Rent in Dubai is skyrocketing

Property developer Sobha LLC is planning an initial public offering (IPO) of its United Arab Emirates (UAE) business in 2022, even as a slump in prices weighs on developers in Dubai.

The company will wait to meet profitability projections before making a final decision on the IPO, founder P N C Menon told Bloomberg. It has not decided where to list the shares.

Sobha expects revenue to jump to about 2 billion dirhams ($545 million) this year from 620 million dirhams in 2018, as it hands over more homes in its Sobha Hartland development, Menon said. About 6,000 homes will be delivered at the $4 billion project over the next six years.

Property prices in the UAE, the second-biggest Arab economy, have dropped about 27 per cent since October 2014 amid excess supply and sluggish economic growth.

Emaar Properties PJSC, the biggest developer in Dubai, this month posted a 4 per cent decline in first-half revenue. Sobha is targeting annual sales of 2,000 housing units in Dubai that will result in revenue of 2.5 billion dirhams and profit of about 400 million dirhams by 2022, Menon said.

Real Estate Prices

Prices in Dubai have stabilised and will "stay like this for the next three to five years," he said. The market is crowded with developers and only the best will survive over the next five years.

The Dubai Financial Market Real Estate Index has gained about 6 per cent this year after tumbling 39 per cent in 2018. Menon and his family also own Sobha Ltd., a Mumbai-listed a real-estate, design and construction company based in India.

In February this year, Dubai-based Sobha Group has revealed plans to build a 60-storey tower on Sheikh Zayed Road that will become its new headquarters. With a development value of $190 million, the skyscraper will have more than 6,500 square meters of office and 1,850 square meters of retail space, plus 140 luxury residential units.

Besides, the flagship skyscraper will be the tallest building Menon has overseen in his five-decade building career, which spans India and the Gulf.