Developers in the Gulf state are left with little option but to build high-end properties in their search for higher margins
Qatar's United Development Co (UDC) will prioritise building its half-finished Pearl development in Doha, a 60-tower residential project situated on a manmade island, a senior executive has said.
UDC's move shows how soaring land values are leaving developers in the Gulf state with little option but to build high-end properties in their search for higher margins, even if most of Qatar's foreign workers, who constitute about 85 percent of its 2.2 million population, cannot afford them.
The Pearl's units sell on average for about $4,121.56 (15,000 riyals) per square metre and monthly rents start at 10,000 riyals, consultancy Deloitte Financial Advisory estimates.
"Since the beginning of last year, UDC has ventured into signing new agreements to further develop The Pearl, attract more residents and expand the island's investment offerings," Abdullatif Ali al-Yafei, UDC chief corporate development officer, told Reuters in an email interview.
He said a company priority is to complete the 10 precincts of The Pearl, while UDC would increase its profits from sales and retail leasing.
Qatar residential sales and rental prices increased 31.4 percent in 2014, Deloitte estimates.
UDC reported steady first-quarter earnings, with net profit rising 8.5 percent to 261.8 million Qatari riyals, despite a 17.5 percent drop in revenue to 399.7 million riyals.
About 90 percent of properties on the Pearl that have been made available for sale or leasing have been bought or leased, Yafei said, declining to provide more details.
The project will consist of "60 towers, of which approximately 26 are currently near completion or already inhabited although the majority of those are not fully occupied", Nick Witty, Real Estate Advisory Director at Deloitte, told a conference this month.
UDC, which is 34 percent owned by Qatar's government after a state-run pension firm was the sole subscriber to a 1.6 billion riyals rights issue in 2012, also has interests in infrastructure, utilities, asset management and energy.
"We will continue to look for new opportunities in areas of interest such as real estate, property and facilities management, retail, hospitality and others," said Yafei.
"Product diversification is core to our business objective."
He said UDC retained much of its assets for lease, rather than sale.
"Although there is no fail-safe protection against a major market downturn, these stable income streams will cushion us from market cycles and support dividend payments to our stockholders," added Yafei.