EMAAR Properties: Analysis of Real Estate Company

This market research study aims at presenting an overarching, yet in-depth, analysis of EMAAR Properties, a pioneer in the field of real estate in the Middle East. The report provides an overview of the company's operations, business model, competitors, SWOT analysis, and proposed strategies.

Table of Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................2
Competition.................................................................................................................................................3
Types of costs in EMAAR...........................................................................................................................3
Fixed Cost...............................................................................................................................................3
Variable Cost...........................................................................................................................................4
Competitors of EMAAR..............................................................................................................................4
Nakheel...................................................................................................................................................4
DAMAC..................................................................................................................................................4
SWOT Analysis.............................................................................................................................................5
PESTEL Analysis........................................................................................................................................6
Political factors........................................................................................................................................6
Economic factors.....................................................................................................................................6
Social factors...........................................................................................................................................7
Technological factors..............................................................................................................................7
Environmental factors..............................................................................................................................7
Legal factors............................................................................................................................................7
Demand curve.............................................................................................................................................8
Promotion/Marketing Affecting the Demand Curve................................................................................8
Supply Curve...............................................................................................................................................9
Promotion/Marketing Affecting the Supply curve...................................................................................9
...............................................................................................................................................................10
Price elasticity of EMAAR........................................................................................................................10
Luxury or Need.....................................................................................................................................11
Number of substitutes available.............................................................................................................11
Game theory..............................................................................................................................................11
Conclusion.................................................................................................................................................12
Proposed Strategy..................................................................................................................................12
References.................................................................................................................................................13

Executive Summary
EMAAR Properties (“EMAAR”) is a pioneer in the field of real estate in the Middle East. This
market research study aims at presenting an overarching, yet in-depth, analysis of the real estate
company.
Since its inception, EMAAR has proven itself capable of redefining the real estate sector in the
Middle East. The company has taken great strides over the past decade towards establishing
itself as a leader in the market via innovative strategies and business models, despite the
emergence of competition in recent years. As EMAAR looks to further strengthen its stronghold
in the real estate sector, it continues to face constant obstacles – especially in Egypt. The
dynamic, but volatile, political environment pervasive across the country has proven to be a
constant source of nuisance for EMAAR’s operations in Egypt, often disrupting the demand and
supply for the company’s products. To combat these issues, it would be in EMAAR’s best
interests to, for the short term, invest in promotions and advertisements, and for the long term,
seek to diversify its business.
The report is divided into nine sections. Sections 1-3 introduce EMAAR by providing a detailed
overview of the company’s operations, business model, and expenses. Section 4 lists and briefly
summarizes the existing competitors competing in the Egyptian real estate sector. This is
followed by sections 5-7, which present a thorough analysis of the various influential factors on
EMAAR’s operations in Egypt. Section 8 utilizes Game Theory to discuss the company’s
potential next steps. The report concludes by proposing certain strategies towards solidifying
EMAAR’s position as one of the leaders in real estate in the Middle East.
Introduction
EMAAR Properties (“EMAAR”) is a joint stock company headquartered in
the United Arab Emirates (UAE). It is primarily engaged in the real estate
market and provides management and property development services. A
leader in the UAE market, EMAAR is most famous for its involvement in
the construction of the Burj Khalifa – the tallest building in the world.
The firm is listed on the financial stock market of Dubai, with a valuation of approximately US$
9.7 billion. The company has sixty active companies across six diversified business segments
throughout North Africa, Middle East, North America, and Europe. These include subsidiaries in
countries such as Egypt, Jordan, Lebanon, Pakistan, India, Morocco, The United States, Saudi
Arabia, Syria, and Turkey.
The Unique Selling Proposition (USP) of EMAAR is innovation and ensuring that the highest
quality of product is used. This enables the company to create and generate efficient sales and
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marketing strategies as well as target its market segment. EMAAR has received a plethora of
awards owing to its accomplishments in successfully implementing unique projects.
Competition
Over the past few years, EMAAR has been redefining the mechanism of property development
that has allowed it to serve as a national champion company throughout UAE and Egypt. The
company has always relied on the vision of discovering new ideas and methods so that it can
outperform others, thereby set an example for others across the world. Furthermore, EMAAR
believes that their shareholders have stood by them when they were providing development and
property management services throughout international markets. In addition, the company’s
shareholders have offered it various opportunities towards an incredible transformation
(EMAAR, 2019). Nevertheless, this has fetched Emaar an opportunity to build Dubai as an
extraordinary place throughout UAE and Egypt, thereby attaining the title of one of the most
admired and valuable companies.
