Developers are emigrating from Russia

The emergence of Russian demand for real estate in Dubai aroused interest in this market on the part of domestic housing developers. According to Kommersant, the Pioneer group and Samolet Group of Companies are looking for sites for projects in the UAE. Due to the hype for new housing in Dubai, plots in this emirate are now expensive, experts warn. In addition, according to their forecasts, in a couple of years, competition will increase in the local market, and high demand will be satisfied.

Two major developers are considering the possibility of launching projects in Dubai at once. According to three sources of “Kommersant” in the real estate market, in this emirate, “Pioneer” Leonid Maksimov and “Airplane” are looking for sites for housing construction. Pioneer confirmed this information to Kommersant. Samolet declined to comment.

The goal of this whole story is the survival of the business and its continuation abroad, says Alexander Pestryakov, head of foreign projects at Becar Asset Management.

“The Moscow real estate market is now in a fever,” adds Ekaterina Rumyantseva, general director of Kalinka. According to Dataflat.ru, in January-November 2022, 5.8 million sq. m of apartments and suites, which is 24% less year on year. This significantly affected the total revenue, which for the capital’s developers decreased by 11% over the same period, to 1.47 trillion rubles.

At the same time, demand in the Dubai market, on the contrary, is growing. According to Kalinka, in January-November 2022, a total of 87.7 thousand transactions with residential real estate were concluded in Dubai, which is already 44% more than in the entire 2021. More than half of the transactions are in the primary market, the remaining 48% – in finished housing, analysts said. Now there are not so few clients from Russia in the UAE and the presence of Russian developers in this country will provide them with an important competitive advantage, believes Irina Dobrokhotova, Chairman of the Board of Directors of Best Novostroy.

Many Russians transfer their capital, families and businesses to this country, reminds Ekaterina Rumyantseva. Against this background, companies involved in commercial real estate began to actively enter the UAE.

For example, Codevelopment plans to open a 4,000 sq. m. flexible office. m in the business center Burj Daman in Dubai. The Emirates do not support anti-Russian sanctions, and real estate there, other things being equal, is no more expensive than in Moscow, which creates a good investment climate, adds Irina Dobrokhotova. Half of Russians are considering investing in real estate, another 40% of demand falls on the purchase of housing for life and 10% is investment demand for plots, development projects and co-investment, says Marina Shalaeva, managing partner of PARUS Real Estate.

But Russian developers in the UAE may face serious difficulties. The country’s market is monopolized, and new players without a local partner can enter it only if there is an administrative resource, explains Ekaterina Rumyantseva. Expansive competition is unlikely to appeal to local players, agrees Irina Dobrokhotova. In addition, Ms. Rumyantseva continues, it is quite difficult to build in the country due to the high load on infrastructure – the developer will have to rebuild transport and engineering networks.

You need to enter the market with a financial partner or your own funds, since there is no project financing in the Emirates, which has already led developers to bankruptcy, Alexander Pestryakov notes.

He is confident that, given the current hype, projects will be sold at exorbitant prices and it’s not a fact that they will turn out to be profitable, but only a few will be able to correctly assess the situation and build a profitable business.

However, despite the difficulties, more and more Russian developers will be interested in the UAE market, predicts Alexander Pestryakov. Players from the top 10, Irina Dobrokhotova believes, will try their hand at the UAE market in the next year or two, but later it will lose its meaning due to increased competition.

Daria Andrianova