leading real estate portals as well as other campaign leads. We’ve also built an app for landlords, which helps property owners get access to their real estate portfolio at the click of a button. These steps are supported by our strong presence online and on social media to be accessible to clients and potential buyers. We are also leveraging tech such as WhatsApp chatbots to enhance our customer service.”

REFLECTING DUBAI’S GROWTH

Backed by a force of invested team members and e cient processes, Banke’s growth has paralleled the stupendous development of Dubai’s real estate sector, with 2022 being a stand-out year for the sector.

Jhunjhunwala says that Dubai’s volume of residential sales in 2022 was the best in 13 years, breaking the 2009 record of 81,182 transactions to reach a total of 90,881.

According to the Zeitgeist 2022 report published by real estate portal Property

Payal Monteiro, portfolio manager Property Management

I value the meaningful relationships and conversations that I have with team members just as I do with our clients. My people are partners in the company’s success and have continued to drive the business through thick and thin”

COVER STORY

In Dubai’s offi ce market, we have seen a signifi cant price increase in the total number of new Ejari (lease) registration. A total of 71,325 new registrations were recorded in 2022, up 71.3 per cent from 2021”

Mohammed Shoeb Hafeez, sales manager, Commercial Sales and Leasing

Off-plan sales have picked up a lot post-Covid and Banke has done exceptionally well in that segment. We have won several awards and have been top performers with most developers. Our marketing is brilliant, and we’re doing exceptionally well with off-plan sales”

— Hira Sohail, associate director, Residential Sales

Finder, in terms of value, Dubai’s real estate market surpassed Dhs240bn in 2022, recording a 61 per cent gain compared to 2021. This growth was fuelled by the remarkable success of o -plan deals, which climbed by 86 per cent compared to 2021.

O -plan transactions’ value made up 44 per cent of all transactions in 2022, up from 40 per cent in 2021 as measured by volume, in the market. The first sales transactions for apartments saw the largest numbers (in terms of value). In contrast, the overall value of the transactions for villas/townhouses beat the previous mark established in 2021 to be the highest ever recorded.

These figures reflect Dubai’s growing popularity as a primary destination for real estate investors and potential buyers who plan to settle here.

“Dubai is a magnet for global property investors as well people who are moving here to work or do business. Buyers are drawn by the security and lifestyle o ered by Dubai and the UAE at large. Geopolitical challenges, the influx of Russian buyers and

WHAT BANKE’S EMPLOYEES REPORTED IN THE ‘GREAT PLACE TO WORK’ SURVEY

SAID YES TO... SAID YES TO...

98% 98%

“I was made to feel welcome when I joined the company”

“I feel good about the ways we contribute to the community”

In the last quarter 2022, Abu Dhabi residential transaction volumes increased by 14.9 per cent from the previous year. In 2022, 3,856 units were completed and delivered in Abu Dhabi”

— Kapil Baliyan, sales manager, Primary Sales – Abu Dhabi

the opening up of China will have a significant impact on market trends and what we see unfolding in the year,” says the CEO.

POISED FOR AN UPWARD TREND

Real estate demand, Jhunjhunwala says, will continue its upward trend this year. “Local property prices will increase steadily by at least 10-15 per cent with some areas growing by up to 26 per cent. The biggest inflow of private wealth this year will continue to be Russian entrepreneurs, investors, and senior professionals looking for new homes.”

He adds: “Dubai’s prime and luxury residential property prices are also expected to experience the fastest growth internationally in 2023. Communities such as The Palm Jumeirah, Emirates Hills, Dubai Hills, Jumeirah Bay Island as well as rental properties located close to key roads such as Sheikh Zayed Road, will remain popular. In terms of other up and coming areas, we could see demand rise for places such as Al Qudra, which will also contribute to an uptick in prices.”

Villa sales are expected to drive the market, says Jhunjhunwala. “They have seen price increases from quarter to quarter, making them popular residences in Dubai. Current data indicates that the apartment segment is also experiencing positive expansion.”

The past two years have been incredible for the real estate industry. This uptick in the market has been boosted by the UAE’s successful Covid-19 vaccination campaign, events such as Expo 2020 Dubai, and the UAE’s newly implemented visa reforms. These factors have boosted the country’s overall economic growth, providing a conducive environment for real estate investment”

— Aditi Jhunjhunwala, head of operations

Jhunjhunwala says that the emirate’s o -plan market will continue to do well. “Properties are available at competitive prices compared to ready ones, as developers compete to o er customers the best deal. For the buyer, this o ers a wider range of choices. The market value of an offplan property also gets major appreciation upon handover as surrounding areas get better transport links, amenities and retail infrastructure.

“The payment plans for o -plan developments are linked to their construction, which means you don’t have to pay the entire cost upfront but in smaller instalments.”

He adds: “Globally, secondary market transactions are way above the primary, however, with the trust that residents and overseas investors have placed upon Dubai and the reputable developers here, o -plan market transactions are usually neck-toneck with the secondary market’s volume.

Subsequently, Dubai property rent prices in 2023, the CEO says, will “remain elevated”. Dubai will continue to o er stable rental yields and develop new catchment areas, making it an attractive proposition for investors.

Globally, infl ation is at an all-time high and real estate investments’ value can hedge against infl ation. The returns on your investments are higher due to higher demand. The rental yield is still strong and with the rental prices increasing we see the yield improving”

—

Muhammad Yahya, sales manager, Residential Sales and Leasing

Jhunjhunwala’s parting words of advice are valuable in a market where buyers are spoilt for choice. He cautions buyers saying: “While it’s a great time to invest, do your homework before you take the plunge. Speak to a well-known real estate firm that understands your needs and delivers on your expectations. At Banke International Properties, this is part of the values we espouse.”