Currently, models of business development are being modified and cycles of innovation have
been diminishing. As a result, companies that fail to react to such alternations encounter
immense risks that can affect their overall long-term growth prospects. However, EMAAR views
such changes as a valuable opportunity to establish a new trend in the international market.
Therefore, it endeavors in establishing innovative strategies and models that can allow it to
diversify its business and grant it the position of one of the leading businesses in the entire world
(Cohen, 2016). Overall, the company has been taking advantage of every possible opportunity
that can grant it the benefit of attaining enormous amount of profits that can further be utilized in
the establishment of smart cities.
Types of costs in EMAAR
The fixed cost that has been used in EMAAR is as follows:
Fixed Cost
A fixed cost is an expense usually borne by businesses and corporations. Such an expense does
not depend on the volume of production. The higher the fixed cost, the more likely a firm is to
sell of its products – in this case, properties. The following are some of the fixed costs borne by
EMAAR –
 Interest on Loan: This defines as any amount being borrowed by bank for acquiring
materials, construction and repairing the property.
 Municipal taxes: This would likely occur where EMAAR constructs is properties in the
South-Asian, European or North American countries.
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 Repairs: Any subjective amount required repairing or renovating the property.
 Machinery: The equipment’s required to construct the buildings, shopping malls, and
much more.
Variable Cost
Variable cost is defined as the changes in the production output with respect to its volume. The
variable cost would increase as the production rises, and further decrease if the production is
down. In EMAAR, the variable costs incurred include Wages & Salaries; Utilities; and Materials
used in production.
Competitors of EMAAR
Nakheel
Nakheel is one of the leading contributors towards the realization of
Dubai’s vision. Aimed at establishing an effective class destination, the
company focuses on offering and enhancing a significant portfolio of
innovative projects throughout Dubai across segments like hospitality,
retail, residential, and leisure. Its developments collectively accumulate
more than 15,000 hectares of land and presently offer accommodation to
more than 270,000 people. These include The World, Palm Jumeirah, Jumeirah Heights,
Discovery Gardens, Dragon City, Nad Al Sheba, International City, etc.
Nakheel’s future and present portfolio of projects covers more than 17 million square feet of land
that can be offered for lease. Moreover, the company’s retail profile also comprises of various
centers of neighborhood communities (EMAAR, 2019). The company’s increasing hospitality
projects also cover fourteen serviced apartments or hotels that accommodates more than 5,200
rooms situated at distinct locations throughout Dubai.
DAMAC
DAMAC Properties has also made its mark in the field
of stylish living. It has affixed its place in the segment of
luxury development throughout the region. This can be
observed by the fact that it has offered 24,000 houses
with a portfolio of more than 40,000 residential units. Besides, this also comprises of 10,000
hotel rooms, hotel villas, and well serviced hotel apartments that are properly catered to by the
company’s wholly owned DAMAC Hotels and Resorts. The company has been focusing on its
never-ending commitments towards the provision of excellent services whether it is providing
assistance to a young couple to choose their perfect house or advising other investors in relation
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to properties that offer best ROI (return on investment). This is the major reason why the
company has been identified as a leading luxury developer throughout the Middle East region.
Since 2002, the company has offered more than 24,000 houses to its customers, with the
numbers increasing significantly on a daily basis. Overall, the company’s success can be
attributed to its never-ending efforts of retaining and selecting best employees, choosing perfect
development partners including designers, architects, and contractors. Hence, the company has
become the leading developer of luxury destination and bespoke houses over these years.
SWOT Analysis
Strengths:
 Business Model: - The company has
established a very powerful business
model that allows it to frame effectively
planned communities to global markets.
It has widely concentrated on
establishing a living lifestyle that is not
limited to offering of properly only
(EMAAR, 2019).
 Foreign diversification: - Emaar has
also concentrated on a wide expansion
mechanism that has allowed it to take
adequate measures to establish
innovative competencies and business
lines in segments like education, malls,
leisure, hospitality, and financial
services. Further, the company has
entered such education segment
through procurement of Raffles
Campus based in Singapore. It also has
a major agreement with Turner
International so that coordination of
projects can be undertaken effectively
(Namtalla, 2015).
