BR Research: What is this project all about? What is its scope and scale?
Tarek Hamdy: The ‘Eighteen’ real-estate project is spread on about 2.7 million sq. yards of land. It will be a mixed-use residential project, offering a new lifestyle built around a very nice 18-hole golf course on a nice topography. The scenery is enjoyable as we have about 13 natural water reserves running through the project area. Between the two 9-holes, we will build a very nice clubhouse, which will serve both the inhabitants and the golfers.
Around the golf-course, we will build around 1,068 residential units – basically a mix of half-kanal, one-kanal, two-kanal, four-kanal and eight-kanal villas. Overlooking the golf-course from the North side, which is closer to the highway, we will build about 970 apartments, which will be low-rise buildings. The buffer in front of the highway will be occupied by thirteen sophisticated buildings in a modern business park that will provide smart and energy-efficient office space to both large and small businesses.
We will also have a 150-room boutique hotel, in the shape of a resort. For that, we have received interest from Best Western and Shangri-La. The project will also include a large mall having a retail space of 600,000 sq. feet, besides both onsite and underground parking. There will be large square in front of the mall, focusing on entertainment. There will be 24/7 on-site clinics for inhabitants as well as outpatients.
BRR: Where is the project site located and how accessible is it from Islamabad city center?
TH: The project site is about ten-minute drive from the New Islamabad International Airport, a distance which is beneficial for us in terms of businesses and tourists. It’s about twenty minutes away from downtown, as it is on the Kashmir Highway, which is luckily being rebuilt and revamped. Good news is that the CDA has enforced building of the interchanges on the Avenues 13, 16 and 17. Avenue 17 is just 1km drive away from us. So the access to the project site is now fully available from both sides.
BRR: What is the breakup of residential villas?
TH: About 70 percent of our product is tailored as the half-canal houses, for there is a big demand for middle-class housing in Pakistan. We are creating a lifestyle destination, not some niche resort for rich people. It’s a new district. The malls and the office space also will accommodate small businesses.
BRR: How much is the project worth and who all are sponsoring it?
TH: The overall value of this project is $2 billion. It will be completed in between five to six years, in three distinct phases.
The shareholders of ‘Eighteen’ are the same as the ones that previously launched Mobilink in Pakistan. This is a partnership between Ora Developers – which belongs to the telecom guru Naguib Sawiris and has real estate projects in Cyprus, Egypt, London and Grenada – and the local Saif Group. Majority project equity – about 60 percent – is with Ora Developers and the rest is with the Saif Group, which itself is in partnership with developers, Kohistan Builders. It’s a good mixture of experience.
BRR: So far, how much equity has been put into the project?
TH: The land that this project owns – about 4,839 kanals – is selling in the market today at between $60,000 and $70,000 per kanal. So the collective worth of the land that we own is about $300 million. We have this land’s clean title deeds as well as full possession. So you can say this landholding is a major part of our equity. The company formed for this project, ‘Elite Estates Private Limited’, owns the land.
BRR: So, to be clear, at this stage, you have some land on which you plan to build residential and commercial facilities. Now, if it’s a $2 billion project, with the land totaling roughly $300 million, where would the rest of the financing come from to develop the land
TH: We are injecting a lot of capex ourselves. We are financing phase one of the construction, which will start this year, with full equity of our own. This phase would include the building and construction of half of the villas, most of the apartments, components of the office buildings, parts of the mall and the square, and probably the hotel as well. This will be a very heavy phase as we will also be building the full golf course, which on its own is a $30-40 million investment. We recognise that we need to build the golf-course and the clubhouse early on to attract potential customers.
BRR: Still, there must be some bank financing involved?
TH: We are not counting on much financing from the banks. We haven’t tapped the banks for more than $20 million so far. We are quite solid financially as well as in terms of development. Also note that a part of capex may also come from the buyers, who will be offered a four-year payment plan. But still, the main infrastructure network – like the golf-course and the clubhouse – and services and amenities – like the main fiber optic network and all the utility installations – we will have to build ourselves.
BRR: In the development phase, where are you going to source the materials from?
TH: We intend to use 70 percent of materials from local sources. We intend to employ local contractors to do the job. We have very strong technical supervision to ensure quality control. We are going to be offering 15,000-20,000 jobs to the locals. To illustrate, Pakistan has some fantastic woodworks and carpenters, who we will be using for the wardrobes and kitchen appliances.
BRR: Let’s turn to competition. You are not selling plots; you’re only selling finished villas. That’s one differentiator from the rest of the prominent housing societies in Pakistan. But what else really separates you from the competition?
TH: We have looked at this market and it is very exciting. If you ask me, I think Pakistan is a luxury market. For instance, everyone in the Pakistani middle-class wants en-suite bathroom, which is quite a treat in the West. So we have developed our product to suit Pakistani aspirations.
As for the competition, the idea of a large developer coming in is not new in Pakistan. You have had some very successful local developers. And you have had some unsuccessful ones. We looked at the things that this market lacked. That’s where we are striving to be different. How? I will explain one by one.
