Dr. Sulaiman Al Fahim

First of all, let’s start with the global sector overview. Moody’s believes that the regional property boom is driven by strong fundamentals and rules out that a bubble is being built. However, the housing assets appreciated by 53% in 2007 and 2008 by Colliers International which is an indication that the speculated capital has been poured into the real estate sector. How would you describe the current real estate climate in the UAE?


I can talk about Abu Dhabi. The Abu Dhabi real estate market is going to appreciate again and again because the infrastructure is ready, the investors are there, the equity is there, and there is a shortage of housing and space. Especially with the new Abu Dhabi Urban Planning 2030, which was announced last year and gave a clear indication of exactly how much you can build here. Even as Hydra Properties, we could have built more last year but were stopped by the Urban Planning. It sometimes haunts a real estate developer, but it’s much better for the market and for the sustainability of the market. Therefore in Abu Dhabi, the prices are going up but still the price is low. Although the average price last year for an apartment was 1300 Dhs per square feet, now we are talking about 3200-3400 Dhs. So there is much more than 100% appreciation there as per Colliers and Moody’s. The way Abu Dhabi is growing is by supporting the industrial zones and cities, by improving the ports, creating new university cities and media cities; that will support the real estate. We are going to see how Abu Dhabi will be for the next ten years; the prices are going to go up and appreciate. Also, demand won’t match supply; there will be much more demand than supply. The good thing about Abu Dhabi is that for the last 30 years, nobody could buy property, not even nationals, unlike other emirates where the nationals always had the chance to buy. Now in Abu Dhabi just recently in the last two years, nationals and foreign companies can buy real estate in Abu Dhabi. That increases demand. That’s for Abu Dhabi. But if we’re talking about other cities, I think we have to fix the infrastructure first.

So infrastructure is a key for success?

Yes.

How does the Abu Dhabi property market compare to the other markets globally, how the real estate sector is structured and how the trends you’ve seen in the region compare with Abu Dhabi?

If you compare Abu Dhabi with big international cities like New York and London in terms of policies and procedures, the regulations are still not mature and need a lot of work, but in terms of opportunities for investors it is much higher than any other place in the world. What we need in Abu Dhabi are more regulations, more policies and procedures to support sales and transactions.

With inflation rampant in the UAE and the region at an all-time record, many experts blame the real estate sector as a major factor driving this inflation.

I blame the Central Bank. We need to help raise the dirham with the dollar. The blame should not be on real estate because the prices are not too high, compared to the prices in Europe. If you compare it with the prices in Europe and America, it is much lower.

But in Kuwait they adopted the basket of money but they still have inflation. It’s been projected that if the UAE was to adopt the basket of currencies the inflation would drop only by 2%.

First, the value of the dirham would be increased by 40%. So that by itself is enough to kill all the inflation, hopefully, or to cut it by over 25%.

So the dirham is undervalued?

It is very much undervalued.

What is the possibility of the government stepping in to regulate property prices to curb the inflation?

You cannot stop the increasing property prices. You can’t tell Hydra why are you selling 100% more than Tamouh when the two buildings are next to each other, which is an actual case today. There are two buildings, same plot, same contractor, same finishes. The government can’t stop you from selling at a higher price. They can only stop the increase of rentals. But of course if we’re selling at higher prices that is starting rental prices higher too. You can’t control it. The only thing you can control is to reduce the taxes on the imports of building materials, you can support it by getting more tourism in the country, by putting in new media cities and so on, but you cannot ask developers to reduce prices.

The real estate projects, including those under planning and development, are estimated to cross more than 466 billion dollars, and that is considered to be just the tip of the iceberg compared to what is expected in coming years. As an industry expert, what is going to happen in Abu Dhabi?

First of all I don’t believe the numbers, they are too high. With the restrictions by the Urban Planning Council, the figures would be much lower. If you meet and talk with all the real estate developers and ask for real figures, it won’t reach that high. Maybe in the next 30 or so years the figures will get that high, but not in the short-run, not in the next 5-7 years.

Hydra Properties, which was founded in 2006 has already been ranked as one of the 50 most influential big real estate developers in the Middle East and the region. In your opinion, what is your key success factor; how have you succeeded in this in such a short span?

The main success is the people, our investors. The second thing is transparency, which lets us build trust with our investors, in addition to the services we provide for them. This transparency, trust, and service make us maybe the number one seller in the country now. People trust us.

But how do you build this trust in just two years?

You build trust by being transparent. You saw how we deal with customers; if a customer thinks a price is too high, we tell them wait three months and then it will be this price. Then if that happens, he is happy. Other companies over-promise.

As a property developer you are not obliged to disclose any financial or growth, but could you talk about some of the financial aspects and growth of your company? Growth is in double digits, I can assume?

Yeah, the growth is in double digits, maybe more than double digits. One thing I can tell you is that I will never enter any project if I can’t make at least 25% profit.

