Dubai economy back on track

Hesham Abdullah Al Qasim There is a buzz in the air: Dubai's economy has come out of recession and growth is picking up. Interesting times are ahead. However, the big question is, is the real estate sector picking up? "The economy is back on a growth track and we see the market picking up. We have witnessed steady growth and we look forward to a better growth track going forward," Hesham Abdullah Al Qasim, Vice-President and Chief Executive Officer of the Dubai Real Estate Corporation (DREC), told Gulf News in an interview.
Asset value erosion has been arrested while in some places prices of properties are showing signs of recovery, he said.
"Asset demand is going to go up and we see prices of villas are beginning to appreciate in certain locations in Dubai," he added.
The Dubai government established DREC in June 2007, combining the assets of the Development Board and Dubai Real Estate Department, through Law No 14 that says the corporation shall be a public commercial institution.
With DREC the Dubai government has effectively corporatised its rental and leasehold assets under a single entity. In order to help the market and ease pressure on rents, DREC earlier undertook a massive housing scheme to provide affordable homes. The new 5,000 units are part of the pack.
This has helped the government to effectively balance the rental market by revising rents periodically upwards or downwards depending on the demand and supply situation and protect residents from rent-related inflationary pressures as the market became too commercialised.
DREC has a residential portfolio of 25,000 units currently being managed by its asset management arm, Wasl Properties, with an occupancy rate of 92-93 per cent. The company has delivered about 5,000 units during the last four years and has a few hundred units currently under development.
The Dubai Government amended the law that helped set up DREC in 2007, bringing it under the direct control of the Ruler's Court, from the Investment Corporation of Dubai, giving it a wider mandate to expand its portfolio and achieve greater financial independence.
In an exclusive interview, Hesham Al Qasim expressed his views on the economy, property and other issues.
Gulf News: What is your view of Dubai's economy in general and the real estate sector in particular?
Hesham Abdullah Al Qasim: Dubai has come out of recession. Things are looking bright. The tourism and retail sectors picked up first and now trade is also growing so is general consumption.
For most of these sectors, they have already hit the bottom of the cycle and are now on a growth path.
In the real estate sector, however, there are encouraging signs as well. It is approaching the bottom of the economic cycle and we expect the sector to return to growth path soon. In certain locations, rents and prices are coming back to normal.
So, generally, the future of the country's economy is shaping up great that will encourage inward investment as we have the best infrastructure and system in place.
Do you really think that the real estate market will pick up?
Yes, of course. And it is already happening. With the economy looking up, we will see the creation of more jobs, more consumers moving in and consumption growth that will trigger new demand for housing units.
These factors will trigger investor demand in coming years. Such a well developed infrastructure will naturally attract investors.
So, Dubai has a strong potential for more growth.
What about DREC? How has it managed the downturn that has affected the real estate sector badly?
Although the property sector was the worst affected sector, Dubai Real Estate Corporation has actually done very well. First of all, we were very careful and conservative. Second, we have historically been in the rental and leasing business not freehold.
And, our rents have been low anyway. So, when the financial crisis hit the local market, the freehold prices and upmarket and properties with inflated rents began to fall.
As people began to look for lower rents, they were absorbed in our housing units as we then began to deliver our own projects. During the last four years, we have added 5,000 housing units that helped the market to stabilise and help Dubai's property market balance out.
And because many of our units were rented at below the market level, we were able to adjust them against the market and that helped us boost our income even in the downturn.
While a lot of other developers and companies' operations shrunk, we grew our portfolio and our rental income also has gone up. We are a more solid company than before and ready to play a bigger role in the economy of Dubai.
How did you manage to save the company from the effects of downturn while some are still reeling from the wounds inflicted by the global financial crisis?
We were always focusing on the market needs. We are careful about our projects, location and rental rates. One of our key objectives is to support the population of Dubai and thus contribute to the economy of Dubai. That's why whatever we built, the market absorbed.
How big is your portfolio and how diverse?
We have a large pool of assets, including 25,000 residential units under management, 5,000 industrial units, a large pool of commercial assets while our affiliate Dubai Golf manages the emirate's two most popular golf courses Dubai Creek Golf Course and Emirates Golf Club.
We also have a strong portfolio of luxury hotels including Grand Hyatt, Park Hyatt, Hyatt Regency, Le Meridien, le Royal Meridien, Le Meridien Mina Seyahi, Westin Dubai Hotel, among others.
So, we have a well diversified portfolio.
What is your growth plan for DREC?
We would like to grow organically. We are conservative and careful in our approach. We have not been aggressive and that paid off well. That has helped us to emerge stronger amid the recession.
However, that doesn't mean that we are not going to look for opportunities. If we find the right location, land, asset, we will acquire and develop. So, we are open to acquisition.
What about acquiring companies, property developers?
No, we do not want to acquire companies, but only assets.
What is your views on hotels, hospitality sector?
I think there is strong potential for growth in the hospitality and tourism sectors.
As a company, we are studying the hospitality market which is the first to recover from the financial meltdown and we see demand coming back, especially in the mid-market and budget segments.
There is a shortage of branded three-star hotels in the market.
However, in terms of luxury five-star hotels, I think Dubai has enough occupancy already. We are also expanding the Le Meridien Hotel with 200 rooms currently under development.
Since in some of your housing units, the rents are very low much lower than the market. Are you planning to raise the rents in those units?
We are following the rent index of the Real Estate Regulatory Agency (Rera). As per Rera's rent index, wherever our rents are lower, we will increase as per the existing caps to align it with the market. In some cases the increase is still very low compared to the market.
Any plans to enter the freehold market?
No. We do not have any plans to enter the freehold market that's not part of our mandate.
Dubai Real Estate Corporation (DREC) was established by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, in June 2007 through Law Number 14.
DREC's activities encompass owning and managing its land bank which includes a sizable amount of properties registered under the name of the Dubai Government, as well as others. Its mandate extends to building, investing in and utilisation of commercial and industrial lands and properties.
Wasl is an Asset Management Group owned by the Dubai Real Estate Corporation, created to manage and develop its assets. It aims to grow into a globally competitive entity. Wasl operates a wide spectrum of property management, project management and investment management services for DREC.
Key business areas that Wasl is focused on are project management, hospitality and investment. In line with its long-term strategic ambitions, Wasl's project management capability will cover residential, commercial, retail, light-industrial, public utilities, leisure and entertainment sectors and education.
With a portfolio of seven hotels and over 2,200 rooms, Wasl Hospitality's portfolio includes three hotels under the Hyatt Group - Grand Hyatt, Hyatt Regency and Park Hyatt - and three under Starwood Hotels and Resorts including Le Meridien Dubai, Le Meridien Mina Seyahi, and The Westin Dubai.
From / Gulf News