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Contractors are unlikely to increase construction costs since raw material prices are relatively stable, Founder and Chairman of Danube Group Rizwan Sajan told Zawya Projects.
"To keep construction costs at a minimum, we enforce a fixed-price contract – where we source, fix and buy the building materials," he stated.
In the last nine years, Danube Properties, the group's real estate arm, has developed 21 projects comprising 9,923 units, with a combined sales value exceeding 8.75 billion dirhams ($2.4 billion). The developer has delivered 11 projects so far.
Sajan said the group supplies the main contractor with the required materials to complete the civil construction, which helps to reduce costs to a large extent.
As the UAE prepares to host COP28 later this year, the Chairman expects regulators to upgrade the unified building code with the latest green building, offsite, modular construction technology, and 3D printing technology.
"This will allow the developer community, contractors, and other stakeholders to join hands in embracing technology and reducing carbon emissions, making the built environment more sustainable," he stated.
Below are the interview excerpts:
How much landbank do you own in Dubai?
We do not own a landbank in Dubai. Instead, we focus on one project at a time, which allows us to concentrate our energy and resources. Our business thrives by announcing new projects, selling them, appointing contractors to build and deliver them, and then moving on to the next project. We have followed this model for nine years and plan to continue. Currently, we are working on a new and promising project, which we will announce in due course.
Do you have plans to enter other Middle Eastern markets?
Danube Properties remains a Dubai-based and Dubai-focused international developer. We believe the opportunities here will keep us occupied for a considerable period. But we are always on the lookout to grow and flourish. So, we will continue to push our limits to achieve growth.
Luxury properties in the UAE are seeing high demand. What is your outlook on the affordable luxury segment?
Upon analysing the trend in the over 100 million UAE dirhams homes, it is evident that the number of transactions is rising. Furthermore, this year, the segment, particularly the 50-plus million dirham homes, is expected to perform even better than in the past. Viewz - the 2.05 billion dirham project with Aston Martin interiors - was sold out within days of the launch. The location and price are our commitment to affordable luxury for Dubai residents.
A significant contributing factor to this trend is the increase in property prices, which are expected to continue to appreciate owing to the high demand. Dubai's appeal to a greater number of ultra-high net worth individuals (UHNWIs) or super-rich individuals is another crucial aspect. The emirate's efficient management of the COVID-19 pandemic helped strengthen its standing as the world's safest place.
Do you see the rising interest rates, inflation, and uncertainty around the global recession impacting property prices and demand in Dubai?
There are headwinds in the global economy, and trouble spots persist in some parts of the world, as has been the case in most years. However, the UAE economy is well-insulated from external shocks, and the lingering Russia-Ukraine conflict will have a limited impact.
Despite global economic challenges, Dubai's real estate market will continue to attract investment due to its fundamental unique selling points, reiterated repeatedly. These include world-class infrastructure, global connectivity, ease of doing business, world-class airlines providing direct connections to over 250 global cities, and a high standard of living, safety, security, lifestyle, and overall comfort.
Moreover, the visionary leadership in Dubai and the UAE understands and supports business growth. The region offers opportunities for foreigners to achieve financial success through hard work, vision, and intelligence.
Additionally, Dubai and the UAE have historically benefitted from uncertainties elsewhere, such as the Arab Spring, which saw capital flight from countries impacted by the unrest to the UAE. The COVID-19 pandemic encouraged wealthy individuals to relocate to Dubai and invest in the emirate's property and economy. The influx of capital from Russia and Ukraine following the war last year further reinforced Dubai's growing status as a haven.
Lastly, Dubai's real estate market is regarded as the best-regulated in the Middle East, Africa, and Asia. The Real Estate Regulatory Agency (RERA) diligently monitors project progress and holds developers accountable for delays, ensuring that property buyers and investors receive their projects on time.
Therefore, despite global volatility and uncertainty, Dubai will continue to attract investors and remain a land of opportunity.
Are you witnessing a rise in tender prices this year, given that many new developments are being launched and sustainability is in focus?
Despite the possibility that contractors may try to increase their prices each time they bid, I see that there is no such opportunity at present due to the relative stability of material prices. As a standard practice, we enter fixed-base contracts with our contractors and provide building materials as the major cost component. Hence, they only charge us for labour and other administrative fees associated with construction. Furthermore, the shipping and freight charges have recently decreased, which leads me to believe that the contractors will not raise their fees.
How did you perform in 2022 in terms of sales and launches?
In 2022, we experienced a record year. We launched and sold out five projects, including Pearlz, Gemz, Petalz, Opalz, and Elitz, totaling 2,099 homes valued at 2 billion dirhams compared to our prior strategy of launching one to two projects annually.
Additionally, we are scheduled to deliver three projects – Olivz, Wavez, and Jewelz – in 2023 involving 1,308 units with a development value exceeding AED 700 million.
We also hired 118 people to help Danube Properties accelerate growth and achieve a more successful 2023.
The last nine years of Danube Properties' development portfolio include 21 projects and 9,923 units, with a combined sales value exceeding AED 8.75 billion. Out of the 21 projects launched, we have delivered 11 so far.
What are your plans for 2023, especially this being the year of sustainability in the UAE?
Our commitment to building green, comfortable, sustainable homes and communities is unwavering. At Danube Properties, we have made several strategic decisions to make our buildings environmentally friendly and intelligent, reduce costs and waste, and pass on savings to property buyers. We have also introduced an industry-leading and trend-setting one percent monthly payment plan to help home buyers acquire their dream homes without needing a bank loan.
To keep construction costs to a minimum, we enforce fixed-price contracts, where we source, fix, and purchase the building materials. This way, the main contractor can focus solely on the project's construction without worrying about procuring building materials. This approach has significantly reduced costs and helped the middle-income group to buy and own properties. Additionally, we adhere to green building codes and employ space-saving architectural designs.
In this Year of Sustainability, as the UAE prepares to host COP28 later this year, I hope regulators will upgrade the unified building code to include the latest in green buildings, offsite and modular construction technology, and 3D printing technology. This will allow the developer community, contractors, and other stakeholders to embrace technology and reduce carbon emissions, making the built environment more sustainable.
For example, suppose more contractors adopt the offsite and modular construction model, which could save up to 50 percent of construction costs, reduce construction time by 50 percent, and eliminate waste. In that case, there is no reason why we should not consider using it to build our projects.
How do you ensure that your contractors are using sustainable construction techniques?
As developers, we are conscious of the environmental footprint of the real estate industry. We recognise the importance of reducing carbon emissions and believe we should all do more. If you specify sustainable products in your contracts, the contractors must deliver them. However, binding regulatory guidelines and mandates from civic bodies are necessary to ensure everyone uses sustainable products.
Is there any plan to reuse construction waste?
Reusing construction waste is a sustainable and cost-effective practice that contributes to improving the environment. We hire contractors for construction, and while we collaborate with them to minimise waste in our collective interest, we do not determine their waste reduction practices. However, reducing waste is mutually beneficial as it enhances regulatory compliance and profitability.
Is there any plan to list the company?
Not now. We are a well-funded business with a healthy cash flow. As we continue to grow, we believe reaching an appropriate size and revenue base is important before considering going public and listing our shares on the stock market.
(Reporting by D Madhura; Editing by Anoop Menon)