So you are only looking for very highly-profitable opportunities.

Yes, one other thing is that we make very good money from reselling. One of my ideas is I want to build high trust for the middle class people, to get their trust and have them become Hydra’s customers. But I make good money from reselling.

Earlier this year, the Real Estate Regulatory Authority (RERA) in Dubai reported that there are about 500 developers that are acting on the market. This is huge competition. How do you differentiate yourselves vis-a-vis your competition in terms of your development?

I think you should ask RERA again if there are really 500 developers. I think that in Dubai you can find that maybe 90-95% of that number are brokers who are being called developers while they are not really developers. Hydra differentiates itself by being international and by having a number of properties. If you look at most of the developers in the UAE that started earlier than us but have only 10,000 properties, while Hydra only started 2 years ago but has more than 25,000 properties only in Abu Dhabi; we have a lot more in Dubai and so on. But most of the people in Dubai are not developers. Maybe if you go to Abu Dhabi you will find 5 or 6 developers. In Dubai, maybe 20-25 developers.

Who do you consider to be your main competition and who do you think is your benchmark target?

I do not see that kind of competition. We are supporting each other in different ways. Companies like Nakheel, Aldar, and Sorough should be looked at as opportunity. They are working on large projects. As for what is our benchmark, maybe we can say that we would like to be like Emaar in terms of being spread out around the world.

Many property companies that have been investigated by Dubai Real Estate Regulatory Authority are delaying or defaulting on a number of projects. How challenging is it to deliver – with many shortages on the market – on time and with adequate quality?

I know that many developers have not developed their talents. Maybe RERA is talking about the 500 developers they have listed. But the main reason for those to not deliver is because of the master developer. I cannot blame the developer himself because the developer himself had saw the towers, and had the cash to develop, but the problem is that when he saw the towers he assumed he had to get them immediately, while the master developer has not delivered the land for a year or two. I don’t want to mention specific names or which developers in Dubai, but this is a problem. They allow you to start construction now, and you pay the contractor but for the next four months you can’t take out the water and say why should I pay the contractor for the next four months. Those extra costs, who should bear them? That’s where we don’t have real regulation. There should be regulation supporting small developers because the rights are always with the main developers and not with the small developers. It’s a problem we’re facing, and I blame the master developers and I blame the authorities for the delay of projects.

In your opinion what should help facilitate your operations as a developer by the public sector?

If RERA is going to put regulation on these 500 developers, let them put regulation on the three main developers, and let them be strict with their properties like Nakheel and Emaar, and then they can start being strict with the other developers. That is the only way that you can solve the problems. The infrastructure is not the problem. One of the three developers, I am building a tower and I have to write that the Emirates building will be ready. I might not have electricity so I have to build my own generator so the hotel will be working on the generator. And that’s in Dubai; then you start thinking about Ajman and Sharjah and so on.

How is Hydra Properties going to guarantee that all contractors and subcontractors will deliver on time and the end project will be delivered on time and with adequate quality?

We give the customers a timeline and we always put a few days extra from day one. We say maybe I can deliver it, but I need to have my own grace period. And with proper management you start to know what comes at which time. I have my own factory that can supply me. I am buying from a new company for smart home technology. We have our own curtain, walls, and aluminium factories that can support Hydra. We have green lighting which is eco-friendly lighting used in our buildings. This synergy and resources support the delivery of Hydra.

Hydra properties has a clear social commitment and responsibilities. In what ways is Hydra properties addressing corporate social responsibility?

We are mainly supporting the youth, with sports and education for young people in the UAE. That’s really how we target corporate social responsibility. We start by supporting the kids in the KG and the primary and secondary school. We want those kids when they go home to say Hydra. That’s kind of a teaser. Then we move on to high school and universities. We send college students to Egypt, New York, and France for cultural tours. Last year I sent twelve girls to New York and France. They come back and talk about this opportunity with their friends, teachers and classmates. This year it’s the same. We have a group of people that goes to every school, every university, every company, and promotes the Emirati identity to people. We do projects for Hydra and for the Emirati identity. That’s kind of part of our social responsibility; telling people what the UAE is about and inviting success to the country. Supporting the youth; there is no money behind that. It’s a way of giving back to the community.

What is your main responsibility towards outside, towards Abu Dhabi being known internationally?

I think that I look at ourselves as ambassadors; wherever I go I mention that Abu Dhabi is the best place to be and to invest in and to live in. There are many ways to promote your home country. When I went to Hollywood I went in my kandorah just so everyone would be curious and think why are you here; they were attracted by the UAE traditional dress and it made them so interested in learning about here and coming here to Abu Dhabi with me. So that’s one way to promote your home country.

