Sanjay Manchanda doesn’t have a reputation for speaking very often, but when he does, the earth certainly moves.
Nakheel’s CEO, who was appointed permanently last year, has one of the toughest jobs in the Gulf. He is in charge of Dubai’s biggest developer in terms of assets, but he also oversees a firm that was one of the high-profile corporate casualties during Dubai’s debt crisis, which saw house prices in the emirate decline by up to 60 percent.
Nakheel agreed a $16bn debt restructuring deal in 2011 and was forced to scale back its plans. The firm is reportedly currently in talks with lenders to extend an AED8bn ($2.17bn) loan due in 2015.
So what does he have to say?
“[Dubai] has amply demonstrated its resilience, whether it’s vision or growth, against all others. We might not be seeing so many cranes, but there is construction happening. The crisis taught us a very important rule, which I think is applicable to real estate worldwide: real estate is driven by location, location, location.”
But there’s also another key player: buyers laden with cash.
“It’s the high net worth individuals who have the ability to buy in cash,” Manchanda says. “Those who are finding it difficult to maintain and conserve their wealth back home due to the Arab Spring, or whatever reason, whether it’s the Cyprus bank crisis, are bringing it back to Dubai for its transparency, for its ability to work... in the right way. I am very, very surprised.”
As to the current state of property, Manchanda cites anecdotal evidence that suggests some house prices on the Palm Jumeirah, Nakheel’s flagship reclamation project, are up by ten percent compared to pre-crisis levels. Residential supply — in an already heavily oversupplied market — also would increase by ten percent in 2013, before slowing to three to four percent in 2014. But he also draws attention to the issue of speculators, many of which invested in Nakheel properties, contributing to the firm’s debt woes.
“Prices do not increase by 20 percent in only a few weeks. [Real estate] is a long-term investment and if you can’t reconcile with the fact, I believe you will be contributing to the speculators to stay,” Manchanda says.
Flipping — the rapid on-sale of off-plan properties — was particularly common during the Dubai boom and Manchanda believes it was a major cause of the emirate’s 2008-09 property bust, which saw prices slashed by up to 60 percent. The quick turnover of properties still under construction caused prices to escalate based only on speculation, he says.
Flipping also led to many being left out of pocket when scammers sold on a single property to multiple people. Analysts told Arabian Business earlier this year that the re-emergence of new residential developments meant the practice was making a comeback.
But Nakheel and Dubai’s other major developer, Emaar, have confirmed they have taken measures to limit flipping.
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