Why are there so many Real Estate Companies in Dubai? How do these companies work?

It's joke in Dubai, that every other person here is in Real Estate. And why shouldn't that be the case! More than 120,000 houses are sold here each year. With the world in a precarious state with all the wars, a lot of foreign nationals have deciding to invest here. It's an obvious boom. You can read about the WHY here:

But have you wondered if you really need those many brokering companies in here? Had heard someone recently say, "300 companies open each year and 350 close!" Well, let's look at some numbers and nuances when it comes to Real Estate Companies in Dubai.

Numbers of Real Estate Companies:

How many Real Estate Companies are there in Dubai?

Well, let's look at @LinkedIn numbers. There are a total of 7000! companies under the Real Estate tag. Here's where it gets interesting:

• 33% have just 1-10 employees with them!
• 40% have 11-50 employees.
• 12% with 51-200, 3.6% with 201-500, and 1.1% have 501-1000 employees.
• Only 90 companies (1.3%) have above 1000 employees and a lot of them aren't broking firms but builders like Emaar (1,000 Employees) and DAMAC Properties (1,800 employees)

How many People are working with Real Estate?

There are over 62,000 people working in Dubai in the Real Estate sector!

Interestingly, about 10% of the profiles aren't in English. 2,100 Russians, 1,300 French, 316 German and about 2,200 speak other languages like Arabic, Cantonese, Mandarin etc. (A lot of Chinese people aren't on LinkedIn).

How much do these companies earn?

Well builders in Dubai don't want to take the headache of lead sourcing, sales, and follow ups. Since it's a thriving market, they can choose to outsource the work. That's where these broking firms come in. Now companies pay anywhere from 2.5% to 7% as brokerage to these firms. Let's take it as 5% for our calculations. Now suppose a typical house is 1,000,000 AED, that'd come out to be 50,000 as brokerage for the sale.

Now since about 120,000 houses are sold every year (2023 data), that'd make the Total Addressable Market (TAM) to be 6,000 Billion AED ($1,634 Billion) in brokerage! Now let's take a typical setup of a company. An office space in a good area near JLT or Business Bay would cost about AED 650,000 per year.(at the center it'd be much more). Let's take the license and setup cost to be another 50k and maybe some other running costs as 70k AED. So 770k is the setup cost. Now, say, you have 8 employees, you are typically paying them 5k each as salary. That makes a yearly spent of AED 480k. Typically a company spends about 300k on Marketing and Lead Generation as well. So total upto 1.550 Million AED.

But you do pay all sales associates a piece of the pie as well. It ranges from 15% to 50% of the commision. Let's take 30% for 6 associates (you do need an HR and a receptionist!)

How much do Sales Associates Sell?

Well, any decent associate makes a sale a month on average. This is after they do 50-60 calls a day with multiple meetings. A good associate will average 2-3 sales a month. Now for the company assuming (18 sales a year per associate), this translates to a revenue of 5.4 Million AED! The commissions, shall amount to 1.62 Million AED. So by the end of first year, the owner pockets, 2.23 Million AED! That's more than most of us would think about earning in 10 years!!!

Is there a need for so many companies?

Well, since it's a very diverse crowd investing here, you have all kinds of companies. Indians prefer Indians selling to them, some Russians don't speak a lot of English so there are dedicated companies for Russian investors and so on. Moreover some companies choose to cater to the ticket price segments. Some will sell luxury properties only, while others like Square Yards UAE goes for scale and numbers.

So, why isn't everyone successful?

Let's see where it gets dirty! Now, if you remember, there are about 120k houses, while about 60k people working in the field. Not all would be in sales , so let's take that as 40k. This translates to each sales person making just 3 sales a year. For the sales person, he'd pocket, 105,000 AED for the year which isn't bad but for the company it might become detrimental! If all the employees gave such numbers, the owner ends up losing 650,000 AED! In fact on average, each salesperson has to make a little above 7 sales in the year for the owner to break even! The competition is high!

Another major factor is attrition. In fact majority of the company owners are ex-real estate employees who figured out that it was a lucrative field and why shouldn't they make 100% of the commision? A lot employees also take an impending sale, and move to a company with that leverage that'd give them 50% commision! This means that your star sales people would always look to leave!

Those who make money, make incredible amounts, but those who lose, lose incredible amounts too!