Lower land prices help developer’s cause in Dubai
There are still ways developers in Dubai can avoid passing on higher construction costs and VAT charges to the buyer. Getting smart with the land purchases is one, according to the head of Danube Group.
The developer on Wednesday launched its latest freehold venture, the Jewelz, in the Arjan cluster (within easy reach of Mall of the Emirates). It had acquired the plot at “about Dh110 a square foot compared with Dh140-Dh150 that we spent for an earlier project”, said Rizwan Sajan, chairman. “It immediately translates into cost benefits for us on the project cost side and helps offset whatever we have to pay up as VAT.
“And given the market situation, developers need to think twice before passing on higher costs to buyers. At the current land prices, at least in some of the less mature locations, developers can gain advantages.”
The Jewelz project, dominated by studios, has an estimated project value of Dh300 million.
Danube had been planning a launch in late Q4 in 2017 but then decided to hold back. The market had gone into a cold spell for buying activity and Sajan said it was better to take on an extra cautious approach.
“We have studios starting from Dh465,000 and the way payment plans are structured, the buyer pay up about 46 per cent at the time of handover,” said Sajan. “Given that studios in Arjan are getting Dh50,000 a year in rents, they can meet the rest of their payments through rental proceeds. From a RoI (return on investment) perspective, we are talking about double digits.
“As for our project portfolio, Danube is now into the full launch, build and deliver mode in a three- to 3.5-year time frame. Our first projects have been handed over and more are scheduled this year. It counts with buyers that a developer has a consistent track record of handovers as well.”
With the latest launch, Danube gets back to one of its favoured spots — Arjan. Its launch before this one had been a high-rise in Business Bay.
“In many ways, we are back in our comfort zone of Arjan,” said Sajan. “But we did do well with the Business Bay launch, having now sold more than 90 per cent of the units. It took slightly longer, but that was in keeping with the pace of the market.
“We will keep looking for more plots to launch … in another three months and if we get to our sales targets on Jewelz. One thing I will not do is create a land bank first and then roll out launches. For us, property development is still a secondary business line after building materials.
“That being the case, I am fine with buying one plot, launching and then repeating the process. I prefer to stick to a set pattern.”
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