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Key Factors that can Hurt Developer’s Reputation

The real estate developers in Dubai face fierce competition. The sector has the presence of some of the most prominent and mammoth developers like Emaar Properties, Damac properties, Nakheel Properties, Dubai Properties Group,  Select Group, BinGhatti, and Sobha Realty to name a few. UAE’s favorable and business-friendly policies, rising investments in infrastructure, and low-tax environment is attracting the world to invest, live, and work in the city. There has been an exponential growth in transaction value and investment in UAE’s real estate sector in 2020, resulting in an increase in new development projects. This is also encouraging several international developers to develop new properties in Dubai which is further making the market more competitive.

As the business environment becomes more competitive, the developers must lay special emphasis on building their favorable brand image and must avoid making these 5 costly mistakes which can have a detrimental impact on their reputation –

1. Oversupply

It is of paramount importance for the developers to perform a critical and well-thought analysis of the current property demand as the oversupply results in downward pressure on the sales prices & rental returns. Furthermore, if the demand is low, oversupply leads to a large number of unsold units, which not only hurts the developer’s revenue but also dents its reputation. The supply for the property outpaced the demand in Dubai between 2014 and 2019. This widening gap between demand & supply has resulted in a large number of unsold units and developers cutting back on the new projects. The problem of oversupply has resulted in a 40-50% decline in property prices with a 5-10% decline in rents since 2014.

2. Lack of Financial Planning

Another pressing challenge faced by the property developers which can significantly impact their reputation is lack of financial management.  It is no secret that developers of all sizes face budget & cost constraints. Non-availability of funds can put a hold on the work at the construction site and leads to a delay in the possession of the property to the homeowners. In many cases, it has been witnessed that developers have failed to release funds to the contractor as their clients defaulted on monthly installments. This can seriously hurt the reputation of the developer. Effective management of finances determines the triumph of the developer. They must come up with a plan to ensure all their related parties pay on time. 

In the last few years, financial institutions in Dubai have revised their flexible lending policies related to loans, mortgages, etc., making it much more difficult for the developers to secure funding. Focusing on effective and efficient financial planning will enhance developers’ abilities to secure hassle-free business loans from financial institutions.

3. Operational Challenges 

Engineering problems or other technical issues can dramatically impact the performance as well as the brand image of the developer. Some of the most common technical issues faced by the developers during the construction process are related to civil, mechanical, and electrical works, etc. If these technical issues persist, they can adversely impact the overall quality of the building.

The most common root cause of quality constraints is the usage of poor quality raw materials and low-cost alternatives by the contractor due to insufficient budget. This often results in frequent breakdowns, leakages, and faults at construction sites.

4. Project Delays

It is pivotal for the developers to ensure better time management and achieve every task on time. There can be delays in procuring materials and equipment, allocating manpower, drafting change order requests, and resolving numerous issues pertaining to contractors, sub-contractors, and consultants within the internal management of the developer, shortage of materials on-site; unrealistic project scheduling; late delivery of material; lack of skilled labour; the complexity of the project; labour absenteeism; delay in payments, poor site management; and delay by a subcontractor are some of the top reasons for the delay in the project completion.

Better planning for these issues will allow developers to complete the construction work before the due date.  

5. Considering Hiring an Owners’ Association Firm as a Cost

It is a common adage amongst several small developers that they will save a substantial amount of money if they manage all the tasks themselves. However, that’s not true. Hiring the right owners’ association firm will allow the developers to save costs.

It is indeed very important for developers of all sizes to work on their public perception and the way people perceive them and their properties. Timely and professional resolution of tiny issues can have a positive effect on their reputation and vice-versa. It’s always a wise choice to invest money in the effective maintenance of the property at the right time rather than losing big on rental opportunities in the future.

A professional asset management firm can play a crucial role in building a positive brand image for the developer. This will attract more tenants and will have a favourable impact on the occupancy rate of the property as well as on the revenues of the developer from the rental income. A positive brand image will also empower the developers in accomplishing their mission & vision and long-term goals. 

Kaizen AMSa top 5 property management company in Dubai with over 15+ years of experience in serving some of the biggest real estate developers in Dubai can play a pivotal role in boosting the reputation of the developer by ensuring utmost tenant or resident satisfaction, finding out tenants to occupy the vacant units, ensuring rents are collected on time, and property value of the asset is preserved. 

Kaizen AMS also emphasizes maximizing the supplemental income of the property by generating additional sources of income from the building. We do that by leasing the parking space, terrace space,  Vending Machines, Marketplace, and storage room on an annual basis which resulted in more than 2% of the additional annual revenue for the building. 

Here is the case study titledCurtailing Costs & Boosting Occupancy for Commercial Buildings which talks about how Kaizen AMS has boosted the occupancy rate for a Grade A office building in Dubai Internet City by maximizing the supplemental income and focusing on keeping the rents & service charges minimal for the tenants. We have also invested in several energy-saving technologies to ensure lower energy bills for the tenants living in our managed communities. 

Undoubtedly, all the efforts laid by Kaizen AMS’ have resulted in a substantial increase in tenant satisfaction, a surge in the occupancy rate of the property by happy tenants, an increase in income from the property, and above all enhanced reputation for the developers of our managed communities.