First, a lot of the developers here can only offer you an allotment letter; they can’t offer you a title deed. We would be extending ownership to the owners. Not only will this make the potential buyers more comfortable, this will allow them, at a later stage, to use the property for other purposes like mortgage refinancing.
Second, if you look at other developers, there is no consistent design guideline or architectural vernacular. That’s because they allow you to build a home the way you want. So the result is that the facades of the houses may look very nice but you will not feel that you are in a destination because the colors and the skyline look so different. We have finalised a detailed master-plan with the help of WATG, UK, through which we have created very strong design guidelines that are all consistent and look very nice together.
Third, the access is convenient. When you move within most housing societies in Pakistan, the feel is that of a city atmosphere. You have those bumps and barriers. We are creating a gated, secure community that is very green and has walkways where children and the elderly can have leisure with safety. We are also looking at smart ways to build things up.
And the fourth one is real convenience. The number one reason why expat Pakistanis don’t invest in real-estate back home is that the facilities and amenities here are inconsistent and the properties are not safe. We are going to ensure proper facilities management, utilities’ supply, and safety & security of their properties.
BRR: Do you have a brand strategy to communicate your USP?
TH: ‘Eighteen’ is a local brand that is building up over time. Our brand strategy is developing. We have started with awareness. Now we are trying to bring in more of tactical message, which is about payment features – like the four-year payment plan and title ownership over time. Our brand recognition will take place through our colors. The ‘Eighteen’ brand has seven colors, each of which is an identifier of a sub-brand like the villas, the apartments, the hotel, the golf-course, the clubhouse, etc.
We did not want to go aggressive with our brand before access issue was resolved and ground-breaking was done. We are now in full control, as ground-breaking will take place in late March and construction will start in April.
BRR: You seem confident of internal capabilities to complete the project within time. What kind of challenges do you currently have, or foresee, in the external environment?
TH: We have already overcome two kinds of challenges. One is the planning consent, the so-called No Objection Certificate (NOC). We got the NOC from the RDA in November 2017, which was just a month before our formal launch. Second is land acquisition; it took us about six to seven years just to acquire the land, because you have to buy pockets of lands from individuals. Another challenge was the site access, but that issue has been resolved. Now the clients can access our site easily.
The main challenge that we have right now is the difficulties in paying our consultants abroad. The central bank has strict regulations on sending US dollars abroad. When we do a concept, we want to go for the best. So we contracted a firm like WATG to get the concept perfectly right. That contract would exceed $2 million. Now when we have to pay them, we must do so from our equity that we have brought in from abroad. But even if it’s a $100,000 contract, it takes two months for the SBP to give their approval.
This has to change and the regulator must allow a percentage of the equity to be spent in US dollars. If we bring in $300 million of equity, a good $10 million being spent on external consultants’ services is not too much.
Besides that, I think that the customs’ authorities are sometimes ridiculous in terms of the percentages they charge on imported goods. I wonder, for the goods that are not being produced in Pakistan, why are they charging so much customs duty?
BRR: Let’s turn to sales. How much of a role will you allow dealers and brokers to have in this project?
TH: We are very client-oriented. We don’t mind using real-estate brokers or dealers or agents. But these people will be there to help us sell more. And we are the ones controlling all the pricing. So we won’t be allowing them to buy the units and re-sell them. Agents that we work with will be few. They will work with us on a commission-basis and not on a bulk-deal basis. We will be selling directly to individuals, who can come in and reserve their homes through their CNICs. We are trying to build a community, so we won’t sell one individual more than two to three units.
BRR: Then, how will the pricing work?
TH: As for pricing, people who buy it first will find favourable pricing. As clusters go ahead and time elapses, they will still get the same payment plan, but at higher prices, like 2 percent more. But we want people to feel comfortable that they are not going to find six prices on the market.
BRR: How much sales have you recorded so far?
TH: We have secured reservations for about $100 million worth of properties so far. That’s almost 107 units of different sizes, with the price tag ranging from $300,000 per unit to a good $4 million per unit.
BRR: Are you open to expanding this project’s scale?
TH: Any decision to expand the project site will not be made until the end of this year. Yet, any decision to buy adjacent land will not divert us from the fact that we are building the entire infrastructure around the golf course. Adding too much land might stretch the project and it will not have the same proposition as the land facing the golf course.
For tactical reasons, we might end up adding 200-300 kanals on the North and South sides. But please note that we have made all our financial and technical calculations based on what we currently own.
BRR: Are there any plans to launch such mega projects in other cities?
TH: This is our flagship project. When they called me to offer this job, I was in London for twelve years, very well-placed and working for a large developer as a special projects director. I accepted the offer in less than ten seconds. The reason is that I like the Pakistani culture and I understand the market gaps. Besides, I have come here because the owners have told me to do one project of many.
We will think of Karachi; we’ll think of Lahore; we might even think of other towers here in downtown Islamabad. The owners have expressed interest to re-invest their profits into other projects here. So we are just waiting for the first year after our launch and then we might be announcing more projects.
Copyright Business Recorder, 2018