Weakness:
 Quality and labor issues
Various non-profit organizations and labor
groups have raised allegations against the
company of offering petty wages and not
providing better treatment, thereby paving a
path for various industrial actions like work
disruption and property destruction on the part
of such laborers. As a result, the company has
witnessed deterioration of goodwill that is a
negative indicator.
 Strategy of funding and operations
The company’s funding strategy is focused on
restricting the funding by the parent
organization so that land procurement and
construction of initial infrastructure can be
financed. Moreover, the parent organization
funding is limited to only eight percent of its
expenses. Besides, further resources are raised
through debt financing, strategic sales, etc. As
a result, the company must pay higher rates of
interest and it can create issues for
enhancement of present as well as future
projects.
Opportunities:
 Revenue diversification and global
expansion
The company’s mission and vision are to
become an international solution for lifestyle
and for such purposes, it has numerous
Threats:
 International economic downturn
Expatriates have been the driving force behind
the progress of Dubai and these consist of more
than eighty percent of the entire population.
Freeze in credit markets and losses of jobs
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investments in segments like hospitals, resorts,
hotels, education, etc. Further, the company
also has undertaken outright procurements and
entered into numerous partnerships with
current organizations so that new markets can
be entered, thereby assisting in expansion of
overall operations and offerings (Zelenyuk,
2016).
 Consolidated opportunity in the local
markets
Emaar has ample power to enhance its current
prevalence in Dubai and this is feasible
through its 16.8 million square meters of land
that can be utilized for construction purposes.
Further, the company has also finished the
construction of key assets like Dubai Marina
Mall in Dubai that has a leasable area of
around 3.9 million square feet.
cannot offer enough capital needed to invest in
the city’s property market, thereby influencing
the company’s sales (Namtalla, 2015).
 Economic protectionism
Several countries pursue restrictions associated
with foreign investments like infrastructure.
Besides, local lobbies in the US have been
successful in derailing huge investments
depicting perceived or real issues of national
security. These limitations can deny Emaar to
carry out growth plans.
PESTEL Analysis
EMAAR functions in a very dynamic environment, wherein it is affected by various factors like
consumer behavior, technological changes, regulatory mechanisms, environmental factors, etc.
The following are some of the major influential factors to EMAAR’s operations –
Political factors
Statutory practices: EMAAR must supervise various statutory rules wherein it operates. Besides,
over these years, the company has witnessed significant increment in rules related to Finance and
Accounting due to the change in the Egyptian Revolution in 2011.
Significance of local authorities in the segment of finance and accounting: Local authorities
assist in setting business regulations and the company must be capable of supervising such
changes so that future issues can be avoided.
Economic factors
Rate of inflation: The prevalence of high liquidity in the market after the 2008 recession can
result in enhancement of inflation in the markets of Egypt.
Effectiveness of financial markets: EMAAR has adequate accessibility of vibrant financial
markets that can grant it maximum liquidity in the equity markets, thereby assisting in
international diversification.
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Social factors
Perception towards safety and health: With enhancement in liberalization, the perception
towards safety and health are also becoming neglectful. Therefore, the company must avoid such
perceptions as it can result in massive failure.
Hierarchy and societal norms: The company believes that the society forms a very integral part
of its successful venture. Therefore, it must endeavor to establish a domestic team that can assist
in understanding the attitude and societal norms in a better way, thereby playing a pivotal part in
serving maximum number of customers (Zelenyuk, 2016).
Technological factors
IPR and protection of patents: If the company has maximum safeguards and protection for its
intellectual property rights and other patents, then there are higher probabilities of more
participants to invest into development and research segments.
Technology maturity: Based on the information given in EMAAR: ‘The Center of Tomorrow’,
the technological sector is not yet at an enough stage and various participants are looking for
fresh methods and innovative strategies that can allow them to gain a maximum share of market.
Environmental factors
Renewable technology: This segment is also another major area for the company. Hence, it can
take advantage of such segment and moreover, various government authorities are also offering
subsidies when investment is being made in the renewable sector.
Management of wastes: Waste management throughout the city of Dubai specially for units
nearby to urban areas have gained importance and participants like EMAAR must monitor the
same in an effective way. Further, the government has also been coming up with tighter rules for
such segment.
Legal factors
Business laws and regulations: The process of business laws and regulations that are being
followed by the government are basically the norms that are consistent with the global
institutions like European Union (EU), World Trading Organization, etc.
Laws related to protection of data: Since the last decade, protection of data has come out as a
significant part of both issues associated with privacy and IPR (intellectual property rights).
