“Most master developers were stopping their projects, people were saying that they will leave Dubai, but at that time, we believed in ourselves and went ahead with our work,” says Rajan Israni, managing director at Sun and Sand Developers, a real estate developer group.
Israni’s decision to keep sprinting in one of the most turbulent times of the real estate industry, allowed him to see the timely completion of his project, Suntech Tower, in Dubai Silicon Oasis (DSO). It also helped the company earn the Dubai SME 100 award, making it the only real estate group to earn a spot in Dubai’s top-performing small and medium enterprises last year.
Costing AED60m ($16.33m) and housing 81 offices, the commercial building may not measure up to the more prominent mega-projects in the United Arab Emirates, but it stands high for its sustainability, especially during the recession-injected year of 2009.
Dubai’s property sector was hit hard by the downturn, with billions of dollars worth of projects either put on hold or cancelled, after real estate prices fell more than 60 percent from their peak. According to Citigroup, a massive $719bn worth of projects have been cancelled or delayed in the MENA region, with the UAE accounting for 57 percent of these.
“In the industry, there are two important components for any real estate developer to decide his costs: land and construction,” explains Israni.
Fortunately, he bought his plot of land directly from DSO for AED105 per square feet, a couple of years before the economy grew exponentially in 2008. If he had waited till then to complete the purchase, the property would have been at its peak, totalling up to AED300 per square feet.
Apart from getting the land at the original price, Israni also maintained lower construction costs, as numbers particularly dropped under the wrath of the recession.
“My main component was steel. When I made the purchase in February-March 2009, it was for AED1,550 per metric tonne, [as opposed] to June-July 2009, where the rate of steel was AED5,500 per metric tonne.”
Israni also points out that labour was available in abundance at the time: “And so, my cost of construction came down fifteen to 20 percent,” he says, adding: “That is why we thought that we will continue with the project, we will be able to complete it, and within one year, we will be able to either rent or sell.”
In a period characterised by slow pre-sales and hesitant banks that did not want to touch the real estate market, Israni chose to self-finance his project. The move stretched his elasticity, as it allowed him to provide his costumers with various payment schemes, one of which vibrantly stands out.
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