Last week I was in UAE and contrasting their residential building market (esp. Dubai) now and a few months / quarters ago. Today, as against a building frenzy a year ago, the market seems downright down in the dumps. The talk of the town however, continues to be how "upscale" properties are now available at 60% of the earlier rate rather than how "affordable" housing has been !
Seeing the numerous ads in the local newspapers made me wonder if there is commercial merit ?
Let us face it, in terms of building affordable housing, the key cost factors of land, material and labour have NOT changed significantly except for land. Given that most of these builders probably have a land bank already and are not making "cash" payments today, what really has changed ?
Is it just that they are going to be using "cheaper" materials and giving up on higher margins ?
Dont' you think that there is some "herd" mentality going on esp. given that default and cost of money has probably gone up ?
If the builders were really looking at "affordable" housing, then, IMHO there should be a grounds up review of the market. Today, the housing market is mixed with 1/2 and 3 bedroom apartments that do not actually leverage the target model.
In my view, if a builder actually did a grounds up building to cater to "similar" target market and then worked on efficiency, there would be better throughput. As an example, I'm sure there is a market for bachelor "pads" with ample two-wheeler parking PLUS utility for single occupants. These utilities would range from food outlets to possible a video rental to a dhobi/laundry.
The ground floor would then generate enough "maintenance" funds and let the occupants in the higher floors (all single occupancy) to work out an efficient cost model ? Dont' you think ?
I'm sure we can think of similar setup for various target users ?
