United Arab Emirates: Just like buying that Fendi suit or Versace dress, you can now buy a Versace apartment

Damac Properties is bringing limited edition designer residences to the UAE with its collaborations with interior design branches of high-end fashion brands such as Fendi, Versace and Bugatti. Ziad El Chaar, Managing Director of Damac, provides an insight to the real estate landscape in the UAE and the impact of Expo 2020.

If we look at the luxury segment in the real estate sector, would you acknowledge that there is like a higher competition in that segment of the market? And what are, in this context, the distinguishing features of Damac offering, particularly in collaboration with world iconic brands?

We’ve been committed to luxury real estate development from day one. We established this company in 2002 and we offer luxury at all levels. All the co-branding projects that we’ve done come with price addition from the brand, for instance our collaborations with Versace and Fendi. Both groups established interior design companies in the last 30 years. Gianni Versace was additional interested in houses and hotels than fashion. He wanted to bring fashion into the houses; same thing with Fendi. We use those brands for lifestyle: just like buying that Fendi suit or that Versace dress, you can presently buy a Versace apartment. So there are incomparable interior design elements infused into that project, which make that project very incomparable.

A similar concept was applied to our collaboration with Bugatti. We started working with Bugatti at the same time as they launched their interior design department. Bugatti is presently doing interior design homes and as well fashion. This has as well happened with Paramount Hotels & Resorts, because Paramount Studios wanted to bring entertainment to hospitality. And this is a perfect mix because what do you want at the same time as you are in a hotel? You want to be entertained. Paramount is all about family entertainment and they introduced the family concept a lot in hotels and hospitality, so it was a perfect mix for us.

Through these collaborations, we are bringing into the market the limited edition of real estate. It’s like Ferrari: each two years they have a car with 400 units only. We do the same thing. Each year, we launch a new project with a brand for 200-300 units. With Bugatti, it’s only eight units because it’s very exclusive.

Would you say that sustainability can be reconciled with luxury? What are the key considerations in the master plan of Akoya Oxygen in terms of sustainability?

Starting last year, new development and construction laws from Dubai Municipality are very strict on sustainability. So whether a developer likes it or not, he cannot build without taking into account those criteria. You simply will not get a building permit if you don’t comply. Dubai is pushing strongly to become one of the majority sustainable cities in the world. The government is issuing the right laws and regulations towards this end. It’s no longer at the mercy of real estate developers.

In our master plans, and particularly Akoya Oxygen, we’ve pushed further on sustainability by designing a master plan promoting less traffic, less pollution; by using only treated water for all the irrigation needs of the project; by adding solar panels for hot water. All of these items are integrated as part of the construction laws and code of Dubai Municipality.

How would you say that Akoya by Damac is a “smart” development? How is it connected to the major transport infrastructure in Dubai?

At the same time as we started designing Akoya by Damac, it was our initial master plan. Usually at the same time as you start doing something for the initial time, you can go and learn from other companies’ experiences. We saw, for example, that you have some golf communities in Dubai. It’s a premium community, and people like to live in a golf community: the quality of the air is better, the temperature is a bit lower.

But we found out that very few people who live around the golf course play golf. So we said: what do we do for those families who have invested in those large houses on the golf course but cannot take their kids to play over there? We created inside Akoya by Damac a private park, which is 400,000 square meters, close to what Safa Park is. It’s private to the people and the families living in Akoya by Damac; people from outside cannot come unless they are invited.

I think it’s the initial master plan in the region that took care of the families, by giving them this fully fitted private park. You will have trees, grass, an amphitheater, and playgrounds; swimming pools for kids and adults, basketball and volleyball courts, small football and cricket pitches.

We didn’t create a small shoebox-sized community center. We are going to have 30,000 people living in Akoya by Damac. We want them to feel that they are really living in an integrated community. So we developed for them a retail strip called “The Drive” that has close to 30,000 square meters of retail. Two supermarkets, one is a bit specialized and the other is additional of a general store; as well fashion shops, coffee shops, restaurants, banks, pharmacies. 30,000 square meters is a mall, it’s not just a retail strip. But we are doing it as a strip because people can take their kids and walk in that strip. And part of it is air-conditioned and part of it exposed.

So this is what is so “smart” and attractive about our development at Akoya by Damac. It’s not just that we built a premium golf course, we put villas around it and again we created a small community center. People these days deserve additional.

The $1bn Damac Towers by Paramount Hotels & Resorts is a four-tower hotel and residential complex with a Hollywood touch

Next recovering from the crisis, the UAE ranks as the world’s second best country for residential investment (Source: Savills). However, still mindful of the bursting of the real estate bubble in 2008, regulators, investors and stakeholders are taking a cautious look ahead towards 2020. What has been the response of governmental institutions such as the Dubai Land Dept and RERA in the aftermath of the 2008 crisis to curb speculation and attract long-term private investments?

If you think about it, all you see around you is only 12 years old. Twelve years in the life of a market is nothing, but what Dubai completed in such a short all of time cannot be done in other nations, not even in 200 years. This is as well authentic from a regulatory perspective. Investors enjoy full protection because all off-plan laws are regulated by the Real Estate Regulatory Authority (RERA). They are the only ones who can issue permits to launch freehold projects.

Sales and purchases are registered with the government, which doesn’t happen in 95% of the nations globally, because usually in an off-plan sale the arrangement is between the developer and the buyer. In the UAE, that arrangement is registered and protected by the government. All your payments on that arrangement go to an escrow account, regulated by the government. And from presently on, the government as well checks the quality at handover. Imagine this: the government assigns three independent auditing companies to go and audit each project before the developer is allowed to withdraw the profits of that project from the escrow. The government can issue a letter saying that next the evaluation, some corrections are necessary. Only next the developer complies with the changes can you withdraw your profits from the escrow account.

