A big announcement made in the beginning of 2014 called for attention – UAE developer Nakheel, known as the developer of landmark project ‘Palm Jumeirah’ announced its plans to pay off a significant part of its $16 billion debt in the coming year. For those uninformed, Nakheel has been under debt
since 2010, being one of the worst hit in Dubai’s real estate crash.
It is evident that the real estate market in Dubai is witnessing an unprecedented upswing.
Nakheel recently closed land deal s
worth nearly AED700 mn
on Palm Jumeirah © Nakheel
However, what brought Nakheel
back on track then was Dubai government’s proactiveness
to bail out Nakheel
in the nick of time and Nakheel
Chairman Ali Rashid Lootah’s
decisive leadership after he was given the charge of restructuring Nakheel’s
business interests. The lessons learnt then by the real estate industry and the governmental bodies promise a healthy real estate build-up towards Expo2020.
Since 2010, the Dubai government has taken many proactive measures, and major events such as Expo 2020 are only prompting all stakeholders to synergize their efforts.
The Dubai Land Department, for instance, has launched the ‘The Real Estate Investment Management and Promotion Centre’. The new initiative serves the real estate industry by providing expert recommendations and necessary services to investors – from the start of a project until its end.
Ali Rashid – Assistant Director General and Head – Real Estate Investment Management and Promotion Center
In an interview with gme-re.com, Majida Ali Rashid, Assistant Director General and Head (of) Real Estate Investment Management and Promotion Center, said:
“The Dubai Land Department is aware that in order to succeed in the development of the real estate sector, it requires the creation of appropriate conditions to create an ideal environment to attract real estate investments. For this reason, the Department has mobilized all of its expertise, and set all legal and regulatory frameworks for promoting and marketing the Real Estate sector in the emirate of Dubai in a professional manner which exceeds international standards.”
DLD has taken a slew of measures by launching programs such as Tyseer (Program) (orienting financial facilities to selected real estate projects), Tanmania (Program) (to revitalize the real estate market), Tanveer Initiative (on investors’ protection law), Takhdeer initiative (focuses on real estate sustainability), Tarweej (to promote the real estate market and projects in developers assembly), Trabut (provides charter investor services), Tadneem (to enhance the competitiveness of the national economy). More information on these programs can be found here.
It would be safe to say that it is due to these proactive measures taken by the Dubai government that a healthy
build-up to Expo2020, and consequent benefits to real estate can be expected.
Major events, and their benefits to Middle East real estate
Knowledge Economic City in Madinah - one of projects
on which leading real estate consultancy firm Alpha1Estates International is involved with. Photo: Madinah KEC.
The enthusiasm and excitement felt by the real estate industry after Dubai was announced as the host city for Expo 2020 is evident. Prominent players in the real estate industry in the Middle East such as Alpha1Estates view Expo 2020 as a pivotal event for the GCC of great significance in the Middle East region.
“It’s about the world’s economic center shifting eastwards, returning to the Middle East at the start of the third millennium as it had been in the first and second millennia. As the World Expo in 1851 in London defined global trade in the 19th century and the 1939 New York World's Fair captured the macro-economic Zeitgeist in the 20th century, Expo 2020 in Dubai is set to re-define global commerce in the 21st century,” says Malik Al-Alawi, Chairman of Alpha1Estates. Since its launch in 2006, Alpha1Estates has worked with three out of the five largest listed real estate companies in the Middle East, with a market capitalization of USD $14 billion and all five of the largest Saudi Arabian listed real estate companies.
How much influence Expo 2020 will have in bringing an upward trend in real estate and different allied industries is yet to be measured. However, and speaking from a broader viewpoint, the benefits will be huge to the region.
The Institute of International Finance report states that hosting the World Expo 2020 will add at least 1.5 percentage points per year to Dubai’s real GDP growth over 2014-2020, leading to an annual growth of 5.5%. The official figure shows World Expo 2020-related spending of AED 88 bn
(US$ 24 bn
Dr. Khalid Maniar
Founder & Managing Partner, Horwath
Mak says, “Naturally, there will be more demand due to real needs – the opening of a diversified portfolio within realty sector, the overall positive improvement in businessmen and ultimate users' sentiments. Also, the opening up of the entire economy, which will lead to an influx of the new breed of entrepreneurs.” Horwath MAK is a comprehensive Audit and Advisory firm counted among the top ten multidisciplinary practices in the Middle East region. It provides bespoke, cost-effective, efficient professional services.
Experienced entrepreneurs can be seen joining hands – recently, a group of Saudi investors established a new real estate investment and development firm in Riyadh called Best Choice Real Estate Development. Best Choice delivers end-to-end services ranging from feasibility and market studies
strategies for sales planning and execution across the global markets.
The official statement of the group says, “Its launching is very timely given the lucrative opportunities currently emerging from international markets, particularly in promising high-growth areas in the Middle East, Turkey and popular Asian tourist destinations.”
Among other things, Best Choice is also developing and selling mixed-use projects in Turkey and overseeing infrastructure and residential developments in the Kingdom of Saudi Arabia. A 5-star resort is currently in the works in the Maldives as well.
