Dubai-based Shaikhani Group, which traces its origins in Pakistan, has started delivering part of the six projects including five residential towers and a commercial project that includes 1,250 apartments with a development value exceeding Dhs1.5 billion in Dubai. The Dubai-based company in May this year launched its Dhs220-million Gardenia Residency in Jumeirah Village Circle (JVC), with investors being offered a post-completion payment plan of up to 10 years by banks. “We have already started work on the first of the five towers and will start working on the rest of the projects,” Mahmood Shaikhani, Managing Director, Shaikhani Group, told Inayat-ur-Rahman of The Gulf Today during an exclusive interview.
Q: You have launched Dhs2 billion worth of residential properties at a time when the market is facing a slowdown. Can you explain?
A: Ups and downs are part of the economic activities. Property development is a long-term business and it moves in a cyclic order.
We are a long-term believer of the economic prospects of Dubai and the UAE.
The real estate market has come a long way to mature in the last 15 years of the freehold property development. In between, we all went through the global financial crisis – the mother of all crises – in 2008-10.
While the market went through the ups and downs and recovered from the crisis, we also have seen the government continue to issue real estate laws and strengthen regulatory environment.
The market is now well-regulated as it matured over the last 14-15 years.
The Real Estate Regulatory Agency (Rera) monitors the market very closely and intervenes whenever necessary.
We have seen how it had eliminated the fly-by-night operators, speculators and flippers in 2014, when the market had shown signs of overheating.
It doubled the property registration fees to 4 per cent and enforced certain clauses that made it difficult for the speculators to operate.
In addition, the UAE Central Bank tightened the mortgage lending rules, making it difficult for flippers to access bank finance. Mortgage is for real buyers, not for speculators. As a result, we have seen the market cool down, prices coming to a more realistic level that the market fundamentals could support.
So, Dubai’s real estate market is in a better shape than before. Now the market might have slowed down – that’s something to do with the demand-supply situation and other factors.
That does not change the fact that the market is in good shape. So, we feel the market has been cleaned up.
It’s a clean market, a real market where there is more clarity on properties, projects, prices, deliveries and the escrow accounts. Investors and property buyers have more clarity and assurances on their investment.
Besides, those developers who managed to continue their businesses overcoming the 2008 crisis are now better off and have become sustainable developers that the property buyers can trust.
So we believe, Dubai’s market is real, it’s good and it’s the right time to launch properties.
That’s why we have announced plans to develop five projects with a total development value of Dhs2 billion and launched the Dh220 million Gardenia Residency project.
Q: Your company is one of the developers that have successfully emerged stronger out of the 2008-10 crisis, while many failed to sustain business. How did you manage that?
A: I think it boils down to the level of integrity and commitment of the developer. While some had entered the real estate business to make a quick buck – without really understanding the depth of the business and realising the challenges – some developers such as us have a strong legacy of delivering properties.
Our family has been delivering properties since 1978 in Pakistan. We know the business inside out. So, when the global financial crisis hit us, our company was just at the point of braking even in business in the UAE. The crisis hit the industry and us like a tsunami.
We quickly assessed the situation and decided to face the crisis head on and continue to work for our customers. We continued to do that. Since most property units remained unsold, we had taken a slower approach as there were no buyers in the market.
When the market started to look up around 2011-13, we started the construction process. By then, the dust had settled and those serious about the real estate business started to emerge from the crisis. We were one of them.
We started to talk to the property buyers, those still remained and also started to sell new units while re-starting the construction process. It was a very painful process. We continued to deliver while sales were still down as investors and buyers were yet to regain confidence in the market.
In 2014, we injected Dhs80 million into our projects to continue the projects that we had launched in 2006-08, some of those we are currently delivering. It was very painful – but then many people went through the growing pains of the real estate sector in Dubai. We injected the money to make sure we delivered our promises, regardless of the sales or lack of it.
As we moved forward, by and by buyers and investors came back and we were able to sell the properties. This also gives us the confidence to build more properties – something that we have already announced.
Q: It looks like you have not sought bank finance for these projects. Do you plan to borrow money from banks for the future projects?
A: Shaikhani Group is a well-diversified business entity and we have a very strong real estate and trading business in Pakistan. The group remains a financially strong business due to its diverse portfolio as well as our presence in a number of international markets where we have investment.
If we need to inject liquidity to continue with the projects, we can do it from our own resources – like when we did in 2014.
Bank borrowing remains a viable option. However, when you borrow money, the additional cost of the finance has to be factored in for properties – which the developer then passes on to the buyers and investors. We want to protect our buyers from the additional burden.
Q: Now that the market has become more real, with real buyers, what are your thoughts on affordable homes? How could the developers turn them from tenants to property owners?
A: Yes, there are more buyers in the middle income group – who have stable household income with some savings.
They could be turned into property buyers and owners, if prices could be brought down. For that the government authorities could incentivise affordable homes, by offering free land or land at a discounted price.
For example, land price comprises about a third of the cost of the development of a property – the way land price is structured in Dubai. So, if a two-bedroom apartment is offered at Dhs1 million – this could easily be lowered to Dhs660,000.
Then, payments and mortgage lending could be facilitated to the real buyers through special arrangements between the developer, the buyer, the bank – that could be supervised by RERA. For ready-to-move-in properties, certain restrictions could be relaxed, such as the payment and mortgage terms, in order to help them move in to their homes from rental units.
These days, the financial situation of the buyers could easily be assessed through the Etihad Credit Bureau and one can gauge their suitability for special mortgage preferences.
This could be applied to the government employees – both the UAE nationals and expatriates – where the government departments where they work, such as Dubai Municipality, Dubai Electricity and Water Authority, Dubai Civil Aviation Authority and Government-owned banks. With a guarantee letter from the employer, the mortgage finance and the 25 per cent initial payment could be reduced for government employees.
This will help families with a household income of Dhs15,000-Dhs25,000 to move into their freehold homes from their rental homes – thus releasing them for new tenants. This will help fill up empty freehold home inventory and help a reverse migration towards Dubai from the neighbouring emirates.
This way, the regulators, developers and banks could ensure a steady sale of ready properties and engineer an unprecedented boom in the industry that will create a win-win situation for all stakeholders.
This way, Dubai could see a lot of families move back to Dubai and reduce the traffic congestion between Dubai-Sharjah roads.
If we are given free lands, we can build low-cost homes in hundreds of units and offer them at 30-40 per cent less price than the current prices.
Q: When do you foresee the market coming back and start to grow?
A: Realistically, sometime next year we expect the market to grow. As we move closer to the Expo 2020 mega event, new investment will create more employment and those employees will need homes for their families.