Dubai: In the luxury real estate brokerage business, it’s all about having the private numbers of clients who might be willing to put up a few millions — even a lot more — at your suggestion. So, if you don’t have a particular set of numbers, go and acquire them. And that’s exactly what Gulf Sotheby’s did with its recent outright acquisition of SPF Realty.
The strategy was quite clear — “The biggest referral office within the Sotheby’s network is India and not the US any longer,” said George Azar, Chairman and CEO of Gulf Sotheby’s International Realty. “The second highest traffic on the Sotheby’s website comes from India after the US, and China is third. “At the same time, our office had no presence within the community of high net worth Indian buyers here, absolutely no client base. That we needed to change and change fast.
“What SPF had was an existing business with strong connections to Indian buyers here and back in India, especially among those who bought property in Dubai. Our buyout of SPF was to use those contacts to not just keep them looking at options in Dubai but — through our global network of 880 offices — even outside of Dubai.”
For the moment, there are quite a few Indians buying up property in Dubai, with the latest Dubai Land Department stats noting their exposures at Dh12 billion in the first half of 2017. That puts them just behind UAE nationals, who collectively spent Dh15 billion.
According to Ranjeet Chavan, one of the founder partners at SPF Realty, there is plenty more to tap among high net worth Indian buyers. “Property buying within India is going through a bit of a challenging time, with Rera — Real Estate (Regulation and Development) Act — and also with GST (goods and service tax). Before Rera, Indian developers would use buyers money to construct … now those funds are going into escrow. This will eventually separate the men from the boys where these developers are concerned.
“For the short-term, this could set back (high net worth) Indians investing in property within India by three to four years. They could seek alternatives outside, and that gives us an even better chance to penetrate that market.”
Some of the biggest developers in Dubai are going all out to keep as much of the Indian fund flow circulating within the Dubai property market. According to market sources, the first three months did see a sharp spike and coinciding with the uncertainties set off by the demonetisation drive launched by the Indian government from November 8. Since then those levels have more or less been maintained.
For Gulf Sotheby’s — for whom this is the third major acquisition in recent years — playing its part in big-ticket property purchases is the name of the game. It was there when the deal was signed for a Dh100 million villa up at Emirates Hills and another for Dh90 million. And more are emerging from the pipeline, according to Azar.
But isn’t Gulf Sotheby’s better placed within the ready property space than selling off-plan? “That’s not true — we do off-plan a lot. We had 1/JBR exclusively for two years and sold nearly 80 per cent of the released stock,” said Azar. “We achieved rates of Dh3,200 a square foot for DP (Dubai Properties and the builder of 1/JBR), and sold penthouses for Dh35 million to Dh36 million.”
Overseas investor interest will continue to be there for Dubai property given that yields still range above 6 per cent on average, and “even up to 10 per cent net on rental yields free of taxes”.
“Our average selling price globally has been $1.3 million whereas most of the competition would be averaging $400,000,” said Azar. “For the Dubai entity we have done over a Dh1 billion so far this year. And for the whole of last year we did a bit more above Dh1 billion. We are hopefully going to grow by 100 per cent this year.
“I don’t buy the argument that Dubai realty is not selling as fast. My target for the next three years is to tell the market we’ve done Dh5 billion worth of sales and Dh200 million of revenues. We are not thinking of anything else.”