Dubai must end sales price worries

24 July 2014

Developing cash-generating assets requires funding, but delivers long-term revenues

One subject has dominated late-night discussions during Ramadan in Dubai this year. And for long-time residents of the emirate it is a familiar one: Property prices.

While the debate rages on, there is one subject that everyone seems to agree on: Population growth.

The obvious opportunity for property developers is that these people will need homes to live in. But while some will undoubtedly be tempted to buy a home, many more will not.

In the past this market opportunity has been largely overlooked by Dubai’s big developers, which have focused most of their efforts on selling homes off-plan.

Developers are starting to shift their focus, and on 19 July Nakheel announced that it would build a community of villas for its portfolio of cash-generating assets. The project is part of the company’s medium-term goal of trebling revenue from its leasing, hospitality and retail properties to generate long-term sustainable revenues and growth.

A strong balance sheet and access to competitive funding are not luxuries enjoyed by all developers, which means that while the business case for developing new communities for leasing is strong, only a select few companies can actually deliver them.

That is something Nakheel and other major developers in Dubai will use to their advantage while everyone else worries about property prices.

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