MEETING THE DEMAND FOR LUXURY REAL ESTATE

WORDS: KUDAKWASHE MUZORIWA

Dubai’s property market entered 2023 on a positive note after the city closed the previous year with a record 90,881 residential transactions, beating the previous record of 81,182 deals achieved in 2009.

The city’s residential market recorded its strongest start to the year in terms of transaction volumes, with 9,229 residential transactions in January 2023, up 69.2 per cent from a year earlier, according to property consultancy firm CBRE’s Residential Real Estate Market Snapshot report.

The property market’s luxury segment continues to be a global outlier, with prices projected to end 2023 around 50 per cent higher than in 2021.

“As an established subsector, the luxury real estate market is less than three years old in the region. Dubai is already seeing multiple transactions upwards of Dhs100m every quarter and we expect an increase in this category of transactions in the coming years,” says George Azar, chairman and CEO, LUXHABITAT Sotheby’s International Realty.

Dubai’s luxury property sector has been resilient to a slowing global economy, geopolitical tensions and interest rate hikes – challenges that are threatening other markets, including London and Seoul.

Real estate services firm Savills projected that 17 major global cities in its Prime Residential World Cities Index will record slower capital value growth this year, while the other 13 cities, including Dubai, are set to register equal or even slightly enhanced growth.

“The regional hubs of Dubai and Singapore are forecast to top the global price growth charts in 2023. Both cities will continue to see sustained inflows of high-net-worth individuals (HNWIs),” Swapnil Pillai, associate director of Middle East Research at Savills says while cautioning that the cities are not immune to high interest rates and global economic headwinds.

DUBAI’S LUXURY PROPERTY MARKET HAS BUCKED THE TREND IN MUCH OF THE WORLD, WHERE VALUES HAVE LARGELY DROPPED AMID HIGH INTEREST RATES AND A CHALLENGING ECONOMIC OUTLOOK

HENLEY & PARTNERS PROJECTED THAT THE UAE WOULD ATTRACT A NET INFLOW OF 4,000 MILLIONAIRES TO ITS ECONOMY IN 2022, THE MOST OF ANY COUNTRY GLOBALLY

Factors pushing growth

Dubai has definitely been seeing a growing influx of wealthy global investors, who are drawn by a flurry of reforms that are being implemented to make the emirate an appealing destination for global companies, investors and talent.

These include wealthy Russians and megarich Asians looking for second homes. Indian billionaire Mukesh Ambani bought a mansion worth $80m mansion in Palm Jumeirah in March 2022. Later in October, the tycoon followed it up with the purchase of another mansion on the palm-shaped island for $163m.

Other big-name investors in Dubai’s prime residential market include UK-based billionaire Lakshmi Mittal and Chaopeng Zhang, the CEO and founder of Binance, who praised the city for its very “progressive and good business environment”.

The list also includes Israeli investors following the signing of the Abraham Accords, as well as crypto millionaires and hedge fund executives.

The confluence of socioeconomic challenges in Southeast Asia is also driving growth in the market as investors from the region, especially mainland China, are pouring millions of dollars into the city’s property sector.

“Based on January’s data, we are likely to see investments from China edge by over 100 per cent year-on-year and the overall market registering growth in transactions value as well as prices in 2023,” Abdullah Alajaji, the CEO and founder of Driven Properties told Gulf Business in an earlier interview.

Europeans, Americans and Canadian investors are also not far behind, and have been snapping up properties along the city’s beachfront.

So what are they buying?

Last year, the luxury segment saw an increase in the number of units sold in prime areas, including Palm Jumeirah, Jumeirah Bay and Al Barari, jumping as much as 30 per cent quarter-on-quarter (QoQ) with 9,836 units sold throughout the year.

The latest data from the Dubai Land Department shared by LUXHABITAT Sotheby’s International

ADDING TO THE CITY’S APPEAL IS ITS RELATIVE ‘AFFORDABILITY’, WITH PRIME HOMES TRANSACTING FOR AROUND $800 PER SQUARE FOOT, MAKING DUBAI ONE OF THE MOST ‘AFFORDABLE’ LUXURY RESIDENTIAL MARKETS IN THE WORLD”

— Faisal Durrani, head of Middle East Research at Knight Frank

Realty shows that the city registered an 8.72 per cent QoQ increase in prime residential market transactions in 2022 with the average price of a property at Dhs6.9m.

The volume of sales in the prime villa market surged by more than 14 per cent with Emirates Living registering the highest number of units sold at 77 villas while Palm Jumeirah recorded the highest sales volume at Dhs2.56bn.

“Reflecting a total increase in volume of 39.62 per cent QoQ and driven largely by prime property sales in Palm Jumeirah (Dhs11bn), Business Bay (Dhs4bn) and MBR City (Dh3.7bn), growing demand drove average prime property prices up by 8.72 per cent in comparison to the last quarter of 2022,” adds Azar.

The start of this year has seen the segment show great promise, with new luxury property sales records being registered on a monthly if not weekly basis. A threebedroom apartment in the super luxe Bulgari Resort and Residences on Jumeirah Bay Island was sold by Driven Properties earlier in February for a whopping price of Dhs13,543 per square foot. The apartment sold for Dhs42.9m.