Hydra is known for some of the most innovative marketing and brand name strategies. The latest initiatives in launch are a musical to further enhance and improve your brand name and marketing…

We traveled to London and to America to get 400-500 people casting for the UK team, signing agreements with TV stations in London and with the Hollywood TV in LA; that by itself is promoting Abu Dhabi, making sure that the whole casting and shooting is done in Abu Dhabi. I believe every commercial brand has its home country brand first. Like Dubai; nobody brands Emaar or Nakheel first. They brand them as Dubai. All these new companies worldwide have Dubai next to it, because Dubai is a brand.

Dubai has done a marvelous job of promoting itself internationally. Do you see Abu Dhabi as doing the same thing in the future?

Abu Dhabi is doing that now. They’re doing their best. You need a CEO like Mohammed bin Rashed Al Maktoum to run Abu Dhabi. They’re promoting tourism. If you look at Dubai, Sheikh Mohammed really ran Dubai as a CEO and not as a ruler so that’s why Dubai got the brand.

Do you see this position changing in the future?

Abu Dhabi itself as a brand has a culture of being the capital, looking at the Louvre and the Guggenheim museum…I believe Abu Dhabi will be the Capital City Number One. Actually I am from Dubai but I believe that Abu Dhabi will take over. I was born in Dubai and I live in Dubai and would not move to Abu Dhabi, but I do believe that Abu Dhabi will take over because of its sustainability, and Abu Dhabi is not in a hurry. They have the drive, they are doing plans. I have met His Highness the Sheikh a couple of times and the vision he has for Abu Dhabi will make it the Capital City Number One.

Do you think Dubai will become a victim of its own success, for example a lack of planning and sustained development?

The good thing about Dubai is that they find their mistakes and they fix them. And the one who fixes his mistakes will always be successful. Dubai fixes its problems, and it fixes it fast. I think that Dubai in the past three or four years was growing too fast, and the plan was there but the problem was the people who were handling it never thought that what is planned might not happen.

Let’s talk about the last part of the interview. Hydra Properties has rapidly expanded in the UAE with several mega projects in Abu Dhabi and Dubai. Now you have expanded to Libya, Kuwait and Mexico?

I want to add one thing. We are not only in Abu Dhabi and Dubai. We are in Sharjah and we are in Ras Al Khaimah. One of our biggest projects not in Abu Dhabi is Saadah which will be launched in December.

Further more you mentioned that “Our ambitions guided us to bypass the local nature and pursue a global character, to maintain this course f business, we will direct 90% of Hydra Properties investments to international developments.” How confident are you that with the increased international exposure the global economic downturn will not bite into your profits?

Actually I invest in the international market so there is either fast growth or slow growth.

You mentioned that you are also investing in the States?

In the States it is the right time to buy, and I am buying at the lowest prices have ever been. It can’t get lower than that. For example there is a plot of land that was previously for sale at $450 million, and is now for sale at $250 million. It won’t get lower.

What other geographic locations are you targeting?

Eastern Europe and the Caribbean/Latin America.

And what kind of developments are you going to develop there with Hydra; will they be commercial or residential?

In Eastern Europe we are looking at a new city themed by Hydra. I hope that will be announced by December. And with Latin America, again, we hope to have an emerging city or village. They call them Dubai cities because in Dubai every one million meters is called a city. If that’s the case, I am building a couple of cities.

What are the main challenges and opportunities of going global? I mean 90% of your investments are going global, correct?

No, when I say 90% I mean that 90% of my income is coming from global markets. Last six months I said I don’t want to buy anymore in Abu Dhabi; I have some land, I will develop it, and whatever I make off it that is enough for me. The numbers in the UAE are almost equal to the international rate. It’s difficult to predict that you will reach the 90% because you know in the UAE you can always be bigger. And there is a place to go in the UAE. I have investors from Hong Kong, I have investors from China, I have investors from Australia and from Costa Rica. So you have investors from all over the world. I attended a horse race in London last weekend and I saw an investor friend, and we discussed that the return rate in London is 7%, so in the UAE it’s higher than in London and he invested with us. It was a mistake investing in Texas; I had met with an investor and I promised him to come to Abu Dhabi. Another investor that I met was a super star in Hollywood and he asked me about a company in the UAE and based in Dubai. I didn’t tell him don’t buy from him. I encouraged him, I brought both of them together and they are launching their tower very soon. I could have taken it for Hydra but he had said I want this company and he’s a friend of mine. And that’s how you build your trust. And that superstar is so happy that he called his friends and his friends stared calling me and so on. When you work like that you are helping your friend and working for the government and the whole country. Then you can always find that customers will come to you.

To finalize the interview, what is your dream for Hydra Properties? Where would you like to take the company in the future?

For me, I would like Hydra to be in the property developers number one in the world. I want to differentiate myself; that is why I am investing in technologies that are friendly to the ecosystem like carbon-free or greenlights. But my own goal is not Hydra. My own goal is to have a big house where my wife and I can have 50-60 orphans supporting them.