The sustained price-correction in Dubaiâs property market could soon be a thing of the past, according to Sobha Group Chairman, PNC Menon. In an exclusive chat with CNBC-TV18, the Omani businessman, with origins in Thrissur, Kerala, said that Dubaiâs more credible developers have already reduced selling prices on respective projects and that there is no room for further cuts.
âThe real developers here have already cut down on prices, I donât think anything further can be reduced,â said Menon, âIf that (further price-correction) does happen, either quality will suffer or the businessman will suffer. That maturity (to desist from further price-correction) has already hit the market.â
The Dubai property market has been on a discounting spree since mid-2014 when prices hit their peak in the aftermath of the announcement that the emirate would host the much-hyped Expo 2020. While transactions have been on a low for several months, June to August 2019 saw some semblance of revival.
Real estate observer Data Finder reported that Dubaiâs residential sales transactions saw a 33.46 percent year-on-year growth in this period. The report claimed that the period between June and August 2019 in the emirate saw 8,833 deals versus 6,618 deals in the corresponding period last year.
The report also said that this sales number is a four-year high, for the period under consideration. Sales volumes also saw a spike in this period. A total of AED 14.94 billion sales transactions occurred in these three months, which was considerably higher than the figure of AED 12.58 billion in the corresponding period last year.
âDubai property market will reward credibilityâ
While Menon maintains that over-supply will continue to remain an issue, the emirateâs market, estimated to clock AED 30 billion in revenue annually, will develop the capacity to reward credibility.
âDubaiâs big brands, like Emaar, have already done business worth AED 9 billion in the first half of this year,â said Menon, âThe market here is stabilizing; there canât be too many operators. If there are too many operators, the right ones will get the market to choose between the boys and the men. It will happen soon.â
One of the ways of getting there is right-size apartment units, and the Sobha boss concedes that it is a practice prevalent among all developers. âAll developers have begun reducing sizes â this is a fact of the market,â he said, âBut I still believe there is a market for products with a size above 1,800 square feet.â
âSobha Realty on course to AED 2 billion sales in 2019â
Sobhaâs Dubai business, branded as âSobha Realtyâ (the groupâs India business is listed as Sobha Ltd) has announced a target of AED 2 billion by the end of 2019. Menon believes the company is on track to getting there. âWe are more or less sure achieving that number, and I hope we will hit it this year,â he said, âWe have already crossed AED1.3 billion in sales. October, November and December are good months in this country. We should be able to comfortably meet that target of AED 2 billion.â
But there are two ways to rake in the moolah, and sales targets are only one of them. The other one is an IPO and Sobha Realty has evinced interest to go public by 2022. Menon confirmed that the will continue to target that timeline. âWe are targeting 2022 for the IPO, but are looking to achieve a few more parameters before we go public,â he said.
âIPO in 2022, AED 4 billion business in five yearsâ
In the run-up to the IPO, Sobha is already contemplating its second project in Dubai. Without divulging too many details, Menon said it would be a âmixed-use developmentâ, planning for which is presently underway: âWe are targeting completion in ten years from now.â
Even as IPO-related parameters continue to be met, Sobha Realty is looking to enhance its sales targets as it looks to take a moonshot of registering AED 4 billion in annual sales. âIn Dubai, Sobha could target AED 4 billion business per year, and this target can be achieved in the next five years,â said Menon, adding: âThe Sobha brand identity has been accepted beautifully in this country, and weâre hopeful of a boost to AED 4 billion now.â