The real estate agency’s record-breaking prime residential property sales include a five-bedroom, 4,558-square-foot townhouse, which was sold for about Dhs36m in Jumeirah Bay Island’s coastal Villa Amalfi development.

“Adding to the city’s appeal is its relative ‘a ordability’, with prime homes transacting for around $800 per square foot, making Dubai one of the most ‘a ordable’ luxury residential markets in the world,” says Faisal Durrani, head of Middle East Research at Knight Frank.

The strong performance of the Dubai property market, a sector that had been sluggish since 2014, has ignited hopes that projects that were stalled due to financial constraints can now be completed.

Healthy supply is key

Azar highlights that in light of the growing demand for Dubai’s luxury residential properties, the focus in 2023 will be to ensure a healthy supply to avoid drastic price escalation.

The authorities introduced measures to prevent volatility, including incentives for property investment funds to enhance the city’s appeal as a global real estate investment destination and attract global property investment funds to the emirate.

Abu Dhabi’s Aldar Properties formed a joint venture with Dubai Holding in February to develop luxury projects across three prime areas in the city. Sharjah’s Arada Developments also forayed into Dubai’s prime property market last year with a $65.4m (Dhs240m) investment in Palm Jumeirah.

Dubai remains a lucrative luxury property market, where proactive government policy has bolstered the city’s safe-haven status fuelling long-term demand from buyers and investors alike.

SHARJAH’S ARADA DEVELOPMENTS FORAYED INTO DUBAI’S PRIME PROPERTY MARKET LAST YEAR WITH A $65.4M (DHS240M) INVESTMENT IN PALM JUMEIRAH

BASED ON JANUARY’S DATA, WE ARE LIKELY TO SEE INVESTMENTS FROM CHINA EDGE BY OVER 100 PER CENT YEAR- ON-YEAR AND THE OVERALL MARKET REGISTERING GROWTH IN TRANSACTIONS VALUE AS WELL AS PRICES IN 2023”

— Abdullah Alajaji, CEO and founder of Driven Properties

FACES A $175BN DEBT SPIRAL

BUCKLING UNDER

PRESSURE

The slump in the world’s biggest asset class has spread from the housing market to commercial real estate, threatening to unleash waves of credit turmoil across the economy. Almost $175bn of real estate credit is already distressed, according to data compiled by Bloomberg – about four times more than the next biggest industry. As the toll from higher interest rates and the end of easy money mounts, many real estate markets are almost frozen with some lenders telling borrowers to sell assets or risk foreclosure amid demands for additional capital from landlords.

Distress levels in European real estate are at the highest in a decade, in part because of a decline in liquidity, according to a study by law firm Weil, Gotshal & Manges. UK commercial property values fell more than 20 per cent in the second half of 2022, MSCI data showed. In the US, the drop was 9 per cent, according to Green Street.

The fall in transactions and development in commercial and residential real estate will inevitably impact spending in the real economy. In turn, that could pose a risk to jobs and growth.

“What we have in this downturn is a fairly unique set of economic circumstances. Interest

rates are tightening instead of so tening the blow for real estate and other corporates,” said Ian Guthrie, a senior managing director at the loan advisory team at Jones Lang LaSalle, a real estate broker. “You have a pipeline of potentially defaulting loans” where “values are under pressure and cash flows are under pressure.”

This year, he added, “is when those problems will start to manifest themselves.” About one in 10 corporate loans in Europe is already underperforming and showing increased credit risk, according to JLL.

The abrupt halt to more than a decade of easy money has been made worse for property companies by a pandemic that has changed the way people work and live, leaving many commercial real estate owners high and dry.

The repercussions are being felt across the world. A Brookfield real estate unit warned in November that it may struggle to refinance debt on two downtown Los Angeles towers and raised the prospect of foreclosures, which Barclays Plc analysts called “concerning” for the market. A missed debt payment by the developer of the Legoland Korea theme park triggered a credit crunch in the country, with the central bank forced to act to stabilise markets. Australia’s Caydon Property Group blamed Covid lockdowns and rising interest rates when it fell into receivership.

“We expect to see some casualties” among UK developers, said Nicole Lux, who studies real estate credit at Bayes Business School. “There will be fire sales.”

Commercial property – from o ces to shopping malls – is more sensitive to economic conditions than other asset classes, said Andreas Dombret, who served on the boards of Germany’s Bundesbank and the Bank for International Settlements, adding that “in the past, when the bubble did burst, very o ten this was related to commercial real estate.”

“But it’s ever so hard to ruin the party,” added Dombret. “This is why regulators o ten shy away from introducing countercyclical bu ers at the right time: when there is no stress in the real estate market.”

It’s already begun rippling out to the wider economy. US homebuilding supplier Builders FirstSource has cut 2,600 jobs, while UK millennial favourite Made.com ended up in insolvency. Swedish household appliance manufacturer Electrolux AB announced plans to cut as many as 4,000 workers last year, many of them in North America.

The signs of a downturn are mounting in the US. But despite a dip, commercial property values “are still moderately overpriced,” said Michael Knott, head of US REIT Research at Green Street, who expects another 5 per cent to 10 per cent decline this year. “Appraisers are behind the curve, transaction activity has slowed down considerably.”

Several US banks predict that credit losses will grow this year. In its fourth-quarter results, Bank of America flagged an additional $1bn of o ce property loans with an elevated risk of default or missed payments, while Wells Fargo & Co. expects more stress to emerge in that market as demand weakens.

