Sobha Realty’s chairman on the developer’s ambitious targets
PNC Menon, chairman of Sobha Realty, on why the Dubai-based real estate developer is increasing its sales targets for the year, and why that is a good sign for the sector
Dubai’s decision to be one of the first cities in the world to open its borders since the pandemic has proved to be a boon for the emirate’s real estate sector, with total transaction volumes in Q1 2022 reaching 19,009 – the highest total ever recorded in the first quarter of the year.
According to a recently released CBRE report, year-on-year in the year to date to March 2022, the total transaction volumes were 75.1% higher, with off-plan and ready transactions increasing by 114.9% and 52.9% respectively. Furthermore, during the first quarter of the year, secondary market transactions accounted for 56.1% of total transactions, with off-plan transactions accounting for 43.9% of the total.
With the city also introducing further incentives to attract investors, such as additional provisions for Remote Working Visas, a Virtual Working programme, and an overhaul of the visa residency system, it is no surprise to see increasing demand in the sector, with both foreign and resident investors showing interest in a wide variety of properties across the city.
As a consequence, one of Dubai’s most well-known real estate developers, Sobha Realty, recently announced that it has increased its sales target by 50% from 2021. The real estate developer says that it aims to achieve a sales target of USD$1.6bn in 2022, thanks to a steady flow of investments, with 50% of foreign and 50% of resident investors showing interest in its offerings.
In fact, according to figures shared by the developer, Indian, Chinese and Emirati nationals make up the top three investors in Sobha Realty, followed by Russian, British and Nigerian nationals. Capitalising on this massive interest, the developer says that it plans to launch a $4bn development in Q3 of this year.
Furthermore, work on its flagship project, the eight million square foot waterfront community, Sobha Hartland, is at the 60% completion market, it adds. Construction on the mixed-use development is underway in three phases, with a offering of luxury apartments, villas and high-end townhouses available for investors.
Therefore, in order to better understand how the Dubai-based developer intends to build upon its success in a resurgent real estate sector, Big Project ME spoke to PNC Menon, chairman of Sobha Realty, about a variety of topics, including its plans for the year ahead, the shifting dynamics of the sector post the pandemic, and the need to be adaptive to change.
Sobha Realty recorded $1bn in sales in 2021 – what were the market factors that contributed to this success?
This achievement, we believe, demonstrates the investors’ faith and confidence in our abilities. A critical contributor to this success is the government support we have received to adapt to the growing real estate market.
Also, demand for real estate has remained strong, particularly from international territories and countries, which had previously been short-term investors. However, we are witnessing more of these investors emerge with the goal of eventually owning a second or third home in Dubai.
This is bolstered by global travel restrictions and lockdowns which prompted many high-net-worth individuals to relocate to Dubai to take advantage of the city’s infrastructure and favourable government policies, resulting in a surge in the luxury property market segment in 2021.
Sobha Realty recently announced ambitious sales targets for 2022, what makes the company so confident about achieving these targets?
Due to the rising demand and interest from international investors, Dubai’s luxury home market is expected to thrive and maintain its high momentum in 2022. Furthermore, the future of the emirate’s luxury home market appears bright following Expo 2020 Dubai, as it is brimming with new opportunities for buyers and investors.
We expect the luxury property market to retain its upwards trajectory in 2022, with more upscale buildings and projects on the rise. Consequently, the sector will attract more wealthy foreign investors, which can benefit the market, especially as demand from Ukrainian and Russian buyers will increase as well.
Additionally, visa reforms, expatriate-friendly policies, and high-profit margins continue to draw investors from all over the world, making Dubai a lucrative real estate investment market.
Our properties have drawn significant attention from investors, who are seeking waterfront properties with all the luxury amenities and benefits.
What are the market segments that have contributed most to your success and what does this interest tell you about how market sentiment and demand is changing?
The prime districts continue to outperform the market, as we have seen. While we expect most districts to recover, prime districts have seen a much sharper rise due to its limited availability and high demand, with investors from different parts of the world showing interest in the luxury residences.
In 2021, we saw a surge in demand for luxury villas and penthouses, with buyers demanding higher quality properties with larger layouts and sizes. The pandemic, lockdowns, and social restrictions have elevated the need and value of a good home, resulting in a strong shift in preference towards waterfront properties, since 2020.
Last year, the demand for large beachfront villas for sale and rent in Dubai was also high.
Keeping this in mind, how do you anticipate Dubai’s real estate market changing in the coming months and years – particularly as a result of the pandemic and EXPO 2020 Dubai?
The real estate sector’s opportunity lies not only in physical structures, but also in tenant health and well-being, social sustainability, inclusion and diversity, and accessibility for which Dubai offers plenty. The UAE market will see an increase in users, and tenants will want more space, as owning a home has become more feasible. Moreover, foreign investors will continue to notice that Dubai’s rental returns, even during a downturn, are considered strong, averaging four to five percent.
Additionally, when you factor in low-price entry points for freehold properties, high capital appreciation, and low mortgage rates, it remains the clear choice of investment destination for buyers. As a result of the impact caused by the pandemic, house buyers are seeking more amenities in their communities that enable them to entertain, raise families, and work from home, without sacrificing connectivity.
As the UAE and the rest of the world align towards global sustainability targets over the next three years, we firmly believe that community-based sustainable development will also become more important – alleviating climate concerns, such as targets for zero net carbon output, energy efficiency, and adoption of renewables.
As many adapted their strategies to simply survive during the crisis, we used the opportunity to rethink our priorities, to stay ahead of the curve and avoid becoming reactionary in the face of economic turmoil. In turn, this translated into the successful launch of our new Waterfront District and its first tower, Waves.
You’ve mentioned the growing interest from expat investors in Sobha Realty projects? Has there been a change in the demographics of investors in recent months? Will that impact project plans in any way?
Dubai’s reputation as a safe destination to live and work continues to grow, resulting in increased demand from international buyers. At Sobha, we have witnessed promising interests from investors in Israel, China, India, and Nigeria, in addition to Sobha Hartland is also garnering investor interests from several nationalities including Emiratis, Indians, Chinese, Europeans, and Africans.
The mix of nationalities changes each year, but 50% of our investors are residents. We have further witnessed a steady flow of investments, with 50% of foreign and 50% of resident investors, respectively.
Finally, what are your plans for the coming year and what does your project pipeline look like for the years ahead?
Our current priority is the timely completion of the Sobha Hartland master development, which includes townhouses, luxury apartments, and high-end villas, spanning across eight million square feet of prime land in the heart of the city.
At present, Sobha Hartland has reached a 60% rate of completion as previously mentioned. It is our goal to complete the project by 2025 and ensure timely handovers. Our current plans also include a continued focus on the UAE, particularly Dubai, and we will continue to expand our Emirate land bank and develop high-quality, unique homes for buyers seeking luxury investments, over the next decade.
This interview originally appeared in the May 2022 issue of Big Project Middle East.
