Steel Price Spike In UAE Seen Subsiding Soon

4 May 2016

With the exception of steel, building material prices in the UAE have remained largely stable since the start of the year, according to the chairman of Danube Group.

“Steel is now at Dh2,500 a tonne from the Dh1,600-Dh1,700 last year and that’s had some impact on project pricing,” said Rizwan Sajan. “The spike has got nothing to do with the current softness in the dollar [and consequently raising the cost of steel imports]. These are due to more localised issues... it’s my expectation that steel would settle back to the median.”

For a developer like Danube, which launches residential projects in the Dh300-Dh500 million range, any volatility in building materials can prove a niggle on its cost estimates. More so, as it supplies 65 per cent plus of the building materials for its developments. “Everything except cement and concrete,” Sajan said.

Danube on Tuesday launched its sixth project and plans to do a repeat in September and December.

“We have 1,800 enquiries on our books and about 50-100 of them should translate into sales for ‘Glamz’, our latest and again located in Al Furjan,” he added.

“In a month or two, we should be able to sell the whole of the 400 plus units. It would be the same sales frequency we have maintained on the previous five — that is enough for us to go ahead with the next one. We don’t carry unsold inventory. The moment I see the pace of sales on our launches slowing down, we will stop the launches.”

By year end, Danube’s development portfolio would have touched Dh2.5 billion.

“We have a simple enough financing formula — only 10-15 per cent of the costs are from loans. These mostly go into buying the plots, averaging between Dh30 million to Dh40 million,” said Sajan.

“The actual cost of development is usually taken care of by the sales proceeds. This way there’s no strain on our financing.”

As with its earlier launches, the developer is offering buyers the change to make a sizeable percentage of the payments — 45 per cent — post handover. And these come free of interest rate charges.

“If it’s an investor buying in, he can immediately access a higher yield from renting it out,” Sajan said.

“If we compare like-for-like locations and properties, our estimates suggest investors will get rents higher than the Dh55,000 average in, say, Discovery Gardens.

“There’s a value-chasing investor still quite active in Dubai realty.”


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