The turnaround has been so swi t that some private credit lenders are already struggling with liquidity, said Tom Capasse, chief executive o cer at real estate financing firm Ready Capital, adding that the company is looking to “buy other people’s problems,” including construction loans.

“We’re in an orderly bear market” where “banks are pruning their portfolios,” he added.

‘Two fires raging at once’

The stress points in commercial property are expected to be at either end of the market: older buildings where the occupier has moved out, and developments that have yet to reach completion. Nowhere has experienced that latter phenomenon more than China. In September, construction of an estimated two million homes had been halted as the property market slowed.

UK commercial property values fell more than 20 per cent in the second half of 2022, MSCI data showed. In the US, the drop was 9 per cent, according to Green Street

Delays in projects in China are being keenly watched by everyone from economists to distressed debt investors amid plunging sales across the nation and sporadic mortgage boycotts. It followed a government crackdown on the industry in 2020 that sought to cut developers’ leverage, reduce home prices and lower the risk to the financial sector.

Beijing has changed its approach in recent weeks and may allow property firms to add more debt as part of a so tening of the authorities’ stance. It comes just months a ter the International Monetary Fund

WHAT WE HAVE IN THIS DOWNTURN IS A FAIRLY UNIQUE SET OF ECONOMIC CIRCUMSTANCES. INTEREST RATES ARE TIGHTENING INSTEAD OF SOFTENING THE BLOW FOR REAL ESTATE AND OTHER CORPORATES”

warned of the risk of more defaults among China’s property developers – starved of liquidity – as they struggle to finish projects under construction.

In an interview with Bloomberg, Harvard University Professor Kenneth Rogoff said “there’s not a quick fix” for the overdevelopment of commercial real estate in parts of China.

China Evergrande Group, which defaulted on its debt a year ago, shows the turmoil. One of its Hong Kong projects was sold by receivers a ter the downturn, with the developer projecting a loss of about $770m on the deal. The company proposed a restructuring plan last month a ter missing several earlier selfimposed deadlines.

The country’s property developers have also had problems abroad. The first phase of the Royal Albert Dock project near London’s City Airport – once billed as a new business district that could rival Canary Wharf – was put up for sale last year a ter the Chinese developer that owned the site collapsed.

“The end of Covid Zero in China has le t the economy especially vulnerable,” wrote David Qu at Bloomberg Economics. “That may have played a role in the timing of what is essentially a rescue line for developers. Government is probably loath to have two fires raging at once.”

Rogoff, and fellow economist Yuanchen Yang, calculated in 2020 that China’s real estate industry contributed about 29 per cent of the country’s GDP. That’s comparable with Ireland before the last financial collapse, they wrote.

Ireland became the poster child of that crisis, falling into a years-long slump a ter the market crashed. Since then, home values in Dublin

Rogoff, and fellow economist Yuanchen Yang, calculated in 2020 that China’s real estate industry contributed about 29 per cent of the country’s GDP. That’s comparable with Ireland before the last financial collapse, they wrote 29% OF THE COUNTRY’S GDP

have recovered but private credit funds are preparing to put some land plots into receivership, according to people with knowledge of the matter. Some of those selling will have been forced to do so by their lenders, the people said.

A ter many needed bailouts during the financial crisis, lenders in Europe have been more cautious in the current cycle, loaning at lower multiples of debt than in the run up to 2008, said Peter Cosmetatos, CEO at the Commercial Real Estate Finance Council Europe, a trade group for lenders.

“There is undoubtedly a lot of distress and pain to come in the real estate market,” but it will be felt more by borrowers because lenders have a large cushion before they take losses, he said. “It’s a healthy crisis in the sense that it is not either coming from or horribly infecting the financial sector.”

Distressed assets

It was the lure of cheap debt that led European landlords to load up on credit a ter the financial crisis, snapping up portfolios where the borrowing cost was lower than the yield. That’s le t real estate as the weakest link in the European junk market, with a default probability over the next two years of almost 8 per cent, according to Bloomberg analysis. Regulators have already warned that lower demand for o ce space since the pandemic, the higher cost of materials from supply chain delays and rising borrowing costs will make some projects in Europe unviable.

And with fewer buyers in the market, many European landlords will have to mark down values, according to

IN SWEDEN, WHERE HOUSE PRICES ARE IN FREEFALL, NORDEN AB HAS ALREADY AGREED TO SELL PROPERTY WORTH ALMOST $1BN TO PAY OFF DEBT, A SIGN THAT LANDLORDS IN THE COUNTRY ARE MOVING TO REDUCE LEVERAGE”

two investment bankers who asked not to be identified. In Sweden, where house prices are in freefall, Norden AB has already agreed to sell property worth almost $1bn to pay off debt, a sign that landlords in the country are moving to reduce leverage.

A similar situation is playing out in the US where borrowers are demanding bigger discounts than many sellers are prepared to offer.

“The leveraged buyer has been pretty much handcuffed and removed from the bidding tent because of what’s happened with interest rates and debt financing,” said Knott at Green Street, referencing the broader market. “Sellers have not fully reset their expectations to better align with where buyers are, so we do see a large bid-ask spread.”

This standoff over valuations has contributed to banks and other credit providers being more conservative around new lending. When landlords come to refinance, they may have to inject as much as 25 per cent of

IRELAND BECAME THE POSTER CHILD OF THAT CRISIS, FALLING INTO A YEARS-LONG SLUMP AFTER THE MARKET CRASHED.

