Interview: Hesham Abdulla Al Qassim
What impact do you see the recently announced government incentive to encourage more private investment in the hospitality sector having on the city in the medium term?
HESHAM ABDULLA AL QASSIM: By 2020 two- and three-star hotels should ideally comprise at least 50% of the market, while the rest should be split between four- and five-star hotels. This is far from the case at the moment. There are currently 84,000 hotel rooms in Dubai, and around 45,000 of them, or 56%, are five star, and 20,000 are four star. Two- and three-star hotels barely register statistically, and yet there are as many as 20,000 one-star, or unrated, rooms, some of which are not registered.
The establishments currently in the one-star category are only surviving due to a lack of options in the middle; once the gap has been filled, one-star hotels will either upgrade their properties or have to drop out of the market. This will be a welcome development as the absence of quality standards among one-star hotels can be damaging to the industry. But most important is to focus on the demand aspect, as there are currently many price-conscious visitors coming to Dubai whose needs are not being properly catered to due to the lack of mid-range accommodation.
In what ways do you see the development focus within the various geographic corridors of the emirate changing in the coming years?
AL QASSIM: Unlike many governments internationally, Dubai did not heavily reduce spending on infrastructure throughout the economic crisis and post-crisis period, with major projects such as Dubai Metro and Al Maktoum International Airport completed in 2009. With that said, we see the infrastructure, logistics and transport platforms which the government continues to develop in Dubai as the main drivers for interest among developers in new and upcoming corridors. As a government entity with a land bank comprising a significant amount of the emirate, wasl Asset Management Group is always striving to balance the market based on supply and demand. Although we have never sold land in the past, the firm will be entering the freehold market for the first time in 2014. We are not committing any specific percentage of our portfolio, but instead intend to proceed on a project-by-project basis.
How can existing programmes that are intended to streamline the entry of bulk investors into stalled projects in Dubai be improved?
AL QASSIM: The Tanmia Programme, launched in September 2011, has provided a strong platform for bringing private investors in to get stalled projects completed, although the initiative naturally has its limitations. It has been aimed at providing new entrants to the market with the right advice and knowledge to move forward. Of course, there is always room for improvement, but the government has provided the subsidies and support for the sector to both minimise fall-out from the crisis and prepare for more sustainable development. Unlike before 2008, we are seeing a much higher level of sophistication among developers entering the market due to more stringent barriers to entry imposed by regulators. The government seems to have struck a strong balance between allowing the market the freedom to function naturally, while still ensuring there is sufficient regulation for sustainable growth.
How do you assess the balance between mid-market and upper-market property?
AL QASSIM: The freehold market is clearly imbalanced and weighted towards luxury residential properties, rather than the more affordable segment. Developers have naturally focused on prime real estate as the margins on high-end property are simply more favourable. In contrast, the non-freehold market is relatively balanced as it currently stands. Affordable housing in the city is mostly purpose built and developed by large firms to accommodate their corporate staff. The employment base must mature before private developers begin to see low-cost housing as a truly viable investment.
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