00:00Joining us now is Katronnada Benghati, CEO and Managing Director of Benghati Holdings.
00:06Katronnada, really good to have you with us on the show.
00:08I know there's been a lot of talk about the impact this war could have on property prices,
00:13so we appreciate you coming on the show to talk about it.
00:16The first question I want to ask you is, how has buyers' behavior changed?
00:21Are they holding off decisions? Are they postponing decisions? What are you seeing?
00:27Well, Jumana, thank you for having me.
00:29One thing we need to remember is that we are only four weeks into this conflict,
00:34so let's talk about what we've seen during those four weeks.
00:37From an overall market view, we've seen just shy of 15,200 transactions in the market.
00:43If we zoom into Benghati's portfolio, and of course, we are prioritizing the projects that we have slated for completion
00:51this year.
00:52And if we look at those projects, those projects are on average about 90% sold.
00:57And in terms of price behavior or client behavior or market behavior, let's remember that behavior is always driven by
01:06liquidity,
01:07and there still is liquidity in the market.
01:10And even the inventory in terms of listings, a lot of the inventory that we are seeing in terms of
01:15listings is actually re-listings.
01:17In fact, over about 60% to 65% of it is actually re-listings.
01:22So in terms of market behavior, the behavior still seems relatively stable.
01:30And what are some of the scenarios that you're accounting for in terms of decline in collections,
01:38in terms of the average drop in selling prices?
01:42Can you walk us through some of the baseline scenarios that you're looking at here?
01:47Absolutely.
01:48So this is really important.
01:49In light of the circumstances, the first thing that we did actually as a company is a stress testing model.
01:55And the most important outcome of that stress testing model is liquidity.
02:01And that's, you know, in reference to the calls that you were referring to earlier,
02:05that is the main central theme of these calls is stress testing liquidity.
02:09And, you know, one of the things that we do when we build these models is test the sensitivity of
02:15our liquidity relative to price and price corrections.
02:20And we've actually modeled price corrections that go as far as 20% to 30% in terms of price
02:27drops,
02:28which is a very aggressive assumption.
02:29But the company remains relatively healthy from a liquidity standpoint.
02:34The other thing is when we talk about worst-case scenarios,
02:37one of the things that is out of our control is how long the conflict carries on for.
02:43And the most important factor in terms of modeling the sensitivity in terms of how long the conflict goes on
02:51for is
02:51an important factor that a lot of people are not talking about is the split between residents versus non-residents.
02:59And the reason this is important relative to how long the conflict goes on for is
03:04even if the demand from non-residents softens, the actual lion's share of our demand is from UAE residents.
03:14So that's an important factor in terms of demand dynamics.
03:17There's a larger weightage assigned to actual UAE residents as opposed to non-residents.
03:24Okay, that's an interesting perspective.
03:26I was going to ask you about whether you've seen a shift in nationalities.
03:29What about in terms of the divergence in demand between sort of mid-level and luxury?
03:36Are you seeing anything notable there?
03:40So this is an important point as well, actually.
03:43And I'm glad you're asking about this, Jumana,
03:45because one thing to remember is when we're talking about the nationality of buyers
03:51or the divergence between luxury versus non-luxury products,
03:57it's important to contextualize the portfolio of Bengati
04:00because traditionally there's been a lot of focus
04:04and I think we've attracted a lot of attention for our branded Uber luxury projects.
04:09But not to forget that over two-thirds of our portfolio
04:12is made up of mainstream and mid-luxury projects.
04:17And those types of projects are much more resilient
04:21and they're a lot less speculative.
04:23So that's why we haven't actually seen a large shift in terms of nationality
04:28or even a large shift in terms of sales
04:31because of that skew towards mainstream and mid-luxury product.
04:40But just on that point, how much of it is that underpinned by population growth?
04:46And I've been in the region for the last two years
04:49and I feel like every conversation we've had about property,
04:52we've talked about the influx of new people coming into the region.
04:56How much of the outlook is underpinned by population in the UAE continuing to grow?
05:03Yeah, absolutely.
05:05And in fact, pre-conflict, we were talking about that with our fixed income investors as well.
05:10We were talking about the 2040 Urban Master Plan, the D33 agenda.
05:14And I think one of the things that the UAE and the Dubai government has been very smart about
05:21is actually creating domestic demand, even pre-conflict.
05:26In fact, as early as 2024, when the CFO and I would go on these roadshows
05:32and speak to fixed income investors,
05:34we were actually, even as early as 2024, talking about latent demand
05:38and demand coming from within the UAE as opposed to just this influx of population
05:44or inward migration that's coming into the UAE.
05:46So we saw a lot of long-term tenants or people who have traditionally been tenants for so many years
05:53actually become homeowners.
05:55And this was actually encouraged by, for example, the First Time Home Buyers Program,
06:01which was launched by the DET in partnership with the Dubai Land Department.
06:06So I think a significant portion of that demand is actually underpinned domestically.
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