SINCE THEN, HOME VALUES IN DUBLIN HAVE RECOVERED BUT PRIVATE CREDIT FUNDS ARE PREPARING TO PUT SOME LAND PLOTS INTO RECEIVERSHIP, ACCORDING TO PEOPLE WITH KNOWLEDGE OF THE MATTER.

SOME OF THOSE SELLING WILL HAVE BEEN FORCED TO DO SO BY THEIR LENDERS.

the original purchase price to satisfy the metrics that banks lend against, according to JLL’s Guthrie.

This pressure on the ratios that measure borrowers’ ability to cover interest payments is “a dynamic which has not been felt since the days of the financial crisis,” said Will Nicoll, chief investment officer of private and alternative assets at M&G, who oversees about GBP77bn in assets.

Adam Tooze, a professor at New York’s Colombia University who has written about the 2008 crash, sees reasons to worry again.

“Property is a major recession variable,” he said.

“It’s the biggest asset class and is directly linked to household budgets, which means it carries consequences for consumption.”

“It’s a large recession risk,” he said. Bloomberg

WHY A TENANT-CENTRIC APPROACH IS GOOD FOR THE BOTTOM LINE

Dubai – choose rental properties for convenience, affordability and credibility. We embrace a tenant-centric approach that gives residents greater value for money. Residents can rely on us to deliver when they need maintenance, for the security of our community, and even organising engaging experiences for their families. By renting, residents can hand over some of the responsibilities of property ownership and management while enjoying fullyequipped and up-to-date communities.

In February 2023, Dubai recorded prime rental gains of 22.9 per cent over last year. How does DHAM residential portfolio fit into this in terms of occupancy?

Last year was a strong year for Dubai’s property market, reflected in the performance of DHAM’s residential leasing portfolio. We signed over 6,000 new leases across our 15 communities, from premium neighbourhoods to affordable units for young families and professionals. It speaks to a sustained demand for high-quality, enriched living experiences beyond the home.

DUBAI HOLDING ASSET MANAGEMENT’S AHMED AL SUWAIDI SHARES THE IMPACT OF THE COMPANY’S TENANT-CENTRIC APPROACH AND HOW DHAM OFFERS A BROAD SPECTRUM OF COMMUNITIES THAT CATER TO THE NEEDS OF DUBAI’S RESIDENTIAL LEASING LANDSCAPE Q A &

Rapidly rising interest rates in the latter half of 2022 meant that more people chose to rent, adopting a ‘wait and see’ approach. How has this impacted occupancy levels within your residential portfolio?

Across the board, we saw high occupancy and retention rates. In fact, by the end of 2022, our occupancy exceeded 95 per cent. While rising interest rates and uncertainty in the global economy factor into buyers’ decision-making, residents – especially newcomers to

Dubai continues to provide an environment that is accommodating to landlords’ ambitions, with an influx of tenants that are attracted to its climate, quality of life on offer and strong business environment. What other factors have contributed to this influx? Several factors are contributing to an influx of new residents. Dubai’s status as a global business hub has gained traction, and new legislation and visa amendments have made living, working and doing business in Dubai much easier. Dubai’s high safety and stability levels are also a significant draw. On a local level, the city is a melting pot of cultures, home to more than 200 nationalities and offers a world-class array of leisure, recreation, hospitality and entertainment. In addition, there’s a significant focus on delivering high-quality, happy and sustainable urban living experiences, underscored by the Dubai 2040 Urban Master Plan, which continues to make Dubai an attractive place to call home.

Dubai’s leadership continues to invest in economic growth through strategies such as the Dubai Economic Agenda d33 and the Dubai 2040 Urban Master Plan. What does this mean for the real estate sector in the UAE?

Dubai’s continued focus on economic diversification and amplification will

AHMED AL SUWAIDI MANAGING DIRECTOR – RESIDENTIAL COMMUNITIES

DUBAI HOLDING ASSET MANAGEMENT (DHAM)

immensely strengthen the real estate sector. The Dubai Economic Agenda d33’s focus on attracting more investors, business and talent to Dubai and positioning it among the top three global cities will drive demand for high-quality residential properties. We’ll see more young professionals, as well as families, set up their base here, especially with the availability of long-term Golden Visas for eligible categories.

We provide a broad spectrum of strategically located communities that can cater to the needs of Dubai’s residential leasing landscape. From premium living at Dubai Wharf, Manazel Al Khor, City Walk and Bluewaters to family communities at Ghoroob, Shorooq, Layan and Remraam, as well as the value community of Al Khail Gate, residents can find something to fit their budget and expectations at key locations across Dubai. We also have customised staff accommodation and labour accommodation that provide companies with a solution to house all their staff in one central location.

DHAM’s portfolio spans residential communities across Dubai, from Bluewaters and City Walk to Layan, Ghoroob and Shorooq. Tell us about the company’s tenant-centric approach. While we are immensely pleased to see our communities grow with new members, retention remains a crucial priority for DHAM. Our strong performance is directly linked to our commitment to tenant-centricity and ensuring that each of our communities, touchpoints and experiences are designed to cater to our residents’ needs.

We are heavily investing in community enhancement projects in line with the Dubai 2040 Urban Master Plan and upgrades to our digital solution, all of which aim to provide tenants with a

high-quality of life. We are introducing state-of-the-art gyms, sports courts and pet parks to encourage active living for the whole family, as well as enhanced landscaping and common spaces in line with a growing demand for open and green urban areas. We also organise community events and activations to engage our residents and connect them to their neighbours. Last year, we held over 60 events, like home gardening workshops, outdoor family movie nights in partnership with Sony, and the Diwali festival, which drew more than 40,000 residents.

