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Having spent more than 40 years in the region, PNC Menon has seen the property market endure many ups and downs. So when the price of apartments at Sobha Hartland at Mohammad Bin Rashid (MBR) City came down marginally from Dh1,600 to Dh1,520 per square foot during the past year, the Founder and Chairman of Sobha Group took it all in stride.
Menon has overseen the development of more than 450 projects spanning 75 million sq ft, and he knows that these projects are not immune to cyclical real estate price movements. So despite the glitch, Menon is pushing forward as he is set to reveal this year a new project out side Dubai. The group is also planning to enter the budget homes sector, with properties competitively priced at Dh1,000 per square foot, following the company's entry into the affordable segment in India. By April, Menon says previously announced overseas sales offices will be operational, denoting a push across locations such as London, Singapore, Riyadh and Doha, among others.
Sobha Developers' portfolio includes developments in the UAE, India and soon in the UK. In collaboration with Meydan, Sobha is also developing the prestigious MBR City — District One project.
Seated comfortably at a mock-up show villa at Sobha Hartland, Menon speaks his mind about the wonders of Dubai to his unfortunate experience with office developments. Here are excerpts from the interview.
- What do you think will shape the real estate market in Dubai this year?
Dubai is a commercial capital for three billion people out of the Indian subcontinent, Africa and the Middle East — roughly 40 per cent of the [global] population. None of the geographies that I mentioned have been able to create a city like this, which is vibrant, well connected, safe and beautiful. The creation of the city has been a very important part of the success of the real estate business in Dubai.
Dubai is the most sustainable real estate city in the Middle East. It is a cosmopolitan city, with beautiful weather five to six months [in a year]. It delivers high quality living and is not very expensive like Europe.
Real estate business is cyclical but no one is able to say how long a cycle is going to last, whether it is a positive or negative cycle. The downturn that started [from the second half of 2014] continued during the whole of 2015. This is only guesswork, but if you take two years as a cycle, in the middle of 2016 we may get into a positive cycle again.
I expect that if not by the second half of this year, definitely by the first half of 2017 it should be back to normal. Cycles have become very short. I have started getting a feeling that these cycles are two plus two — that means two years of positive cycle, balanced by two years of negative cycle. Even during the two-year negative cycle I'd say that it is not totally negative, but about 40 or 50 per cent of what one could sell in a positive market.
- When you say negative do you mean both demand and prices are down?
Prices get corrected during the negative period. In a mature market it could be between 10-15 per cent. Suppose you could get 100 units in a positive cycle, you could get about 40-50 units in the negative cycle. But it could be a price correction of up to 15 per cent.
- Your reports mention that in India you sold more real estate, but earnings were a little lower. Do you expect similar annual results here as well?
In India we introduced a budget product. Once you get into a budget product, the balance shifts. The number of units could be more but the value could be less.
- Do you have any plans for budget homes here?
We're looking at budget [homes] here as well, at about Dh1,000 per square foot. Sobha is not going to compromise and make it cheap. We're planning to launch it by the end of this year, if everything goes according to plan.
- Will the currency situation affect interest from countries such as India?
The Indian subcontinent is important because people there like to come and live here. They like buying property here as a second home. India is a country with a population of 1.25 billion. In absolute numbers, India is probably the biggest buyer in this market and it will continue to be so because the prosperity of India will have an effect on real estate purchase capacity.
- Any plans this year?
We're looking at another destination in the UAE, which has been kept very confidential. We are going to have a beautiful development in one of the other emirates. It is going to be a mixed-use, tourism-centric development with hotels, residences, a mall and a golf course. I will completely break the suspense in a couple of months, by, say, June.
We'll also be developing a piece of land that we have on Shaikh Zayed Road. We've plans for a hotel, retail, offices and furnished apartments. That will be Sobha Headquarters. We'll be starting in the first quarter next year. It's a three-year plan. We should be ready by early part of 2020 to occupy.
With our partner, Meydan, Sobha plans to start handover of District One in the middle of this year. We start July 1 and by November 30 we will finish phase one. We are on time for delivery.
- Are you looking at the office market here?
When there is demand people start building. But I've never been lucky with offices either here or in India. Of course, I will try to build something for renting out, not for sale. We've a project coming up in Hartland. It is a multiuse building. It'll be 50 per cent residential and office, very high-end. There is a huge demand for very high end properties. The plans are ready. Hopefully, we will launch in a year or a year and a half.
- Are you seeing commercial demand spillover into residential?
There is a theory that when you sell one square foot of office, you have to sell five square feet of residential to accommodate the people who work there. Another thing is tourism. There is already 14.5 million people coming into the country. The projection is 20 million. It is continuously growing. This is definitely going to have an impact on the industry. We have roughly about 60,000 hotel rooms. And the requirement would be about 120,000-140,000 rooms in 2020.
