Property prices in Ajman have risen by an average of three to five per cent every month for the past two years.
Ajman-based Developer Chapal was selling at an average price of Dh300 per square foot in the emirate in February 2007. Currently its average selling prices are in the region of Dh625 to Dh650 per sq ft. « By December 2008, we will have revised our prices to between Dh700 and Dh750 per sq ft, » Director Khurram Wahid told Emirates Business.
He said the return on investment for a developer in Ajman is averaging 25 per cent per year. « For a new developer to enter the realty scene in Ajman today he has to ensure he has sufficient capital in hand. The market is maturing and the Ajman Government is coming up with a set of regulations. A new developer has to be financially strong and understand the business, » he said.
We have seen a number of small-time developers who could not succeed in Dubai moving to Ajman. Are you worried you will be associated with them, considering you are one of the larger developers in Ajman?
It is a concern for us. One of the main issues that affects us is that developers in Ajman are selling at very low margins. We are waiting for more regulations to come out similar to those in Dubai, then we will see more stability in the Ajman property market.
Are you looking to raise your prices?
Definitely, we cannot stick to a certain selling price. Realistically prices in Ajman should not be less than Dh700 to Dh750 per sq ft. But small developers are eroding the market and under-selling at Dh400 per sq ft. We have to keep this in mind and as a result are selling at around Dh625 to Dh650 per sq ft. After Ramadan, we will look at our prices, we will bring them up to an average of Dh700 to Dh750 in three months’ time.
Mortgages are not yet available in Ajman. Do developers such as you budget a certain amount in respect of financing your buyers?
We don’t offer that service as yet. The way we make it comfortable to buy is by having a liberal payment plan but at the same time one that will not upset our cash flow. Generally, our payment plans are spread across a little over three years. This is the timeframe in which we expect construction to be completed. According to the progress of the building we also offer extended payment plans which run for up to six years. A buyer should have paid up to 50per cent of the property value by possession time and the rest should be paid within a further two years.
How does an extended payment plan work out for you in terms of cash flow and other factors?
The way we handle our cash-flow projections is we phase our sales schedules and attach a premium on subsequent sales programmes. On an average, we are seeing an appreciation of property prices in Ajman of around three to five per cent every month. When we launched our projects in February 2007 our average property selling price was in the region of Dh300 per sq ft. It is now Dh625 to Dh650 per sq ft.
What is hot in Ajman from a property perspective?
Studios are currently the hottest and the fastest-moving properties in Ajman. The return-on-investment for a buyer of studios in Ajman is currently around 50 to 60 per cent per annum. The demand for studios and one-beds is high from end-users as there is a dearth of accommodation of these sizes for small families who are not able to keep pace with escalating rents. Also from an investment perspective there is a low value of investment on these properties.
Why is the secondary market not yet picking up in Ajman?
One of the reasons is the fact that there are still a number of projects being announced in Ajman with very good payment plans and prices. Property prices are still not peaking so a buyer is constantly looking for a new product in the market at a competitive price. Once property prices in Ajman reach a certain level people will look for lucrative buys in the resale market. The property market is still in its primary stages in Ajman. Affordability is another factor. Ajman has generally seen end-users who would rather put a lower down payment in a new buy than a higher down payment in the resale market. We also anticipate that when infrastructure is built and people can see more towers ready for handover Ajman’s secondary market will surge.
The absorption at the moment – is it investor interest or end-user interest ?
The buyer interest is coming from the end-user. Prices are attractive to investors who find Dubai expensive.
What is the total value of Chapal’s developments and what are your key projects in the UAE?
We currently have Dh20 billion worth of projects across the UAE. We started our first project in Ajman in February 2007. Since then we have announced two master development projects in Ajman, the Emirates Lakes Towers, a 2.5 million sq ft development comprising 51 towers and Chapal Flora Residences, a four million sq ft development with 1,762 villas. We also have residential twin towers in Dubai Sports City and a mixed-use tower in Jumeirah Village South.
As a master developer, what special agreements do you sign with a sub-developer?
We sign a sales purchase agreement (SPA) and an affection plan issued by the Ajman Land Department. The SPA contains the handover date – we have a penalty clause for delayed handover. It is a two-way contract and has to be beneficial to both parties. The affection plan details project plans and build times. There are penalty clauses with respect to changing master plans. With a buyer/end-user, we also sign SPAs that detail delivery times and the specifications of the tower and villas we are building.
What are the current land prices in your master development projects?
The land deal on the Emirates Lake Towers was Dh900 million with the government of Ajman. We started selling the land in February 2008 at an average of Dh50 to Dh60 per sq ft and after seven months the land value is averaging Dh110 per sq ft – up 40 per cent.
What new projects are you planning?
We currently have our hands full. We would like to first develop what we have announced and get that on track. Regarding what is to come, it all depends on demand and how the market goes.
Infrastructure and power supply problems are not new in Ajman, How are you dealing with them?
That has been quite the talk of the town. We are still in the planning and design stages for most of our projects. We are definitely considering the power situation in Ajman. The government is also doing its bit and has contracted various companies to attend to these issues.
Do all designs in Ajman have to go through a pre-approval process? Is that mandatory?
It is mandatory to have designs approved by the government prior to developers announcing their project. Developers can start building a project only when they get the building permit.
Business Emirates 24/7, by Anjana Kumar – September 16, 2008
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