It is widely agreed that the main contributing factors to this phenomenon are the skyrocketing prices of building materials and the double-digit electricity rate increases.

The real estate market has witnessed a series of dramatic changes and transformations during the period from the last quarter of 2007 to the beginning of the current year, according Mr. Yousef Fakhruddin, CEO of Fakhruddin PropertiesFakhruddin Properties, a subsidiary of Fakhruddin Group and one of the region's fastest growing developers. "Some companies were about to incur heavy losses as their profit margins diminished, but the government intervention which solved the cement and steel crisis has come to their rescue. The current scenario can be mainly attributed to the prices of building materials, the hike in maintenance costs and the high water and electricity costs, especially in the new buildings," said Fakhruddin.

Fakhruddin, whose company is behind a number of quality projects in Dubai, added, "The stable five percent return on investment will contribute significantly to containing the 35 percent inflationary pressures in the sector. But this move is not healthy as it is not the outcome of a wave of rectifying the disequilibrium in price level or a demand and supply balance, but rather a result of exceptional circumstances. We may have a rebalance in the market, as there is a mounting demand for commercial and residential units and a rising need for labour and bachelor accommodations. The market is still competitive for investors and will remain attractive until there is a demand-supply balance."

Speaking about the other buoyant sectors that may attract the capital coming from the real estate market, Fakhruddin said: "Liquidity may be pumped into capital markets or injected into other investment opportunities in the tourism or aviation sectors, while investment in the property market will focus on rent, purchases and sales."

Some real estate developers have proposed solutions to address the current problem, such as acquiring stakes in building materials manufacturing companies, especially the cement and construction steel factories, or sending representatives to the countries of origin to get competitive prices. Other suggested solutions include importing the raw materials at low costs for reproduction in the country or entering alliances to establish a manufacturing company to reduce construction costs.

-Ends-

About Fakhruddin:
The Fakhruddin Group of Companies was established in 1963 and quickly went from strength to strength based on its core values of providing quality products by understanding and then satisfying its customers' needs. Fakhruddin's track record in real estate development and property management has been marked by its exponential growth in the UAE. In the arena of an increasingly competitive market, Fakhruddin is committed to providing quality to its customers and increasing its market share, as It is now developing a series of signature projects in Dubai, notably the Maimoon Twin Towers, the Coral International Hotel Apartments and the Lake Central Towers. Using smart technology in its array of plush state-of-the-art facilities, the company's projects are proving quite popular in the country's real estate market.

© Press Release 2008

 

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