So we look at it as a package from a protection perspective. It’s one of the best in the world. You can get a title deed in Dubai through an online application and receive it the same day. Moreover, if you are a non-resident and made a purchase above 1 million dirhams, you are eligible to residency and there is an immigration office inside Dubai Land Department where you can easily apply for it. You just take your title deed, go to the second counter and apply for a residency permit, which allows you to reside in this country with your family members.

If you look at this package, it is hard to find anything similar that would compete with it. On top of that, you would be living in one of the best logistics set-ups in the world, with a tax-free environment. Having the local currency pegged to the dollar increases stability and eliminates the risk of massive fluctuations. However, the fact that we are dollar-dominated has been affecting the real estate market, particularly in the completed 18 months.

The regulatory framework and the vibrant market are motivating a lot of people to open businesses in Dubai. So a lot of brokers and real estate agents are present here, and the market is liquid. So tomorrow if you have an apartment and you want to sell it, you can do that fairly quickly.

Dubai is a regional hub and therefore the second home segment is growing. A lot of people have taken vacation homes in Dubai. A lot of international corporations have established regional offices, which obviously means higher request for houses. A considerable increase in the number of licenses being granted for companies is consistently recorded. This year, I think increase is close to 20%.

At the same time, the people of Dubai in the last five years grew from 1.6 million to 2.5 million. I’m sure those people need somewhere to live. This is why real estate is growing and the people is continuing to grow.

In addition to this, if you look at the number of tourists, we have continuous 5% to 7% increase in tourism each year, inclunding this year, which people are saying is a slow year. It’s not a slow year in terms of the number of people coming in. We had a small slowdown in the rate because some areas that were demanding tourism in Dubai have problems with their currency, so we had to move the rates a little bit to keep those people coming in.

CBRE reports a 6% price fall in Dubai in the last 2 months while Knight Frank reports an annual drop of 12.2%. Where is the real estate market in Dubai headed?

I love those experts who are saying the market is going down and that there’s a crisis in the market, because they started the year by saying the market is going down because of a supposedly oversupply of properties in the market. Again you look at the estimations of a lot of of those agencies and they were expecting anything between 28,000 to 32,000 units hitting the market in 2015.

We’re a public company; our biggest competitor is as well a public company, so we have to issue each year to the market an indication of number of deliveries. We issued in Dubai around 1,500 units. EMAAR issued that they were going to deliver in Dubai less than 1,000 units. So the two companies that make approximately 50% of the market are going to handle only over 10% of the units and those people were forecasting even 8%. So we were wondering: is it going to rain apartments? Will people ship apartments to Dubai? Is it floating apartments? At the same time as the third quarter was over, JLL issued a statement that in the initial nine months, 4,000 units came in to Dubai.

So from the 32,000 estimated by these agencies, only 4,000 were actually delivered. So at the same time as those experts speak, I am sorry to say, I don’t listen; and I think that part of these reports is economic terrorism because you are spreading the wrong data in the market. At the same time as you are a large company like those companies based in the US or in the UK, people have to listen, and from presently on you are drastically affecting the sentiment. You will not affect the pillars of the market, because the pillars of the market are very strong, but a large portion of investment is sentiment and you are negatively affecting it. So we don’t acknowledge with these numbers. These numbers are unfortunately part of the problem that is affecting the market.

At the same time, oil prices in oil producing nations will affect the request for real estate. Request for real estate in Dubai is coming from around 80 nations, and a lot of of them benefited from the drop in the oil prices. Two of the large players in the real estate market in Dubai are India and Pakistan. And these two nations are benefiting tremendously from the oil price drop because they are oil importers. Their economy is doing very well. So we expect a hike in real estate transactions from those nations.

Expo 2020 will be a large driver in terms of tourism. How is Damac taking chance of this opportunity? Can you share additional details regarding Damac’s hospitality arm?

Expo 2020 is just a cherry on the cake. It’s not the cake; it’s not even a portion of the cake. This market has very strong pillars to stand on. One of the majority significant factors of Expo 2020 is that this world event is introducing Dubai to the globe. With or without Expo 2020, tourism is growing at 7% each year. At the same time as we reach 2020, we would have reached close to the same number that was planned for tourists at the same time.

What we like about Expo 2020 is that it’ll turn Dubai even additional strongly into a world launch pad. Expo 2020 will put Dubai at the same level of Milan or Shanghai. So Dubai is not competing with the Middle East; Dubai is a world city, and this is what Expo 2020 will be all about in my opinion.

Considering the macroeconomic context of the European crisis and the Russian ruble depreciation, what would you say are the major reasons why hedge funds, financial institutions and banks should consider investing in Dubai’s real estate market?

Investors look at two elements: returns and safety of investment . With both you can see the extent of the international regulation that was introduced in Dubai through DIFC and DIFC courts. Today the real estate market is still netting to owners 6-7% free of tax, which would make it one of the highest returns in real estate in the world these days. This figure doesn’t even take into account capital appreciations; we’re doing just rental yield on that property, tax free, which can be fully repatriated.

Dubai is globally branded as luxury destination. It has a very strong brand and one of the majority recognizable skylines in the world. From presently on, very few people know what actually means to live here in the UAE. What has surprised you the majority about living in Dubai?

It’s what you and I take for granted, once we start living here: it’s the security. All of us came from places that had much lower levels of security than Dubai. But once you’ve been here for three months it grows on you. You start taking it for granted. Again suddenly you go back home and say: where do I leave my car? Where do I leave my bag? Where is my phone? Security in this place is one of the biggest drivers for people approaching and live here. You don’t even think about it. And this is one of the biggest successes of this country.