Danube adjusts project launch to test VAT waters

Developer will launch affordable apartments in Arjan in Q1 of 2018

Danube Properties is waiting to gauge the initial impact of value-added tax (VAT) before launching its next affordable project in Q1 of 2018. Located in Arjan next to Miracle Gardens, the project will cater to the affordable segment of the Dubai market.

"Developers need to give some time for residents to adjust to a VAT reality. In the initial stage, there will be market caution. But it will not be long term. Eventually, consumers have to pay the VAT," says Rizwan Sajan, chairman of Danube Group.

Danube Properties has handed over 302 homes worth Dh270 million across Glitz Residence 1 and 2 in Studio City this year. It is also preparing to hand over 354 homes in Glitz 3 and 171 Dreamz townhouses in Al Furjan in Q1 of 2018.

"The townhouses in Al Furjan are ready. We have the building completion certificate and are waiting for power connection," adds Sajan.

The developer, which has a Dh3 billion+ portfolio, is open to developing more townhouses if a right plot comes by. "There is demand for a townhouse between Dh1.2 million to Dh1.5 million. There is still huge demand for affordable apartments as well. Eighty per cent of people who live in rented accommodation in Dubai wish to purchase their home," observes the chief executive.

Danube Properties launched projects worth Dh750 million this year, of which only Dh100 million remains to be sold. This includes Bayz, its first luxury residential project in Business Bay, which is around 85 per cent sold out.

It has awarded five construction-related contracts with a combined value exceeding Dh381 million in 2017.

On its new project in Arjan, Danube is guaranteeing rental returns of up to 15 per cent. "For instance, if you purchase our studio apartment for Dh450,000, you pay Dh225,000 until handover. For the remaining Dh225,000, you can easily get rental income of Dh40,000 to Dh50,000 per year. So, the returns are in fact much more than 15 per cent," reckons Sajan.

The developer still takes a cautious approach to buying land plots. "I only have the Arjan plot in my land bank now. Land prices have come down by about 15 per cent," he adds.

The chairman is not perturbed about oversupply worries in the Dubai property market. He claims that although around 25,000 to 30,000 units are being launched, deliveries are not keeping pace. "In the last five years, nothing more than 14,000 to 15,000 homes have been delivered to the market. Until Expo 2020, there will be a surge in demand for housing," explains Sajan.

The construction boom related to Expo 2020 is beneficial for Danube's building materials business. The development of infrastructure and several hotels in the UAE is resulting in more demand for building materials.

The chairman said that Danube's building materials division reported less than 10 per cent growth, driven by business in the UAE, Oman and Bahrain. Danube Home recorded 30 per cent growth. The property development division registered smaller growth compared to 2016 because the launch of the Arjan project was moved to 2018.

"It has been a good year considering the subdued market we have been operating in," concludes Sajan.


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