We introduced the DubaiAM app in February 2019 to improve tenant experiences with online tenancy renewals, maintenance requests, queries, bill payment, and more. We are continually working to improve the app so that it caters to the needs of our tenants and provides a more streamlined experience.

To ensure that tenants have convenient access to key amenities as well as entertainment and retail options, several of our residential communities include retail centres that have restaurants, supermarkets, health clinics and pharmacies, hair salons, primary schools and even nurseries.

Residential communities such as Bluewaters and City Walk sit within retail destinations. What role does tenant retention play, and to what extent do tenants immerse themselves in the community within the wider retail destination?

Bluewaters and City Walk are exclusive. Luxurious apartments, modern interiors and finishings, and floor-to-ceiling windows that afford unique views of sea, cityscape or vibrant retail destinations depending on where you are. Both communities offer residents unique and premium living experiences. Being closely linked to the city’s most popular retail destinations adds to their appeal.

Residents are walking distance from various original dining concepts, entertainment attractions as well as unique retail and hospitality options, so it’s never dull. It folds residential into the ‘Experience Economy’ trend, so the living experience extends beyond the physical unit and encompasses the environment and energy of the wider community.

THERE’S A SIGNIFICANT FOCUS ON DELIVERING HIGH-QUALITY, HAPPY AND SUSTAINABLE URBAN LIVING EXPERIENCES, UNDERSCORED BY THE DUBAI 2040 URBAN MASTER PLAN, WHICH CONTINUES TO MAKE DUBAI AN ATTRACTIVE PLACE TO CALL HOME”

ON A GREENER PATH

ZĀZEN PROPERTIES’ MADHAV DHAR SHARES INSIGHTS ON THE IMPORTANCE OF SUSTAINABLE DEVELOPMENTS IN THE MARKET

How important is sustainability to the real estate industry, and what do you think is driving this shift towards sustainable development?

QSustainability is essential. Developers are seeing the benefits of implementing sustainable-centric features in their projects with urban development’s driving approximately 40 per cent of global carbon emissions via construction. All industries are responsible for helping the UAE realise its sustainability agenda and the real estate sector will become increasingly involved in this effort –especially as the population grows.

How do you see the real estate industry evolving over the next decade around sustainability, particularly in light of the COP28 conference?

There has been an uptick in LEED-certified developments around the world, primarily due to the US Green Building Council’s longstanding credibility as a green rating system, and the cost-saving benefits that such builds offer developers and end-users.

From 2015 to 2018, LEED-certified developments saved approximately $1.2bn in energy, $149.5m in water, $715.3m in maintenance, and $54.2m in waste. LEED-certified projects also contribute to a 34 per cent reduction in carbon footprint and this resulted in a 152 per cent increase in such residential developments being deployed globally from 2017 to 2021.

As it relates to the UAE, the country was the world’s sixth most LEED-certified country in 2021 with 73 projects spanning a total of 13,733,832.33 square feet. The UAE government cited that 121 LEEDcertified buildings rose as a byproduct of Expo 2020, 103 of which were LEED

Gold. These efforts are mapping out the country’s sustainable future and combatting the challenges of global warming. With many LEED developments existing on the same plot as Expo 2020, where COP28 will also be hosted, this will help reinforce the importance of sustainable real estate.

What are some of the key challenges facing developers and investors who want to prioritise sustainability in their projects, and how can these challenges be addressed?

Sustainability in real estate starts from conception through to design and development, and developers face several challenges when implementing sustainable practices within their projects. An unavoidable obstacle to any development is climate change. Varying temperatures, rains and snowfall can damage buildings and affect the efficiency of a development’s infrastructure. Similarly, concrete waste and general waste are known to be the two biggest categories of waste during the construction and operation of assets. The list goes on, but all of these factors must be accounted for from planning through execution.

Another regional challenge is not having easy access to sustainable raw materials such as timber used for construction across Europe or North America. Also, the environmental constraints of high temperatures make it essential to use more cooling and air conditioning in this region, when compared to certain parts of Europe and North Africa.

What are some of the most innovative and effective sustainable design and construction practices you have seen in this industry?

The global construction sector is reportedly on track to witness 85 per cent growth by 2030, and 36 million new housing units

are projected to be built in the world’s top 20 cities by 2025. Developers must responsibly adopt solutions that will minimise environmental damage.

Thankfully, they can choose from several effective sustainable design and construction practices. Existing technologies like smart building automation systems and IoT sensors are becoming more prevalent in construction with their ability to optimise energy use and improve overall sustainability. Similarly, prefabricated and modular construction techniques are also growing in popularity as they effectively reduce waste, and renewable energy technologies like solar panels and wind turbines are being integrated to mitigate climate change.

On the other hand, innovation in construction is also abundant with new materials and technologies being developed all the time. For example, materials such as bamboo can be used as a sustainable and renewable resource in construction, largely due to its high compressive strength and low weight. Technologies such as 3D printing can also be used to create custom, energy-efficient building components.

Tell us about your latest development – Z ZEN Gardens.

ZāZEN Gardens in Al Furjan will be the first LEED Gold certified and ‘wellbeing integrated’ development in the area, which is built with the highest standards and with no compromise to services or amenities for owners.

Upon completion, the development will contribute to a reduction of more than 24 per cent in annual electrical costs, while the use of efficient water fixtures will reduce annual water use by more than 33 per cent.