Nonetheless, the company must consider whether the nation pursues a tight and strict
technological or legal methodology that can play a key role in protecting breaches of data.
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Demand curve
EMAAR Egypt faced a major issue relating to the country’s political environment. The presence
of anti-government problems, owing to improper management, coupled with the emergence of
armed rebellion severely affected the construction of several EMAAR properties. As a result, the
quantity of properties demanded plunged sharply.
The demand curve shifts when the quantity demanded of any particular product changes, at a
certain price and because of various factors affecting it, such as of consumers taste and
preferences, consumer’s income as well as change in the prices of other goods which were
expected to maintain the same price (Mankiw & Taylor, 2011).
In this situation, the demand curve changes for every change in price level. This is also known as
a shift in demand curve. The rightward shift or the leftward shift depends on the factors that
affect the demand curve. The current price of the good as well as the expected future price of the
goods affects the quantity demanded. The expected change in taste and preferences of the
consumers along with their income also affects the quantity demanded.
Figure 1 Shift In Demand
Promotion/Marketing Affecting the Demand Curve
In the scenario when marginal cost is unaffected by advertisement, the equilibrium price and
quantity, both rise for the property (the graph shows that there is only change in demand). The
shift in the demand curve shows that there is an increase in the number of properties demanded
by the people (Cohen, 2016). The firm which is supplying properties will increase the prices for
the increased demand, which means that the price will rise. But if it is observed that there is a
shift in both demand and supply curve, the equilibrium price will surely rise, but there is no
certainty about the change in quantity.
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The graph below will explain the scenario stated above:
Supply Curve
The supply curve of EMAAR underwent changes in Egypt. It can be seen that the quantity
supplied was affected owing to the pressure emerging from the political instability. Hence, in all
probability, it can be commented that the quantity supply affected the real estate.
The supply curve shows the change in quantity supplied due to a change in the price of the
goods, given all the other factors remain constant. If there is a change in other factors, leaving
price, then there will be a shift in supply curve. A shift in demand curve shows the change in
quantity demanded at every price whereas a shift in the supply curve shows a change in quantity
supplied at every price (Blanchard & Leigh, 2013).
In order to know about the various other factors that affect the supply, let us keep in mind certain
points that motivate a firm. A higher difference in revenues and cost, higher the profits motivate
a firm (Egert, 2015). The goods that are produced by a manufacturing company require certain
inputs such as labor, material and machinery (Mankiw & Taylor, 2011). If these costs of
production are minimized and the revenue per unit remains unchanged, then the profits earned by
the company would go up (Amadeo, 2018). If the profit earned per unit is maximized, then the
firm gets highly motivated and starts manufacturing higher outputs, which results in higher
profits. So, we can conclude that a fall in the cost of production increases the supply of goods.
This change in the quantity supplied is shown by a rightward shift in the supply curve (Mankiw,
Gregoryand & William, 2011).
Promotion/Marketing Affecting the Supply curve
The supply curve becomes the shape of the marginal curve of the firm. There will be a shift in
the supply curve if the marginal cost is affected by advertising activity. If the firm decides to
change the packaging of a product completely then the marginal cost would rise which would
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result in higher cost per unit. This would result in decrease of supply of the goods moving the
supply curve towards left (Cohen, 2016). For instance, there is a company that is engaged in
printing vinyl banner to display at an institute. The banner has a certain cost of production and
this cost does not depend on the fact that how many units are being sold. These costs do not
affect the marginal costs and so it will not shift the supply curve.
The following diagram shows how sales and promotions have an effect on the supply curve.
Figure 2: Impact on the Sales curve
Price elasticity of EMAAR
It is a known fact that housing supply is highly inelastic. Building a house takes a long time. The
housing widget of each widget is costlier. We cannot move the house when it is built.
(Exception: being mobile homes).
If there is an imbalance between demand (rapidly mutable) and supply (inflexible) it will have
certain implications. These include:
1. Consumers are more sensitive to market loop compared to the producers, therefore, there
might be a fall in rent suddenly. It is observed that home prices fall slowly when
compared to the rentals and the reason behind it is that those people who buy smaller
houses usually shift from big houses which they had to sell (Mankiw, 2010).
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2. A decrease in the household size is considered to be a positive indicator as it shows that
housing is a small part of the income.
