By Philip P. Merrell
Real estate developer Nakheel reveals plans to build Dhs2.5 billion villa complex in Nad al Sheba, Dubai.
Spread over 2.5 million square feet, the development will comprise 900 luxury three to five bedroom houses, each boasting a swimming pool. The complex will also house a retail centre, cafes, a sports facility and access to Nakheel’s beach facilities at Palm Jumeirah.
At the beginning of this month, Nakheel announced that, in the first half of 2014, it experienced a rise in profits by 54 per cent. A rise in Dubai’s rental prices and a handover of more than 620 completed units contributed to an overall profit of Dhs1.85 billion.
Having released its strong performance in H1 on July 9, a spokesperson for Nakheel said: “Strong revenue from property development, together with improving performance in Nakheel’s retail, leasing and leisure businesses contributed to these robust results.”
These results, combined with the announcement of new projects such as the Nad al Sheba villa complex, all indicate that Nakheel is steadily recovering from the crisis it endured throughout the 2009 real estate sector collapse.
In 2010, Nakheel was largely accountable for a $10 billion debt, out of the overall $26 billion owed by its then-parent company Dubai World. However, having been saved by a major bail-out from the Abu Dhabi government and a number of debt restructuring programmes, year-on-year profits since 2010 should put them in the clear for the first time by August 2014.
Furthermore, having already announced a further 20 major projects set to start this year, Nakheel will be expecting a boom once again, with 2009 seemingly a distant memory. Dubai’s real estate sector as a whole will be anticipating new highs in preparation for Expo 2020 and plans to build mega developments such as the $32 billion Al Maktoum Airport and the Mall of the World, the world’s first temperature controlled city expected to cost over $7 billion.
Only time will tell whether pre-crisis mistakes have been overcome or whether the only lesson Dubai’s real estate giants have learned is that this time projects must be made bigger and better. One worrying reality which certainly hasn’t been overcome – which the recent crisis at Arabtec reminded all – is that the property sector still drags Dubai’s financial stability with it.
In this sense, high volatility must be met with a great deal of caution; even if, for the time being, there is a 54 per cent rise in profits to celebrate.