Abu Dhabi developers change focus to suit economic constraints

Developers in Abu Dhabi are altering their strategies to take into account the changing nature of their potential customers.

While some are choosing to actively accelerate construction to ensure the prompt handovers of sold units so that resources can then be diverted to other projects, others are adjusting the specifications of upcoming developments, aiming to target middle class investors rather than the luxury segment.

Some companies are also expecting a shift to rental from sales as access to credit for investors becomes harder to come by.

Embargo on home loans

This is underlined by the latest move by Amlak, the biggest lender in the UAE, which announced this week that it has placed a temporary halt to all mortgage lending. The move comes as figures released by the country's Central Bank show that home loans almost doubled in the 12 months leading to June 2008 to total $24bn.

'We are reviewing our existing credit policy to ensure the optimum servicing of existing and prospective accounts,' said Amlak CEO Arif Al Harmi. 'Our temporary measures of not sourcing new applications will bring us up to the level we have outlined in our management strategy at the beginning of the year.'

'Going forward we will be very much focused on development and on the end user rather than speculators,' Gurjit Singh, Sorouh's chief development officer told AME Info.

'The Abu Dhabi market has a very interesting and different outlook because it is focused on the end-user occupier. The affordable property segment especially has a lot of potential.

Focus on the rental market

'Prioritising developments, even before the credit crisis, has always been one of our strengths.

'Whereas in the past we have allocated a fair amount of our developments to the residential sector, we have also now focused a fair amount of our portfolio on recurrent income property. If you were to put the credit crisis on the table for consideration, I think developers will have to be smarter in coming to the market.'

This is also one of the strategies that will be employed by developer Aldar Properties, as newly appointed CEO John Bullough explained: 'In Abu Dhabi there's an undersupply of residential accommodation for rent, buildings have been constructed to sell.'

Aldar Properties is also expanding its non residential portfolio, with a recently announced deal with Ritz-Carlton meaning that the company, through its hospitality and hotels division, will develop a number of luxury hotels over the next few years.

Despite the current uncertainty, strong demand means that projected developments in the emirate will continue to attract investment. A switch in focus to certain market sectors does, however, illustrate that the financial situation may have altered the local market for good.


See also:
Will Abu Dhabi beat the global financial crisis?
Will the global financial crisis affect Abu Dhabi off plan sales