- When is the handover for Sobha Hartland?
We'll be completely delivering phase one before 2019 in stages. It will start from 2017. The first phase is worth Dh7 billion. This project is worth about Dh15 billion total. We'll have another Dh9.5 million in phase two, which will be announced in three or four years. We're expecting this to continue until 2018. Post 2018, depending on the sales we may bring it forward or push it later.
- Did the price points for Sobha Hartland change during the last year?
We've adjusted the price points according to the selling price. For example, we are selling at Dh2,000 plus for villas. We're selling apartment here at about Dh1,520 per square foor. That is the price point now. Earlier the apartment price was Dh1,600. We brought it down to Dh1,520.
- What are your plans for overseas markets?
There are about 10 offices all over the world, which will be operational by the end of April, hopefully. In London, we have a 50-50 partnership with a British company to develop a project. Hopefully by mid-2017, we should be there in London.
A glimpse of Sobha Hartland
The master plan of Sobha Hartland shows the Dubai Water Canal on the periphery. Already, property listings boast of apartments with ''canal-view balcony'' and villas with ''barbecue area and direct access to the canal''.
The project will feature airy, open spaces with a lot of greenery and an emphasis on high quality of life, transforming a vast, open desert into a vibrant community not far away from the iconic Burj Khalifa.
As the project is still under construction, the show houses and sales office sit like a dollhouse flanked by corrugated sheets. It's off the grid on GPS maps, so going to the project site might feel like driving into nothingness, even when you are on a well-paved pathway. The show house, however, gives a glimpse of what the development has to offer.
''Sobha's apartments are larger than the norm. Our apartments are larger than what Dubai normally offers,'' says Sanjay Sachdev, Executive Vice-President of Marketing at Menon Capital.
The project comprises international schools, gardens, mosques, hotels and a spa, along with offices, serviced apartments and retail. The residential component comprises four- and five bedroom villas, six-bedroom signature residences, and garden apartments featuring studios, three bedders and duplexes.
''Offices will be a part of phase two, which will be a mixed-use project with residential serviced apartments and 450,000 sq ft of high-end offices. We have a mall next door, Hartland Mall, which will have 550,000 sq ft of leasable space, along with a hotel and furnished apartments as part of phase one,'' says PNC Menon, Founder and Chairman of Sobha Group.
Phase 3 of MBR City — District One launched
Meydan Sobha recently launched the latest phase of Mohammad Bin Rashid Al Maktoum City — District One, a stunning community development that seeks to add a new dimension to Dubai's city centre. The project's developer believes District One has an unmatched location, just 4km from the iconic Burj Khalifa.
A major attraction for potential homeowners is the availability a fresh wave of four- and five bedroom freehold villas built on larger plots in phase three, with a range of new floor plans, including basement options, and an extended payment plan.
A joint venture project between Meydan Group and Sobha Group, Meydan Sobha villas in phase one and phase two are already sold out. Handover is scheduled to start in the middle of this year. With thousands of workers on-site, both phases are scheduled for completion by next year.
Giving the community a unique waterfront dimension will be the 7km Crystal Lagoon, an idyllic man-made beachfront in the heart of the development, with lush green landscaping and a 14km boardwalk.
The Crystal Lagoon will offer residents exclusive access to swimming, paddle boarding and other non motorised aquatic leisure activities. A state-of-the-art and environmentally friendly technology will keep the lagoon's waters crystal clear. Many experts already expect such man-made lagoons to overtake golf courses as the most sought-after amenity of luxury real estate developments in the future.
''This is a hugely exciting project and we are delighted to launch the newest phase of Mohammed Bin Rashid Al Maktoum City — District One, while reporting great progress on the first two phases,'' said Saeed Humaid Al Tayer, Chairman of Meydan Group.
''We are proud to be adding to Dubai's status as one of the most desirable cities in the world in which to live. We are creating a beautiful, luxurious community offering the most central freehold villa properties in the heart of the city, overlooking what will become the world's largest crystal lagoon.''
Speaking at the launch of phase three, PNC Menon, Group Chairman and Founder of Sobha Group, said: ''As a developer, we are committed to meeting our delivery schedule.
''Construction of both phase one and phase two of the project are progressing well. We expect keen demand for the villas in phase three, as we are offering homeowners bigger plots, a variety of new floor plans, as well as the option to include a basement.''
To ensure phase three of District One is on schedule for its 2018 handover, Meydan Sobha has employed more than 9,000 workers on-site for the construction of the villas, with another 1,000 presently engaged in infrastructure works.
Source: Shalini Seth, Special to Property Weekly