UAE builders look beyond borders

All eyes are on the phenomenal growth of the UAE's property industry, but for many of the country's developers, domestic opportunities cannot satisfy their appetite to expand.

Emaar and Limitless have invested more than Dh550 billion between them in markets throughout the world, while fellow property heavyweight Nakheel, sister company of Limitless, is on the verge of its first overseas venture.

A host of private developers including Damac, Tameer and ETA Star have followed the trend of building up a substantial domestic portfolio before breaking into emerging markets in the Middle East, Asia and North Africa.

Analysts say the move is a positive step despite the fact that state-owned developers such as Emaar do not have the access to the free land that they enjoy in Dubai.

"Yes, they may have to accept a thinner margin because they have to pay for land, but it's a question of diversification. Companies like Emaar are doing the right thing," said Jurgen Herre, managing director, Mena region, Hines Development Management Abu Dhabi.

Marwan Shehadeh, managing director of Al Futtaim Capital, said UAE firms should take advantage of foreign opportunities while they last.

"Construction costs are lower [in overseas emerging markets], labour costs are lower and in markets such as Egypt and Morocco there is less competition, so developers can sell at a higher price," he said. "But getting good land is not easy. The era of cheap land will be over soon."

Emaar, which is building Burj Dubai, was the first UAE company to diversify into foreign markets and has built up an international portfolio valued at $131.203 billion (Dh481.51 billion).

According to the company's records, its biggest international commitment is in Pakistan, valued at more than Dh166.61 billion, followed by Saudi Arabia where it has projects worth Dh141 billion.

North Africa has been the scene of the company's most aggressive expansion. It recently announced the development of four mixed-use projects in Algeria worth Dh73 billion, including the New City of Sidi Abdellah, a tourist resort at Colonel Abbes, a waterfront development by Algiers Bay and a modern healthcare city at Staouali County.

By far the most active UAE company overseas in recent months has been Limitless, the internationally focused development arm of Dubai World.

The company, headed by CEO Saeed Ahmad Saeed, has invested close to Dh89 billion into multiple use developments in Vietnam, India and Saudi Arabia.

Last month it said it would build a $220 million (Dh807 million) residential and hospitality complex in Vietnam, the company's first project launch in Southeast Asia. The Halong Star project will be built on a 125 hectare site at Halong Bay on Vietnam's North East coast.

Limitless then launched a Dh44 billion ($12 billion) mixed-use township near Bangalore in southern India. The company said the Bidadi Township will be India's biggest new urban community, sprawling over 4,000 hectares and housing approximately 750,000 people.

New companies

With its eye very much on booming Asian markets, Limitless set up two new companies in China, where it aims to launch the first of many large-scale urban projects later this year.

Closer to home, it said it will build a 45 billion riyal ($12 billion) community in Saudi Arabia.

Al Wasl, which went on show at Cityscape Dubai, will be developed on a 1,411 hectare (14.1 million square metre) site north of Riyadh.

Meanwhile, Nakheel, the sister company of Limitless, is planning its first overseas ventures under subsidiary Nakheel International.

"We're actively pursuing a number of opportunities. I'm confident that in the next few months we'll launch our first major developments," Nakheel CEO Chris O'Donnell told Gulf News.

Raju Menon, an investment adviser and managing partner of Morison Menon, welcomed such international ventures.

"Large publicly-listed development companies like Emaar Properties need to expand in other markets in order to diversify their risks to maintain shareholder value," he said. "These are good steps and goes in the best interest of the shareholders."

In the past, analysts have suggested that concern over a supply-driven correction in the UAE was the main reason for developers' expansion overseas.

Roy Saker, associate director at property consultants Colliers International, said in a previous interview that most major developers are 'solid enough' to survive a correction. "Over the last five years UAE real estate developers have done very well here and it's only natural that they want to succeed internationally as well," he said.

"They have conducted feasibility studies into how much they can keep developing in the UAE and found that to continue making money they need to enter emerging markets. They can't just develop in the UAE and back out."

Although they cannot boast the capital resources of Nakheel, Emaar and Limitless, private developers have also allotted funds to overseas projects.

Dubai-based ETA Star is developing five projects overseas, the majority of which are in India. In Bangalore, the company is building the Dh500 million The Gardens, while in Chennai it is developing ETA Technopark at a total value of Dh1.5 billion, the Dh80 million Jasmine Court and ETA Township Chennai, a Dh3.65 billion project. In Oman, ETA is building a mixed use project, which has a total value of Dh3 billion.

An ETA Star spokesperson said the company's investment into overseas projects will outweigh new UAE developments for the foreseeable future. Targets include Oman, Turkey, Qatar, North Africa, Egypt, Russia, Kazakhstan, in addition to India and Pakistan.

Going big

Damac Properties, has also gone big in foreign markets. More than half of its $35 billion portfolio is made up of projects overseas. The company is building the Gamsha Bay project at a development value of $16.4 billion. In Saudi Arabia it is developing the Al Jawharah project, while in Jordan it has four commitments - The Loft, The Heights, The Courtyard and Business Heights. Other projects include La Piazza in Qatar and La Residence by Ivana Trump in Lebanon.

Dubai-based Tameer is developing residential and tourism projects in Sana'a, the capital of Yemen, and Aden, as well as "Al-Hana'a City" in Libya. Tameer has also entered other regional and international markets, such as Turkey, Bahrain, Saudi Arabia, India and the Far East.

In neighbouring Abu Dhabi, property developer Aldar announced its expansion into Malaysia via a tie-up with South Johor Investment Corp (SJIC) in a deal that represents the largest foreign real estate development in Malaysia.

Sorouh Real Estate, which has Dh40 billion worth of projects under development, says overseas expansion is very much part of its strategy.

"We are a growing company and international expansion is part of our strategy," said Masood Al Away, the company's executive director for sales and marketing. "Developing locally is our still our primary focus, but we are keeping our eyes open for regional opportunities."

However, leaving familiar territory in the UAE is not without its risks. Saker said the political climate in certain countries is the most risky factor, as demonstrated by violence in Lebanon following the launch of Damac's $150 million La Residence by Ivana Trump in Beirut City Centre.

Other considerations include securing permits and coping with variations in property ownership laws, he said.

Ailsa Pollard, director of strategy at Istithmar Real Estate, stressed that developers should take overseas expansion slowly to ensure adequate research and good local partners.

O'Donnell said Nakheel is well aware of the risks.

He said: "The risk associated in going international, such as issues on planning laws, currencies and taxes, means we have to have those well thought through before we push forward with any developments."

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