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Sun 8 Mar 2020 02:48 PM

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Dubai's real estate committee increasingly curbing oversupply, says JLL

80,000 new villas and apartments are due for delivery in 2020, according to JLL's head of MENA research

Dubai's real estate committee increasingly curbing oversupply, says JLL

Despite the coming influx of supply – a significant portion of which are in relatively new areas of the city – there will still not be any less demand in traditionally popular areas of the city such as Downtown Dubai.

Dubai’s Higher Committee of Real Estate will be increasingly active in monitoring and regulating oversupply in the market, according to Dana Salbak, the head of MENA research at real estate investment and advisory firm JLL.

Announced in September 2019, the committee – which is chaired by Dubai Deputy Ruler Sheikh Maktoum Mohammed bin Rashid Al Maktoum – includes senior representatives of major property developers among its members and aims to avoid duplication of projects in the sector.

In an interview with Arabian Business for an upcoming edition of the newly launched Arabian Business Podcast, Salbak said that a total of 35,000 residential units, both villas and apartments, were delivered into the market in 2019.

“That’s the highest that’s ever been delivered,” she said. “In 2020, we’re expecting almost 80,000.”

JLL, however, factors in a 50 percent materialisation rate. Even so, 40,000 additional residential units would be the most on record.

“What we know, for a fact, is that there have been delays in the handovers of some projects,” she added. “What we understand is that some of these delays are intentional [on the part of the government], to hold back on projects and phase the handovers and deliveries.”

Salbak explained that any new project – whether from large developers or their smaller industry peers – must go through a stringent process of approvals before a decision is ultimately made on whether the project can go forward or not.

“There’s been a lot of projects that have been canned and told they can’t go through,” she said. “They [the committee] have been a lot more active with this issue of controlling supply.”

Despite the coming influx of supply – a significant portion of which are in relatively new areas of the city – there will still not be less demand in traditionally popular areas of the city such as Downtown Dubai.

“People want to live where they work and where their kids go to nurseries. Demand will continue to be strong there,” she added. “Those get absorbed, quite quickly, based on quality and location.”

Salbak’s comments have been echoed in the past by developers themselves.

Comfort for developers?

In a September interview, for example, Azizi Developments CEO Farhad Azizi said that he believes that tight market regulations have already proven effective in more established markets such as Germany.

“It stabilises the market. As a developer, I feel very comfortable because I know somebody has checked whether there is a need, for example, for me to launch a 100-unit project,” he said. “I know the demand will come naturally, because someone in a higher authority has checked it.”

Additionally, Azizi said that he believes one of the main benefits of the committee will be the fact that it possesses market intelligence that is not readily available to private companies.

“As a developer, I don’t have all the data about how many people live in a certain neighbourhood, because of privacy [concerns],” he said. “What if I launch a building in the middle of nowhere, and I sell it out, but there is nothing there? People can’t live there and will leave eventually, so the money is wasted on steel and concrete.”

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