Economic Update

Published 22 Jul 2010

When it comes to real estate, the northern emirates take much inspiration from their high-flying sister, Dubai, the regional leader in cutting-edge property development. But while many projects appear to have been photocopied from Dubai’s design studios, new philosophies in the north are aiming for high standards at more affordable prices.

At the forefront of the strategy is delivering property by deadlines. “Most important for us is our credibility. We deliver what we promise on time. This is our goal which we achieve with careful planning in the initial stages,” said Abdul Rahman al-Tassan, CEO of Al-Hanoo Properties, lead developers for Nujoom Islands in Sharjah.

He says he is taking a comprehensive approach to Nujoom Islands, the Dh18bn ($4.9bn) mixed-use residential, tourism, leisure and business development, to avoid snags that have occurred in the past with other fast-tracked projects.

This means finalising contracts with the subcontractors, labourers and the government before coming to the public with prices and completion dates. He points out that even though Nujoom Islands was launched in September 2005, the company has yet to put a single plot up for sale.

Indeed, this is unusual in the UAE. Property is generally on the market immediately after it is announced – and years before it will be ready. Called “off plan” sales, UAE developers can generate income and public interest during the infancy of the building stages, which can last up to 10 years.

Selling conceptual property also means the completion date has a habit of becoming theoretical as well. For some buyers in Dubai, delays are not uncommon. And with the absence of sophisticated real estate legislation, there is little recourse to compensation for homeowners for sliding delivery dates.

For example, the first villas in the Palm Jumeirah, the flagship man-made islands project in Dubai, were scheduled to be completed in 2005, but residents will not take possession until November 2006. Emaar Properties, which will have delivered close to 30,000 units by the end of 2006, is Dubai’s most experienced developer, but even they at times have problems meeting deadlines exactly.

Northern emirate project developers know they will struggle to lure people away from Dubai if they don’t perform better when it comes to living up to their contracts.

And developers in the north have learned from watching the mistakes of others. They identify problems stemming from unrealistic delivery times; not accounting for inevitable delays with materials, labour and bureaucracy; and – most importantly – not factoring the scale of the project they are undertaking.

“Often developers underestimate the complication of the projects,” said al-Tassan. One of the most commonly overlooked areas he points out is the necessity of rearranging streets and highways, modifications that involve permission from multiple government departments. “Sometimes projects take six months to complete the road works alone.”

Another way the northern emirates property sector is differentiating itself is by focusing on sustainable development.

“We don’t want to sacrifice quality for economic returns. We want responsible developments,” said Imad Haffar, CEO of Rakeen, responsible for Ras al Khaimah’s Marjan Islands, the Dh10bn ($2.72bn) real estate and tourism initiative.

To this end, they have adopted more environmentally friendly building methods. Instead of dredging the sea floor, the preferred method for forming man-made islands, they are bringing coarse materials from the mountains for their 3.7m square metre offshore project.

Developments are also committed to generating more green space. Marjan Islands will be 50% of the land size of Palm Jumeirah, but will have less than 20% of the Palm’s population, opening more room for common areas.

A similar plan is being outlined for the Dh10bn ($2.72bn) Mina al Arab, an onshore mixed-use development in Ras al Khaimah, which will have parks, lakes and walkways taking up at least 70% of the development. Nujoom Islands will dedicate more than 50% of the development to a series of canals, and 60% of the remaining land will be designated “green”.

As al Tassan emphasised, Haffar thinks the vital component in mega-projects is thorough planning. “One of the most important things I learned was that you should never change [a project] at the macro level,” he said, “Each time you change the masterplan is it quite expensive.”

He explains he consistently rejects wealthy customers’ requests, which would modify the overall design. Regardless of what a customer is willing to pay, he says, the ripple effects usually result in higher long-term costs and stretched delivery times.

Developers in the northern emirates admit they are targeting customers who, in the past, would only have considered Dubai. They feel that their real estate projects can offer similar or better living conditions at cheaper prices, due to a more careful approach to building in the initial stages.