Face to face: Rizwan Sajan, Danube Group
Danube founder to launch more schemes after first project sells out
“Have you seen my advertising?” Rizwan Sajan, founder of the Dubai-based Danube Group asks as we’re wrapping up our interview in his Jebel Ali office.
It’s just a couple of days before the company is due to host the sales launch of Dreamz By Dubai, which is his company’s first foray into the property market.
To be fair, the advertisements are hard to miss. Billboards promoting the development featuring former India cricketer Sunil Gavaskar have been plastered over hoardings right across the city.
Sajan clearly decided not to take any chances, even though he was confident of quickly selling all 171 of the townhouses the company was offering at the site.
“We are expecting a mad rush over there. Seriously, with the branding which we have done I will have to call the police over there,” he said, in a nod to some of the more lively off-plan property launches that Dubai experienced during the last property boom.
“We have about 2,000 people pre-registered for 171 lots,” he told CW.
“I’m expecting 1,000-plus people to come at least. I’m expecting to be sold out within the first couple of hours. The reason? Because in that area – the new Dubai area – there is no property at this particular price.”
His confidence was well-founded. In the following week, the development did indeed sell out within hours.
Sajan had been confident for two main reasons. The first was its location in the Al Furjan area of the city, where master developer Nakheel has been making improvements to infrastructure, and it has just awarded an $11.9mn contract for a new community mall.
Although he had previously bought and sold land as investments, Sajwan said the Al Furjan plot had only been acquired around three months ago after he had taken the decision to launch his new Danube Properties arm.
“We were very lucky to get this plot, because this is only one of a few left in that area. Why Al Furjan? Because it is ideally located in the new Dubai, close to Sheikh Zayed Road behind Ibn Battuta Mall.
“Location-wise, it’s one of the best locations one could have today because there are hardly any plots in that area left,” he said.
Indeed, a report published by consultancy Asteco last week highlighted Al Furjan as one of the areas for villas that has experienced the highest demand growth. Within the past 12 months, prices in the area have increased by 44% to $300 (AED1,100) per ft2.
“You could have plots in Dubailand and near Al Ain Road but not in this area. Close to Sheikh Zayed Road there is nothing.”
The other reason for his confidence is he believes they offer value for money. He is offering three- and four-bed townhouses ranging in price from $680,000-$940,000 (AED2.5mn-3.45mn).
He argues that the townhouses have been designed in a contemporary style, which will make them popular in an area that has, to date, been dominated by traditional villas.
“Plus, what we are doing is providing amenities in townhouses like you would get in a villa – like Italian marble, parquet flooring, jacuzzi in the bathroom, landscaped gardens, a modern kitchen and luxury fittings from Milano, Italy.
“As this is our first project, we thought we should offer a very good deal to our customers,” he said.
He argues that it is in a better position to do this than other developers because of its superior product sourcing capabilities. This is, after all, its core business.
Sajan recently threw a party to celebrate the 20th anniversary of the Danube business, which he set up in 1993 after he had fled Kuwait following the Iraqi invasion. He relocated to the UAE and asked his wife to give him six months to launch his own building materials business.
Sajan said Danube now has a turnover of $545mn (AED2bn) and sources 25,000 products from around the world – 35-40% of which come from China – for sale in 40 company-owned stores in the GCC, in Kenya and India.
“We started in 1993 with only two people. Now we are 2,000. We started with a small shop and now we are the number one building materials company.”
Over the past two years, he has expanded into Saudi Arabia, opening at sites in Jeddah, Riyadh and Dammam. He has also franchised the Danube brand in a number of locations in India and in a couple of African territories.
“We are looking at new markets,” he said, indicating a number of potential targets in East Africa.
“Not only Africa – we’re looking at Pakistan, Sri Lanka, Bangladesh and other markets. We’d do this mostly through franchise,” he said.
“That model we have found to be more successful. We are also successful but we have found it easier to handle,” he said. “When you have your own operations you require your people to go and there are a lot of considerations. Franchise is a better model for us.”
He said that Danube has worked closely with franchisees when setting up operations, teaching them how to run the business and how the company operates its own stores.
However, he added that it then gives franchisees plenty of space to operate in the manner which is most suited to their own markets.
“We work on a very small margin and allow them to make their own decisions,” he said.
Sajan said that Danube is currently growing at a rate of between 10-15% per year.
“Last year, we had 14% growth and this year we are expecting more or less the same,” he said.
Following the successful sell-out of Dreamz, Sajan has said that he intends to move onto site as quickly as possible, as well as sizing up other opportunities.
A contractor for Dreamz has yet to be appointed, but the project is in the tendering phase.
“I believe we should start awarding the contract by September. And by October we should start the first phase construction.
He said that the project will complete by the last quarter of 2016. “I’m expecting mid-2016 but I just want to manage (expectations).”
Sajan said that he had considered launching a property arm in 2006 as the last property boom entered its most active phase, but decided against taking it forward at that time because he felt the market was “really unstable”.
“It was too dangerous. I bought (land) for my own investment, but not as a developer. Now I feel that, after what happened, we have all learned a lesson. The government has put a lot of caps in so flipping can be stopped. Transfer prices have gone up from 2-4%. So whatever investment is happening now, the buyers are direct end users... mostly. That is a very healthy sign.”
He expects to launch his second project by the end of the year, but does not yet have a location firmed up.
“I want to do one at a time. Buy the plot, sell that and then look for another plot rather than buying a land bank. I would rather pay the market price. It’ll be a little more expensive but at least I know what I am doing.”
He also said that he would prefer to continue building townhouses or low-cost apartments as opposed to luxury villas, as he believes demand is greatest among lower-income or and middle-income buyers.
“I would like to make 1,000 studios and start selling them in the market for AED500,000 each,” he said.
He plans to concentrate on Dubai-based projects initially, because that is where his own team are based.
“In the future I may look somewhere else but right now my concentration is only on Dubai. But for marketing I will go into different markets.”
He believes that the property business could eventually rival the core building materials business in terms of revenues.
“The property side can become very big providing we do it very properly, like we have with this one. I expect the business will grow big.”