In total, the development will reduce nearly 470 metric tonnes of CO2 emissions annually. To top it off, our solar panels are estimated to produce approximately 40 per cent of the annual common area energy requirement for the project, which will be passed onto owners in the form of lower service charges.

With this type of approach, developers will be able to provide financially viable projects that are sustainable and add value to how people live and the environment simultaneously.

MADHAV DHAR

CO-FOUNDER AND COO ZAZEN PROPERTIES

OUR LATEST DEVELOPMENT, ZAZEN GARDENS IN AL FURJAN WILL BE THE FIRST LEED GOLD CERTIFIED AND ‘WELL BEING INTEGRATED’ DEVELOPMENT IN THE AREA, THAT IS BUILT WITH THE HIGHEST STANDARDS AND WITH NO COMPROMISE TO SERVICES OR AMENITIES FOR OWNERS”

PUTTING SAFETY FIRST

THE INTERNATIONAL CODE COUNCIL, WHICH RECENTLY OPENED ITS REGIONAL OFFICE IN DUBAI, AIMS TO ESTABLISH A SAFETY-FIRST APPROACH IN THE MENA REGION WITH A FOCUS ON DELIVERING QUALITY BUILDING SYSTEMS

A &

ounded in 1994, the International Code Council (ICC) is a source of model codes, standards and building safety solutions such as product evaluation, accreditation, technology, training and certification. Over 60,000 members – from government officials to architects and engineers to students and contractors – make up the ICC.

F

Having recently opened a regional office in Dubai, the firm aims to focus on delivering quality building systems with a safety-first approach.

QHistorically, for more than 27 years, ICC has been involved in projects in the region and several jurisdictions use the International Codes to regulate building safety. In 2012, Abu Dhabi government, through its Department of Municipal Affairs, introduced the Abu Dhabi International Building Codes, which are based on the International Codes developed by the ICC to be the standards to guide the development of construction projects in the emirate.

We spoke to four key people from the organisation and here are their thoughts and opinions on the safety and protocols in the real estate sector.

What made ICC choose Dubai as the location for its first office outside the US?

The ICC has been active in the MENA region for over 25 years through the activities of our different business units and subsidiaries. In fact, it is the most active region outside the US for us. When we began to look and global expansion, we recognised the need for an on-the-ground presence in the important markets to us so that our clients could turn to us without the twelvehour time difference between here and North America. Because of our history, the MENA region was the natural first location, and within this region there were some very good incentives

WHEN WE BEGAN TO LOOK AND GLOBAL EXPANSION, WE RECOGNISED THE NEED FOR AN ON-THE-GROUND PRESENCE IN THE IMPORTANT MARKETS TO US SO THAT OUR CLIENTS COULD TURN TO US WITHOUT THE TWELVE-HOUR TIME DIFFERENCE BETWEEN HERE AND NORTH AMERICA”

DOMINIC SIMS

CEO OF ICC

that Dubai, and particularly the Dubai Association Center, offered to us, made the emirate an attractive location.

When it comes to construction and real estate safety, how does the UAE differ or excel from the rest of the world?

It is difficult to make a blanket statement about this, but we know that regulators and enforcement officials in Dubai and Abu Dhabi place a high priority on safety and compliance. They insist on the use of advanced building codes and standards, and they are anxious to find ways to safely enable the use of emerging technology. Engineers and architects who design buildings are expected to be highly educated and trained. All of these are characteristics of an advanced building safety system.

What is the value and impact of architectural designs based on the I-Codes particularly in the urban setting with skyscrapers?

The design of large commercial buildings would primarily align with the International Building Code (IBC), which would be supported by other specialty I-Codes, such as the International Plumbing Code and International Mechanical Code. These codes reference thousands of prescriptive standards that make it easy for regulators to enforce, but also enable the use of innovative methods and materials, which are often integrated particularly into creative architectural designs including skyscrapers. It is interesting to note that the Burj Khalifa design was based on the IBC. The performance-based aspect of the IBC, especially when coupled with ICC Evaluation Service Reports, enables the safe and compliant use of innovation, in a way that is straightforward and provides a clear enforcement pathway for regulators.

Does sustainability fit into the codes?

Absolutely. ICC publishes the International Energy Conservation Code as well as the International Green Construction Code which have sustainability at their core, but also align with the other I-Codes to ensure that energy efficient and green construction are not done at the expense of structural or fire safety. It is important to ensure that innovations in sustainability do not have unintended consequences that negatively impact building safety, so in addition to embedding these considerations in our codes, we try to be at the forefront of global discussions related to such things as battery storage and PV panels, particularly as they relate to fire safety.

Tell us about the International Building Code and what it entails. How has the Abu Dhabi International Building Code and the Saudi Building Code adapted it for their respective regions?

The International Building Code (IBC) is basically the foundation of the complete Family of International Code, which is an essential tool to preserve public health and safety from hazards associated with the built environment. It addresses design and installation of innovative materials that meet or exceed public health and safety goals.

Both Abu Dhabi and Saudi Arabia have adapted ICC’s base codes to create their own building codes. Given that each jurisdiction has its own set of regulations and laws when it comes to the administrative approach, most jurisdictions that adopt our model codes might make five to 10 per cent changes within the code itself, and this has been the case in both Abu Dhabi and Saudi.

How have Saudi giga projects like Neom, The Red Sea Project, Qiddiya and Diriyah Gate implemented the codes into their projects?

