Emaar Properties - A STEEPLED Perspective

Emaar properties PJSC was established in 1997 and has been listed as a Joint stock company on the Dubai Financial market.  Emaar has helped in creating large scale master-planned communities as well as establishing competencies in the Hospitality & Leisure, Shopping Malls and Retail segment across the GCC region as well as in International markets. According to Marmore’s report on Emaar Properties, Emaar Properties has been behind the development of some Dubai’s iconic structure such as Downtown Dubai, Arabian ranches, Emirates living and the Dubai Marina. The Dubai Downtown project consists of the two iconic landmarks and tourist attractions in Dubai – the Burj Khalifa towers and The Dubai Mall.

STEEPLED Analysis

What is a STEEPLED Analysis?

STEEPLED analysis is an extension of the famous PEST analysis. While the PEST analysis covers the Political, Economic, Social and Technological factors the STEEPLED version adds the environmental, legal, ethical and demographical factors into consideration. This analysis basically gives an overview of the different macro-environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.
We analyse how Emaar Properties fare in the STEEPLED analysis

Social – Good
The social factors vary from country to country within the region. But in general, Middle East has higher economic growth rate, younger population, and higher propensity to splurge on luxuries. With the governments providing various subsidies and taxes being on the lower side, disposable incomes are higher which makes the restaurant and retail sectors the prime beneficiaries. UAE has a very interesting social mix whereby close to 90% of their workforce and over 80% of the population are expatriates. Close to 75% of the population lays between the ages of 15-64, a sweet spot for increased consumption and real estate spending as people start to marry and settle down in their life.

Technological – Good
Globally there are technological advances that are made in terms of building materials, passive/active solar energy cells; usage of biodegradable materials in construction etc., The Dubai Municipality has recently brought in the Green Building Regulations and Specifications which mandates the reduction in consumption of energy, water and minerals. The Unified Green Building code for GCC is expected to be drafted by this year and its implementation would be a great challenge as well as an opportunity for real estate players in the region. Implementing green standards would reduce the consumption of fossil fuels helping them to earn additional foreign exchange through sale of oil which would otherwise have been burned for power production.
 
Economics – Good
The GCC region collectively has one of the world’s largest oil reserves. The slump in the oil prices is expected to leave a lasting impact on the economies of the region. Many countries in the GCC region have had budgetary surplus over the years which would allow them to sustain their spending for some years to come. However, UAE has been working on diversifying its economy in the past ten years which has currently borne fruit. Oil contributes to 1/3rd of UAE’s GDP making it the most diversified country in the region. While the lower oil prices could have significant impact on revenues, UAE has enough buffers in the form of sovereign wealth funds and a relatively lower fiscal breakeven price compared to other major oil producers.

Environmental- Neutral
GCC countries suffer from acute shortage of land and water. Real estate companies in the UAE should make an effort to reduce the wastage of water during the construction. UAE does not have any natural water source and entirely depends on desalination plants (close to 80% of water is supplied by 25 desalination plants). Incorporating water and energy saving requirements in construction of new buildings would help in reducing the environmental impact of the projects.

Political- Good
The UAE is seen as a country with very less political risk in the Middle East. Although each state – Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah and Umm al Qaiwain – maintains a large degree of independence, the UAE is governed by a Supreme Council of rulers made up of the seven emirs, who appoint the prime minister and the cabinet and an Elected Federal assembly which plays a consultative role. UAE also has a reputation of being one of the transparent and business friendly regimes in the region.

Legal – Good
The Real Estate Regulatory Agency was established as a result of a law issued by the ruler of Dubai.  An arm of the Dubai Land Department, RERA is responsible for regulating the real estate sector, helping in formulating sector’s strategies, regulating the activities of companies that manage residential compounds, as well as the activities of real estate brokers and the Owners Associations.

Ethics – Good
Developers in UAE who have come out strong from the real estate crisis in 2008/09 are set to benefit from the maturity in the market. Investors have shown their preference for players who have had a positive track record of delivering projects on time.

Demographics – Good
Youthful, technologically aware demographics, with high per capita income are one of the major advantages of this region. Tourism is a major revenue generator in the region and as a result the benefit both hospitality and retail sectors.