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‘The big picture is looking positive’

August 2016

Basel Al Kasem, CEO and founder, Al Basel Group, Dubai, says despite low oil prices he doesn’t see any major hurdle in the UAE’s and Dubai’s education sector, as the overall Dubai economy is growing and the economic indicators are encouraging

Could you brief us on Al Basel group? How did it evolve into different business segments?
I have been a business professional for a long time. When I was 27, I was approached by Burj Al Arab to join them as Business Development Manager. Afterwards I sold off my business and took up the job, which opened for me access to various high-heeled VIPs in the Gulf. It was a successful 8 years of my life working for Burj Al Arab. Then I left the full-time job in 2007 to start Al Basel real estate brokers. The business did pretty well in the first year with sales crossing AED 100 million, while in the second year, the sales crossed AED 520 million. In 2007 we also started the business of rent-a-car and Al Basel Consultancy. We started with one car and today we’ve almost 100 cars available for rent. These two companies too have been successful.

During the peak of global financial crisis period, our real estate brokerage business was most affected. Nevertheless, with proper cash-flow management we were able to survive the strong wave. During 2010-2011, we started three business verticals, namely, a travel agency, a kids’ magazine and Amani Investments. So far I’ve set up 7 boutique companies and all are making profits. I thank my team, who I trust and work from the start of my business.

UAE property prices have come down and now are cheaper than that in many other leading cities in the world. Going ahead, do you expect Dubai and UAE property prices to bottom out soon?
Across the world, property prices have gone down. However, in Dubai the fall has been the least compared to other markets in the region. Dubai economy will be the least affected from the ME economies. One of strong trends has been that residential property rentals haven’t been going down at the same pace as the prices primarily because Dubai properties are backed by strong demand.

I believe it’s a good time for investors now to invest because although the prices have gone down in some areas, yet the rental return or yield still remains high. For instance, if a buyer had bought an apartment valued at AED 1 million a few years back renting at AED 80,000 a year, he is getting almost 8% return on his property. If the price of the same apartment were to fall to 800,000 now, and rent at 80,000 a year, this means the same property is yielding 10% return. I also believe that for buyers sitting on the fence, it’s better to go and buy. If they keep on waiting, somebody else would come and buy what they’re waiting for. The prices are not expected to go down further in high demand areas and most of the distressed sales have already occurred. So the big picture is still looking positive.

In January 2014, Mortgage Cap regulations were introduced in UAE which stipulated that expats need a minimum of a 25% deposit for properties under AED 5 million and 35% above AED 5 million. Although such measures helped avoid another 2009 type of crash, do you believe they remain the single biggest obstacle for those hoping to buy property?
I believe these measures are helpful to property buyers as they are reducing a buyer’s cost of financing and at the same time reducing the time of payback. Another positive aspect of these measures is that when a buyer pays 25% as deposit at one go, he feels more attached to the property he’s buying. This is generally not the case if he had paid only 5-10%. The third positive aspect is that if one pay less amount as down-payment, it’s very difficult to expect decent return on the investment as mortgage repayment will take away most of the rental return.

Where do you see the market going into 2017?
I’m optimistic and a believer in Dubai growth story. Though the market is experiencing a few hiccups in the short-term, but in the long-term it’s healthy and growing. The success of Dubai’s businesses is due to Dubai’s regulations and Dubai’s positioning.

Do you see demand for affordable housing from end-users gathering pace in future?
Affordable properties especially in areas such as Business Bay and downtown are getting healthy demand from mid-to high income families. Having said that, as an asset management company, we’re seeing more people vacating residential properties this year than the same period last year. In 2015, the vacancy rates was around 3% and the notice period was 60 days. In 2016, the vacancy has jumped almost 9% and the notice period has also dropped. However, despite the rising number of vacancies, re-renting them soon hasn’t been a tough task for us. While some of the occupants are shifting to lower-rent apartments, some are leaving the country or leaving their jobs and moving into shared accommodation. Nonetheless, it’s not at all an alarming sign as many people are also moving into the country and finding jobs.

At a time when oil prices are low and the overall business activity is a bit subdued, what are the key growth drivers for the education sector in the UAE and the GCC region?
We don’t see any major hurdle in the education sector, as the overall Dubai economy is growing and all the economic indicators are encouraging as well as promising.

Since you’re into consultancy as well, what’s the biggest concern by most of the businesses you deal with?
The most important issue businesses are facing is the cash-flow management. If a company makes profit and it receives payment invoice after 60-90 days, it becomes difficult for the company to pay for current expenses, say, for the next 15-30 days. In this condition, businesses can’t survive in the long term. Therefore, cash-flow management by minimizing cost is critical.

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