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Thu 18 Oct 2007 01:30 PM

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Towering ambition

Burooj Properties' managing director Adel Al Zarouni explains why the region's real estate industry is a safe investment.

Adel Al Zarouni has a lot on his mind. In between planning the company's billions worth of investments for the next three years, anticipating Cityscape, and looking at new markets to tap into, he manages to squeeze in a quick interview. The managing director of Burooj Properties, a solely owned subsidiary of Abu Dhabi Islamic Bank (ADIB), aims to hit US$13.5bn, by 2010 in UAE investments alone. While the company's main focus within the UAE is Abu Dhabi, at the moment, Al Zarouni says there are broader plans on the horizon.

"We have investments in Jordan and Syria. We are going to expand those investments and are looking into Algeria, Egypt, Nigeria and other countries in the region," he says.

With the regulations and legislations in place, the property market is attracting institutions and big international firms that were reluctant to invest in the market earlier.

Jordan is one market where the company sees a lot of potential and has already started pouring money into.

"It is one of the markets that we feel offers an opportunity for us and where we can meet our criteria of investment," says Ahmed Al Sakban, head of sales and marketing at Burooj.

Previously this year at Cityscape Abu Dhabi, the company launched its property investment products within its property development project ‘Burooj Jordan' located in Al Jeezah area of south Amman. The project, which was established in partnership with Jordan-based Al Bustan Real Estate, consists of more than 130 pieces of land allocated for residential units, handicraft and light industrial use.

The Burooj Jordan project also includes developing main roads and other branch roads to link the different parts of the project, therefore connecting it through a direct main road to the airport road. It will also look into the entire basic infrastructure such as water and wastewater facilities, telecommunications, electricity, as well as nearby service facilities such as schools, hospitals, mosques, and banks.

With projects on such a scale, the company is also unveiling one of its master developments in the UAE directly after Cityscape Dubai 2007.

"We are participating in Cityscape to present Burooj as a developer. We are presenting our concept for our new mega project that we will be unveiling towards the end of November in the UAE, which will be worth US$2.45bn," says Al Sakban, adding: "We are also presenting some of our other services such as project management, property valuation, and real estate investments."

Al Sakban also stresses that traditional markets such as the US, Australia and Europe are no longer attractive to international investors who are shifting their sights into emerging markets like the Gulf. Meanwhile, in the second quarter of 2008, another master project will be announced. Also in the pipeline are major projects across the region for the coming three years.

To Al Zarouni, due the continuous poor equity market returns of the different stock markets in the region, the real estate industry has the gleam of a safe investment, excluding the tarnish that other asset classes may bring.
"The recent slow down of stock markets has served in reminding investors of the dangers of being overweight in equities and has renewed interest in the region's property sector which is realising excellent returns on investment," says Al Zarouni, adding that the region's continuous real estate boom stems from the fact that direct investment through real estate funds can be an ideal building block for enhancing and safeguarding the assets of any investor's portfolio.

"They are particularly beneficial to investors who are heavily concentrated in highly market-sensitive asset classes, and are therefore a lucrative way of diversifying a portfolio," he says.

You need to provide them [customers] with the means and tools to be able to invest and buy... one of those tools is a mortgage.

In such a relatively short period of time, Burooj has managed to come a long way. The company was established in January 2006 with a working capital of US$136m and is the property investment arm of ADIB.

With over six years experience in the real estate sector, Burooj is involved in a number of high-profile direct investment projects in the region.

Last year, which was also the company's first year, Burooj scored a net operating profit of US$13.6m, according to Al Zarouni. "This year by Q3, we have closed US$20.4m. By the end of the year, we expect our results to be much better than last year," says Al Zarouni adding: "These are net operating profits, unlike the other property companies that announce figures in terms of the net profit but due to the revaluation of the property.

"There are no revaluation games here. The figures are purely net cash; net income."

In the meantime, however, the company is very optimistic about Abu Dhabi's property market which Al Zarouni says has just picked up and "has a lot of potential and opportunities" and will focus on investing in the budding emirate. Al Zarouni believes the competition within the UAE's property market has produced very positive results.

He also adds: "The regulations that have been put into the property market and the maturity have made it very competitive. With the regulations and legislation in place, the property market now is attracting institutions and big internationals firms that were reluctant to invest in the market earlier due to the lack of proper legislation in this sector." The release of recent property laws, Al Zarouni says, has given international organisations more confidence to come into the market.

"We will see in the coming years that big organisations and investment houses come into the country and put in big investments," he predicts.

Al Zarouni sees anything but a slowdown in the property market in the UAE. He believes the market poses great opportunities but there many elements that go into making a mature market. "You need a legal framework, you need a legislation that protects everybody's rights, you need financing systems and mortgage facilities to be put in place," he says, adding: "In the UAE, we have put lots of those elements in place and we are heading towards the right set-up for the property market."
While mortgage laws remain absent in the region, their negative effects on the property business remain hard felt. Al Sakban, however, believes change is bound to occur at some point.

"The absence of any kind of law always creates uncertainty and gives a hard time both to the seller and buyer. The UAE governments are working very diligently to issue these laws and I think they are on the right track by issuing the escrow law in Dubai.

"My own prediction is that other emirates will follow suit soon. This will give more confidence to buyers," says Al Sakban.

Purchasing a property has definitely become easier for buyers in the region today than it has ever in the past. In the UAE for instance, people are now able to pay off their property purchases within 15 to 25 years. Al Sakban sees this as part of the cycle of selling to customers.

"You need to provide them [customers] with the means and tools to be able to invest and buy.

"One of those tools is mortgages, so it is in the best interest of companies to provide financial options for customers to buy their products," he says, adding that although banks in the UAE have fallen behind in terms of entering this market, they have now begun to get a grip of the situation and are offering mortgages for longer periods of time.

"This is very good and will push the markets to perform better," he says.

Still, there are other gaps in the region's property market that are crying out for attention. The majority of big property players continue to focus on the high-end segments of the market, while turning a blind eye on middle to lower income categories.

Al Sakban admits that companies catering to the latter categories are very few but he argues: "They are coming up these days and we will see them in the near future," adding: "There are companies that find their market in the very high end, other companies cater to middle classes and others cater to lower income. I feel the market is full of all the products it needs right now."

Burooj's strategy, where this is concerned, is to invest in "any segments that will benefit" the "company's shareholders, the community, and contribute to the UAE economy," according to Al Sakban.

Currently, there is a tendency among developers to build boutique, four and three-star hotels, as opposed to five-star hotels. Al Sakban concludes by saying there is a need for such developments in the market at present, especially given the high number of executives flying in and out of countries in the region who are looking to spend a short period of time before flying back home.