I believe that implementing codes provides consistency. The Saudi building code, which is based on the ICC codes, provides uniformity focusing on the performance requirements within our building codes. Some of these mega projects are far reaching and are really pushing the envelope that look towards the performance provision of our model codes which allows new methodologies and design techniques that are sometimes validated through peer review.

HAVING A CONSISTENT BUILDING CODE IMPLEMENTED ACROSS THE REGION ALSO HELPS TO REDUCE TRADE BARRIERS BOTH INTERNALLY AND TO EXTERNAL PRODUCT AND SERVICE PROVIDERS WHO SHOULD BE ABLE TO MORE EFFICIENTLY SERVICE THE REGION”

Using tools such as the ICC evaluation reports, which assess innovative materials and methods to ensure compliance with the building code, helps regulators to more easily accept the new products and construction methods with confidence in their safety and compliance.

How will the Gulf Building Code assist in safe, sustainable and resilient structures?

The Gulf Building Code is based largely on the Saudi Building Code, so that provides an instant advantage to its adoption and implementation around the region, since designers, practitioners, and regulators throughout the region already have some exposure to the Saudi Building Code, and/or the I-Codes, which underpin the Saudi Building Code. Having a consistent building code implemented across the region also helps to reduce trade barriers both internally and to external product and service providers who should be able to more efficiently service the region. Implementing a consistent code across the region also opens the door to the potential sharing of resources, such as plan reviews and special inspections that can be leveraged across the region in a cost-effective way.

MARK A JOHNSON

EVP AND DIRECTOR OF BUSINESS DEVELOPMENT, ICC

How has setting up a system of building regulations and compliance enabled continuous improvement around the world?

The International Codes, or I-Codes, which are a suite of 15 coordinated building codes developed through a consensus process facilitated by the International Code Council, are updated on a threeyear cycle with updates based in large part on innovations and lessons learned. The I-Codes are model codes that are generally adapted by jurisdictions throughout the US and around the world when they are adopted into legislation. Having regularly updated model codes enables the jurisdictions that utilise them to have access to contemporary regulations as

IBQC IS A COLLABORATIVE THINKTANK TYPE ORGANISATION THAT BRINGS BUILDING SAFETY EXPERTS FROM AROUND THE WORLD TOGETHER TO PROVIDE BEST PRACTICE SOLUTIONS RELATED TO BUILDING SYSTEMS, PRACTICES, REGULATIONS, CODES AND LAWS”

well as the most updated referenced standards. Likewise, those jurisdictions that have experienced challenges and learned from them can propose code changes that will help other jurisdictions around the world to learn from those experiences by embedding emergent best practices into the latest edition of the codes. There are many jurisdictions in the MENA region that are using the I-Codes, so millions of residents are beneficiaries of this knowledge base that can be embedded into the local building regulations.

In the wake of the recent earthquakes in Turkey and Syria, how can building codes ensure the safety of residents and buildings?

What we have seen in the tragic earthquakes recently is that when enforcement is insufficient, the results can be devastating. Having strong and updated building codes is very important, but even more critical is ensuring that the regulatory system includes robust enforcement to ensure compliance with those codes and standards. It is a challenge for jurisdictions,

How can ICC help construction companies working in areas with advanced regulatory ecosystems?

The interface between ICC and construction companies is probably most focused in the areas of plan review and compliance of the building design to the relevant codes and standards. This is especially the case when a designer is implementing a performance-based design or utilising innovative construction method and materials. The challenge then come with municipalities that are implementing the plan review. While they are interested in seeing new and innovative products, they may not always be comfortable to utilise them. I believe the best part of what we do at ICC, and perhaps need to do more of, is to educate the jurisdiction about the processes followed to accredit and test these new innovations so that they can be implemented by them safety and securely, without any uncertainty.

especially in emerging economies, that do not have any building codes, or building codes that are severely outdated, to try to build a building regulatory ecosystem from scratch. This is where model codes can be extremely useful – but the codes need to be right-sized for the jurisdiction so that they are enforceable. And even before a building code is adopted or promulgated, the jurisdiction should be planning for and building the capacity for effective enforcement.

How has the International Building Quality Centre (IBQC), a global think tank, helped identify high level challenges with building product performance?

IBQC is a collaborative think-tank type organisation that brings building safety experts from around the world together to provide best practice solutions related to building systems, practices, regulations, codes and laws. It is a totally separate organisation from the ICC, but the ICC supports the IBQC administratively.

The organisation has to date primarily generated international good practice guidelines, including a series of guidelines specific to the challenges faced in emerging economies. One of the ongoing projects is related to building product performance, in which we have examined the challenges and issued a problem statement detailing primarily gaps in regulation and enforcement that have led to tragic events around the world.

EVP OF CONFORMITY ASSESSMENT GROUP,

SHAHIN MOINIAN

ICC

I BELIEVE THE BEST PART OF WHAT WE DO AT ICC, AND PERHAPS NEED TO DO MORE OF, IS TO EDUCATE THE JURISDICTION ABOUT THE PROCESSES FOLLOWED TO ACCREDIT AND TEST THESE NEW INNOVATIONS SO THAT THEY CAN BE IMPLEMENTED BY THEM SAFETY AND SECURELY, WITHOUT ANY UNCERTAINTY”

JUDY ZAKRESKI

SVP – GLOBAL OPERATIONS AND SOLUTIONS, ICC AND EXECUTIVE DIRECTOR, INTERNATIONAL BUILDING QUALITY CENTRE (IBQC)

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