Abu Dhabi’s Sorouh Real Estate has signed a 5.4 billion dirham ($1.47 billion) contract with the Abu Dhabi government to develop a community aimed at Emirati families, Sorouh said in a statement on Sunday.
The deal, funded by the emirate’s Urban Planning Council, provides a new public-funding mechanism to Abu Dhabi’s second-largest developer, and adds to its portfolio of projects in the capital, which is suffering from the effects of the financial crisis.
“It’s a new way for Sorouh to fund their projects,” Khaled Al-Rajhi, Sorouh’s procurement director, told Reuters on the sidelines of a property conference.
Developers across the UAE have suffered the impact of the global financial crisis which put an end to a six-year construction boom. While Dubai has suffered the most, Abu Dhabi, home to most of the country’s oil, has fared better.
The first phase of construction on the project, called Watani, has already started, the statement said.
The major project win for Sorouh comes as the firm prepares to hand over some 1,350 apartment units in the second half of 2010 in a move that will fortify the company’s revenue, its chief financial officer told Reuters earlier on Sunday.
“We expect to hand over a good portion of 950 units in Q3 and Q4,” Richard Amos said. Amos was referring to the company’s Sun and Sky Towers project in Abu Dhabi.
He also said that Sorouh will hand over another 400 apartments from its Tala Tower project starting in July.
Amos said liquidity and high mortgage rates were still hampering a recovery in the Abu Dhabi property market. “It’s a question of liquidity coming back into the marketplace. Mortgage rates are relatively high although we are seeing signs of mortgage companies trying to address that recently,” Amos said.
Average mortgage rates are currently around 8-8.5 percent, he said, adding the firm offers a rate of 4.99 percent for customers for its Sun Tower project.
Amos said Sorouh would need additional financing in 2010, but declined to give further details.
Conditions in Abu Dhabi’s property market were still “fairly challenging” he said, adding he expected the slump to be “quicker and shallower than Dubai.”
The firm expects to double its income from rentals from 12 percent currently over the next two years. In January, Amos told Reuters he was “cautiously optimistic” that 2010 will be better than 2009 on land sales, and does not expect to take more provisions this year.
House prices in Abu Dhabi are expected to fall 10 percent in 2010 while rents are seen declining by 15 percent, according to a Reuters poll earlier in April.
Average house prices in Abu Dhabi have fallen some 50 percent since their peaks in 2008, according to UBS.
