Endorsements from celebrities like Shah Rukh Khan no guarantee of success, experts warn

People tempted to invest in much hyped off-plan developments endorsed by celebrities should think back to the boom and bust years, experts have warned, when multi-billion dirham projects were named after international stars before being unceremoniously shelved.

Bollywood actor Shah Rukh Khan, centre, during the launch of Royal Estates in Dubai. Antonie Robertson / The National

DUBAI // Anyone planning to invest in real-estate projects should always do the necessary due diligence and bare in mind that celebrity endorsements are no substitute for examining the numbers carefully, according to experts.

“A celebrity being associated with a project will get interest initially, with so many projects coming up,” said Dr Cedwyn Fernandes, chief executive and professor of economics at the Institute of Management Technology, Dubai.

“I noticed a project today because of Shah Rukh [Khan’s] name, otherwise it would be just another project. But after that I would need to do due diligence and homework.”

Former India cricketer Sunil Gavaskar and Bollywood's Khan have recently signed up as brand ambassadors for separate residential projects in Dubai. Both feature on large billboards around the emirate.

Bollywood superstar Khan has attached his brand to UAE developments in the past, such as the Shah Rukh Khan Boulevard residential towers in Ras Al Khaimah, announced and subsequently shelved in 2008.

Mr Khan, who was in the UAE last week to launch the Dh2.3 billion Royal Estates in the Dubai Investments Park (DIP), blamed the project's failure on the global economic downturn.

“It was a time when it was very unfortunate that things all over the world went wrong, but I want to be part of the goodness and beauty of Dubai.”

He said the commitment of the developers was one reason he decided to promote a property project again.

“I have met a set of people who were already working on the Royal Estates and they have stuck by it and are still standing by it.”

While any project carries a certain amount of risk, the current level of increased regulation will help to mitigate such risks.

“There are more conditions in place to support investors now,” said Omar Mesmar, DIP general manager. “Government departments have put in more controls so there is very little speculation and no flipping. That gives a lot of strength and more confidence for investors.”

Flipping refers to the practice of buying and then quickly reselling a property for a profit.

With the proximity of DIP to the Expo 2020 site and to the Al Maktoum airport, Mr Mesmar was confident of projects in the area.

“The sentiment is positive,” he said. “For the DIP, in particular, we are exactly adjacent to this project and that’s why such projects near by will add value. I believe it will be a very successful project in the coming two years.”

Last year, the Government introduced new restrictions on flipping properties and the Central Bank also imposed stringent mortgage regulations to prevent the real-estate sector from overheating as it did in 2008.

Analysts said targeting the Asian community – such as with endorsements from South Asian film and sport stars – was a smart move, since Land Department data shows that Indians invested almost Dh6 billion to the market in the first quarter of the year.

Last year, Indians invested Dh18bn, with British citizens, Dh10bn, and Pakistanis, Dh8bn, among investors from 130 countries who bought property in the emirate.

“Dubai’s year-by-year analysis has shown that Asians, specially Indians and Pakistanis, are the biggest percentage of investors,” said Kalpesh Sampat, SPF Realty director. “Since the crash, the Dubai land department and Dubai government have organised the entire off-plan selling with proper rules and regulations, which has brought in security and confidence for people to start investing in off-plan projects again.

“Cricketing and Bollywood icons as ambassadors do help to convince potential buyers. By attaching their big names with the right projects they help massively in branding and marketing of the project.”