#UAE Property Giant Aldar Bets on Cheaper Homes, Private Credit - Bloomberg

UAE Property Giant Aldar Bets on Cheaper Homes, Private Credit - Bloomberg

For the last two decades, Abu Dhabi’s largest developer has focused largely on building upscale homes. But flush with cash after a lengthy boom, Aldar Properties PJSC is now setting its sights on affordable housing, lower cost schools and even a private credit fund.

Aldar — which is majority controlled by prominent Abu Dhabi entities — is adding homes at a wide range of prices from 500,000 dirhams to 3 millions dirhams ($136,000-$816,000) as it attempts to cater to different income groups, Chief Executive Talal Al Dhiyebi said in an interview. It’s also aiming to develop a rental portfolio of shared and single accommodations for people earning 5,000 to 20,000 dirhams.

Aldar will add more affordable schools as well as stores that cater to lower income families within its developments. Meanwhile, to help other builders who need funding, it’s planning to set up a Gulf fund that will offer private credit.

The capital of the United Arab Emirates, Abu Dhabi has in recent years attracted billionaires, hedge fund managers and crypto executives. The flood of expatriates that have landed here and in nearby Dubai have driven up the cost of living and left many workers financially stretched.

Aldar’s approach suggests that the emirate’s rulers are looking to tailor their city not just to the ultra rich, but also to the vast numbers of teachers, engineers, nurses and small businesses they need to compete as an international hub.

Al Dhiyebi says there’s huge pent-up demand for lower cost housing and education in this Gulf city that’s home to about $2 trillion in sovereign wealth and has been attracting expats from around the world.

Affordable housing is a “big area of focus for us in both the development and the investment segments, which we think is still significantly under-served,” Al Dhiyebi said in a recent interview. “We want to build it today because we know when a city grows, it grows across all affordability” levels, he said.

Abu Dhabi’s government has been diversifying its economy. It’s building a Disney theme-park, a Sphere entertainment arena, new museums as well as data centers that will create jobs and lure thousands of new residents over the next five years. They will all need places to live in.

At the same time, Aldar is adding luxury homes on Yas Island where it constructed a Ferrari theme park and an F1 racing track.

Al Dhiyebi said that an Aldar school attracted 1,000 students in its opening year in 2024, much higher than the 500 students the company expected to attract. That’s because the annual fees were around 30,000 dirhams, compared with 50,000 dirhams for many other international schools.

“Schools typically took us five to six years to break even from a PNL point of view, this is now broken even in less than two years,” said Faisal Falaknaz, group chief financial and sustainability officer.

Aldar, which partnered with wealth fund Mubadala and Ares Management on a $1 billion private credit fund in London in 2023, is planning to set up a similar unit to provide private credit for real estate projects in the Gulf region within the next 12 to 18 months, the CEO said.

Aldar wouldn’t necessarily need to commit its own money and a fund could be raised for that, he said. Al Dhiyebi has already been hearing from contractors who are struggling to secure credit facilities and bonds in the region.

Property prices have been climbing steadily in Abu Dhabi. Apartment prices rose 14% over the past year, according to the brokerage JLL. In July, Aldar said it sold a 400 million dirham mansion on the beach of Saadiyat Island, describing it as the most valuable home ever sold in the city.

Separately, a Four Seasons penthouse on Saadiyat Beach by another developer was sold for around 200 million dirhams fetching 14,000 dirhams per square foot, marking another record for Abu Dhabi on a per square basis, broker Sotheby’s International Realty said on Monday.

Earlier this year, it kicked off a development on Fahid Island that’s set to include around 6,000 luxury homes. In June, the company sold 3.5 billion dirhams worth of properties there. It’s also building homes, offices and hotels in Dubai and Ras Al Khaimah.

“People ask, are you in a bubble? We say, no,” the CEO said. “You can look at the quality of buyers, you can look at the default rates. Payment plans today are far more aggressive in favor of the developer than they were in the past.”