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This year's projects to reflect price levels of 2006-07, say developers

The real estate prices for projects that will be launched in Dubai in 2009 will reflect 2006 and 2007 price levels, said developers.

As construction and land costs have dropped in Dubai, developers are looking to pass on the benefit to the buyers. "We are planning to launch projects by the end of this year or early next year and the benchmark prices that we will set on these projects will reflect 2006 and 2007 levels," said Abid Junaid, Executive Director, ETA Star Properties.

"For our new high-end launches we will look at prices in the region of Dh1,800 per sqft. For mid-end projects we are looking at around Dh1,100 to Dh1,200 per sqft. It all depends on the type of project and the location."

Mohammed Nimer, Chief Executive, MAG Property Development said: "Real estate prices will be affected in Dubai because land and construction costs are coming down. If and when we do launch our new projects they will reflect new benchmark prices corresponding to the market conditions."

Ghassan Sakhnini, President, Tameer Holding said: "In general it is market transactions over a period of time that dictate benchmark real estate prices. Due to our projects' prime locations and high-quality finishes and our prestigious clientele, most if not all of our prices will be somewhat higher than the market benchmark."

Meanwhile, developers said they are saving up to 30 per cent of their project costs by re-tendering construction contracts they are passing on to their investors either through reduced benchmark prices or the rescheduling of payment plans.

Junaid said the savings made by a developer from re-tendering would depend on the time period of the contract and the price at which the previous contract was awarded.

"Steel prices have fallen by more than 50 per cent from the peak. For example, during the middle of last year steel prices were at $1,500 per tonne but are now they are at $500 per tonne. "Overhead costs as an absolute number have dropped. However, if you compare the overheads of a developer today with their drop in sales, then one can say overhead costs are up. Sales volumes have dropped considerably and some companies have not reduced their staff by the same amount."

Markus Giebel, Chief Executive, Deyaar Development also said: "Development companies that are well capitalised and have strong balance sheets would be able to ride out the slowdown in the real estate sector. But he added: "Developers with highly leveraged balance sheets and cash flow problems are likely to be acquired or merged - or will perish."

Deyaar recently launched a strategy under which some of its projects are being consolidated within the developer's portfolio. Investors in these projects are being given the option to transfer their ownership to projects that will be completed on a fast-track basis.

"Whatever remaining inventory is left in the market is being consolidated to provide better facilities, easier payment terms and quicker deliveries to our customers," added Giebel.

Giebel said the developer had one of the healthiest cash flows in the industry and was well positioned to take advantage of emerging opportunities over the next two years. "Our recently announced business strategy clearly reflects that," he added. "We believe the fundamentals of the UAE market and the wider region are strong and the real estate sector is well positioned for sustained expansion in the long term."

According to ETA Star , the developer does not have much inventory left to sell in the market. Junaid said the company had made between five and 10 per cent of its staff redundant but had re-deployed them in the larger ETA Group.

By Anjana Kumar

© Emirates Business 24/7 2009