3. The demand for houses is mainly concerned with availability at a price point.
Luxury or Need
The elasticity of housing increases with the increase in the price range. The reason behind it is
that luxury items usually have higher elasticity. If the amount of disposable income is high, then
an individual will be willing to pay more for what he actually wants.
Middle class families usually have budget constraints and concerns at lower price point. Thus,
even though the percentage price for two types of houses is same, they will consider it to be
significant.
Number of substitutes available
The elasticity of demand is affected by the number of substitutes available. When there are a
large number of homes available for sale and there are very few buyers available, then they get a
better deal. If the houses are not available at good prices, then there are many rental properties
available. This factor is also in relation to the range of prices of the homes. It is observed that
low price homes are easily available.
Game theory
The flow of some controversial political information in non-democracies can be studied with the
help of the combination that is formed by game theory and complex networks. This model helps
to know that whether in any given situation, the protest will happen or not by facilitating a
communication between the potential protestors. Going by the scenario of EMAAR in Egypt it
can be commented that political change was a major issue that led to major halt in the progress of
the company’s operations. The main finding based on the study carried out is that if there is a
small increase in the proportion of the population that has an access to the Internet connection,
there will be a huge difference. When it is seen that the support for the protest is increasing, then
there will be more chances of agents joining. The objective of this model is to demand an
explanation for the self-organized protest and its frequency that have majorly impacted the Arab
world.
The diagram projects a matrix where different strategies are present. It comprises of two sets;
that is one from EMAAR, and the other from the competitor. Other factors are kept untouched
and limited. The initial game, when both, EMAAR and the competitor, agree to spend money on
promotions and advertisements results in the modest payoff that is pattern (4,4).
This decision strategy is known as Nash Equilibrium that implies that an entity cannot enhance
the profit simply by altering the approach that involves independent actions.
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Another strategic move comprises when the competitor does not vouch for the advertisement, the
payoff will be decided by the matrix (6,6). It needs to be noted that in some scenario, absence of
advertisement might lead to reduction in expenses.
Strategy Donot Advertise
Advertise
Donot Advertise
EMAAR
Nakheel
5,-5
6,6
4,4
5,-5
Advertise
Proposed Strategy
EMAAR can be very effective if it launches a new FPO (follow-on public offer) that will help
the company to accelerate. This will provide a strong stability to the company and help in
capturing new business. In this scenario, it can be commented that EMAAR can reach a great
height if it is able to procure new business by engaging in promotion, construction and other
activities that provides a leading edge. In short, the modern scenario demands more of
promotional activities and this needs to be undertaken by the company so that it remains the
forerunner. New and inventive methods should be undertaken that will help the company to have
more of clients. This needs to be done in a unique manner because the client base matters. By the
overall business of EMAAR, it can be seen that it has strong fundamentals and has a strong grasp
on the overall business. The only thing that is required in the case of EMAAR is the framing of
new internal policies that will attract more clients and will help the business to flourish.
After growing its market in UAE and Egypt, EMAAR is thinking about investing enormously in
the Kingdom of Saudi Arabia, which focuses on developing new-age integrated townships that
would change the way people live. These townships would include a choice of homes for buyers,
from apartments to villas, row houses and vacant plots for customized construction. Shopping
complexes and landscaped gardens would be integrated with world-class medical care, schooling
and recreational facilities as a part of the SAUDI 2030 mega project. To attract current
generations, strip malls would be an ideal choice of development, as it would offer a variety of
entertainment and branded products, ultimately redefining suburban living. Besides real estate,
the firm is also keen on diversification, seeking to engage in the hospitality, retail and
infrastructure markets. This would result in EMAAR strengthening its hold as a leader in the
infrastructure industry.
Conclusion
After growing its market in UAE and Egypt, Emaar is investing enormously in Kingdom of
Saudi Arabia which focuses on developing new-age integrated townships that would change the
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way people live. These townships would include a choice of homes for buyers, from apartments
to villas, row houses and vacant plots for customized construction. Shopping complexes and
landscaped gardens would be integrated with world-class medical care, schooling and
recreational facilities as a part of SAUDI 2030 mega project. To attract the current generations,
Strip Malls would be an ideal choice of development as it would offer a variety of entertainment
and branded products, ultimately redefining suburban living. Besides real estate, it has also been
forayed to hospitality, retail and in infrastructure. So, definitely it would be the largest player in
the infrastructure industry which would promote foreign direct investments and tourism.
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References
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red-flag-for-egypt-s-bet-on-property-boom
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