Organizations like Crowe Horwath have already predicted that tourism, construction and hospitality are likely to be the biggest beneficiaries of Expo2020. Consider this: forthcoming infrastructure projects in GCC alone are pegged at $408.8bn, and a major share of this ($187.2bn) goes to projects in UAE. By conservative estimates, Dubai Expo 2020 expects to attract 25 million unique visitors, and up to 33 million visits over the six-month period. It is also predicted that employment opportunities in these sectors will be unprecedented.
Al-Alawi feels Expo2020 will have three major impacts.Malik Al-Alawi, Chairman of Alpha1Estates over The Palm Jumeirah in Dubai. Photo courtesy: Government of Dubai.
“The first is that there will be a need for increasing and enhancing the physical ‘hard’ infrastructure in the region. For example, H.E. Mohammad Alabbar, the Chairman of Emaar, the Dubai-based real estate developer, recently stated that Emaar’s total investments in Egypt’s real estate sector had increased 700%over the past seven years to EGP 57 billion (USD $8.2 billion).
This trend will not only continue but also potentially accelerate, depending on market conditions.
The second is in soft infrastructure. For example, Dubai’s success and challenges in establishing, liberalizing and regulating an efficient real estate regulatory market can be of great value to other countries in the region, particularly Saudi Arabia, where Emaar has led the establishment of the USD 86 billion King Abdullah Economic City.
The third beneficial impact would be generally increased transfers of financial, socio-cultural and labor capital across the region as demand increases.”
As far as Alpha1Estates goals are concerned, keeping in mind the Expo 2020 opportunities, Al-Alawi says, “Our focus will be very much on expanding our presence in the region in line with the expected growth in the sector over the next decade, acting as the global channel for the region and the region’s channel globally.”
Al-Alawi believes that, apart from Expo 2020, events such as FIFA 2022 World Cup Qatar, and The Two Holy Mosques Expansion 2020 in Makkah and Madinah are likely to sustain the upward trend. Not just Dubai, but the entire Middle East region could benefit.
Ali Rashid, Assistant Director General and Head (of) Real Estate Investment Management and Promotion Center feels friendly relations with members of GCC and the existing tax benefits can be utilized to explore opportunities. “There are also tax exemption
advantages for members of The Arab League, as well as other trade agreements that can assist economies and promote respective property sectors. Advantages can be gained whether through direct investment in Dubai and the UAE, or by meeting the growing demand in the local market and its continuous need for products and services. In light of the above, the Middle East region as a whole can attract significant foreign investment and strengthen confidence across all local markets,” she says.
And in what other ways could real estate developers outside GCC benefit from Expo2020? Dr. Khalid Maniar, Founder & Managing Partner, Horwath Mak
says, “By showcasing to the Expo2020 visitors and potential investors their potential, and plugging in some threats, there may be strong opportunity
. They may create demand as most advantageous of Expo2020. They may get from spillover
impact with lesser competition with almost no threats.”
While GCC and their neighboring Arab countries are set to gain due to friendly relations, the stability maintained within the Dubai real estate market is likely to attract investors from Europe and beyond.
Rashid says, “It’s notable that Dubai’s real estate market attracts investors from all over the world. If you go back to the regular annual reports issued by the Dubai Land Department, you can see that European investors have a significant share of the emirate’s total real estate investments, where the total value of foreign investment topped AED 69 billion from 36,219 investors in 2013. This impressive level of investment from across the globe was due to the attractiveness and stability of Dubai’s market in comparison to those of Europe, which is still unstable.”
According to Rashid, presently there are 140 key European investors’ in the Middle East. “It is expected that the recent tranche of regulations issued by the Dubai government to protect stakeholders will attract more of these investors through creating peace of mind for real estate transactions,” she adds.
Interest in GCC, and Dubai in particular, is not restricted to real estate. Retailers, who add the lifestyle element to real estate, are exploring the opportunities Expo2020 is likely to bring.
Dubai launch of international luxury fashion brand Oroton
Australia’s leading luxury accessories and lifestyle brand Oroton
recently launched in upmarket
Deira, Dubai. Oroton
already has a strong presence in Asian markets such as Hong Kong, China, Singapore and Malaysia.
Group Property Manager, David Prince says, “Following the positive impact that Expo2010 had on
Shanghai and the luxury retail market in China, we believe that Expo2020 will see a spike in retailer activity as more international and luxury brands look to secure strong market presence
in order to capitalise
on international media attention. Limited edition ranges, first to market product and campaigns, and new store concepts will all potentially be a result of the Expo in Dubai.”
Prince suggests there is significant opportunity to expand Oroton’s presence in the Middle East market, particularly in Dubai, and thanks to their partnership with BAIS Fashion, they are likely to open additional retail outlets throughout Dubai. For Expo2020, Oroton will look at specific limited
edition products and events to capitalize on the spike in international interest and overall visitor rates into the region.
“I would not be surprised to see some luxury brands taking the opportunity of partnering with new industries or technologies in order to further push the boundaries and progress the industry even further at Expo2020,” adds Prince.
How does your real estate business aim to benefit from Expo2020? Write us at email@example.com