By Rashid AW Galadari
The real estate industry in the UAE is an MBA marketing student's dream come true.
The real estate industry in the UAE is an MBA marketing student's dream come true. A real-life experiment: How big is the potential to gain market share based purely on marketing - combined with minimal delivery of product during the sales cycle - and how long can it be sustained for? The power of marketing and PR in the modern business world cannot and should not be taken lightly; yet in Dubai the phrase "perception is reality" is sometimes taken to another level entirely.
The real estate sector here is becoming increasingly cut-throat, and the rumour-mills are rife the minute an organisation even begins to scale down its marketing efforts, let alone stop them. It is a marketing war out there, and to be fair, 2006 was the last year I believe new companies could enter the industry with relative ease. Barriers to entry are now much higher than they were. More and more buyers are now looking for "realistic" propositions, i.e. delivery of at least the beginning of construction, even before the project is formally launched. This view is best surmised by Philip K Dick's statement that "Reality is that which, when you stop believing in it, doesn't go away."
Macro-level delays are no help to developers or sub-developers in making their marketing dreams a reality, with late handovers and permissions for land a major issue in some prime areas. You can point the finger at any and every layer of the onion involved in this process, but given the scale of some projects, and the audacity of some of the innovations, months of delays would be expected anywhere in the world. After all, how can you benchmark against world-firsts?
So, what about today's market? Right now, it seems that most companies intend to spend every dirham owned on their exposure to the end-user and investors, rather than focusing on the delivery of the project, or the increasing of the specification levels in their "luxury" residences. Real activity should form the cornerstone of any marketing efforts, and delivery is the proof of the pudding. Some developers - and investors - have already been burned; the question now is whether the rest of the pack learns from these early failures.
To further protect investors, it seems that an escrow law is due, and lawyers tell me it is imminent. Security of capital for the purchaser is then assured, and the developer can only access monies for use in constructing the product, leaving much less available for ‘soft' costs. I believe this will lead to two things: One; the bigger fish will be able to control even more of the visible and therefore perceived-to-be-real market, as they have the most liquidity; and two; it should galvanise the rest into adopting logical marketing budgets, and strategies - developing first, then selling second - as they do not have the cash reserves to continue.
The entire market is on a very steep learning curve. Business ethics can only grow as the market matures. One of the fundamental issues in ethics is called the is-ought problem: "Given our knowledge of the way the world is, how can we know the way the world ought to be?" Most ethical views hold that the world we live in (the real world) is not ideal - and there is room for improvement.
The miracle of Dubai is that so much has been achieved so quickly. HRH Sheikh Mohammed is now determined to bring every area up to the 21st century, and his strategic vision is based upon how it is in the private sector. He then incorporated this into how it ought to be in his public sector. Now we in the private sector need to do the same again, and again, and again, until everyone observing is satisfied.
A recent experiment in the realm of quantum physics has shown that reality does not exist, when there is no observer.
Rashid AW Galadari is the chairman of Galadari Investment Office (GIO).