Can you buy a home with Dh10,000 salary in Dubai?

Published : 3 Dec 2017 ,      Source : Khaleej Times

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000 in the UAE.

After qualifying for a mortgage, you have to arrange the up-front payment and registration charges

There is a property for every income bracket in Dubai. The lower sales prices and attractive payment plans offered by developers in Dubai are resulting in more first-time home buyers hopping on the property bandwagon. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.

Even someone with a salary of Dh10,000 can climb onto the property ladder today, provided they can arrange for the up-front payment and registration charges.

home buying plan

“There are enough properties available to cater across a wide range of salary brackets. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity,” says Lynnette Abad, partner and head of Property Monitor/Cavendish Maxwell.

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000.

qouate

“The average one-bedroom apartment in new residential areas such as Dubai Silicon Oasis, Liwan, etc., is worth about Dh600,000 with a down payment of Dh150,000 and Dh30,000 in registration expenses. The buyer has to pay about Dh2,200 a month. This is easily achievable for most people earning Dh15000+ a month. This is much less than their rent,” suggests Sanjay Chimnani, managing director, Raine & Horne Dubai.

This year, the top areas for affordable properties to one with a monthly salary of Dh10,000 are (in order) International City, Jumeirah Village Circle (JVC), Al Furjan and Dubai South, estimates Property Monitor, a real estate intelligence platform.

For someone with a monthly salary of Dh15,000, the top areas with affordable properties are Dubai South, JVC, Business Bay and Dubai Sports City, the consultancy adds.

However, if you are looking to buy a villa or a townhouse, it would require a monthly salary of Dh25,000. “It will fetch you a townhouse in master-planned communities such as Town Square and Reem, Mira. Some of the other top areas in this salary bracket are Dubai Marina, Business Bay and The Lagoons,” informs Abad.

The challenge for most buyers is to arrange for the down payment plus registration costs of about 30 per cent. “If this was to be reduced to 15 per cent, we would see an even greater shift to ownership in this market,” suggests Chimnani.

However, the moot question is whether a person earning Dh10,000 a month is eligible for a mortgage. Provided the customer does not have any major loans (personal, credit card and auto), s/he would be eligible for a house loan of up to 25 years, subject to age criteria which restricts payments to the age of 65.

“People earning Dh10,000 and above can apply for a mortgage. The minimum salary requirement for a mortgage is Dh10,000. However, there are only a few banks who do mortgages for clients with Dh10,000 income and, therefore, options for these clients are limited. Majority of the banks require a minimum salary of Dh15,000 and above,” says Carol Monis, head of mortgages, MortgageMe.ae, a group of mortgage brokers in Dubai.

She adds that “most of our mortgage clients are end-users who fall into an income bracket of Dh20,000 to Dh25,000”.

Dhiren Gupta, managing director, 4C Mortgage Consultancy, adds in the same vein that the average income group buying property in Dubai is around Dh25,000 to Dh35,000 and they are primarily buying mid-priced property worth of Dh1.5 million to Dh2 million.

“With such income, they can easily qualify for a loan, barring they do not have pre-existing liabilities and age limitation is not a barrier. Moreover, banks are more comfortable to funding such profiles wherein the property will be utilised for self-use,” concludes Gupta.

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Related News

All you need to know about registering for VAT?

Dubai: According to the executive regulations on value added tax (VAT) published last week, the mandatory registration threshold is Dh375,000.

This means that anyone with a turnover of Dh375,000 or more is required to register their business for VAT, the Federal Tax Authority (FTA) and Ministry of Finance (MoF) said in the recently release regulations.

The voluntary registration threshold is Dh187,500, with companies of that size or above able to register for VAT too.
The failure of a taxable person or business to submit a registration application within the time frame specified in the tax law is liable for a Dh20,000 fine.

Also according to the executive regulations, companies are able to register as a tax group.

Through this mechanism, more than one company can register for VAT as a group, under a single common control, according to Dubai-based Jitendra Consulting Group. They say that the main benefit of group registration is to simplify the procedures and save costs through consolidated tax returns and a single VAT registration.

The group’s tax returns and payments are carried out by the member who acts as a representative of the group, the FTA has stated. All the members are jointly liable, however.

VAT rules VAT rules

VAT rules

 

6 Dec 2017

UAE’s Federal Tax Authority announces full VAT supplies list

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax).

These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT in education

UAE vat in all sectors

 

6 Dec 2017

Can you buy a home with Dh10,000 salary in Dubai?

There is a property for every income bracket in Dubai. The lower sales prices and attractive payment plans offered by developers in Dubai are resulting in more first-time home buyers hopping on the property bandwagon. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.

Even someone with a salary of Dh10,000 can climb onto the property ladder today, provided they can arrange for the up-front payment and registration charges.

home buying plan

“There are enough properties available to cater across a wide range of salary brackets. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity,” says Lynnette Abad, partner and head of Property Monitor/Cavendish Maxwell.

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000.

qouate

“The average one-bedroom apartment in new residential areas such as Dubai Silicon Oasis, Liwan, etc., is worth about Dh600,000 with a down payment of Dh150,000 and Dh30,000 in registration expenses. The buyer has to pay about Dh2,200 a month. This is easily achievable for most people earning Dh15000+ a month. This is much less than their rent,” suggests Sanjay Chimnani, managing director, Raine & Horne Dubai.

This year, the top areas for affordable properties to one with a monthly salary of Dh10,000 are (in order) International City, Jumeirah Village Circle (JVC), Al Furjan and Dubai South, estimates Property Monitor, a real estate intelligence platform.

For someone with a monthly salary of Dh15,000, the top areas with affordable properties are Dubai South, JVC, Business Bay and Dubai Sports City, the consultancy adds.

However, if you are looking to buy a villa or a townhouse, it would require a monthly salary of Dh25,000. “It will fetch you a townhouse in master-planned communities such as Town Square and Reem, Mira. Some of the other top areas in this salary bracket are Dubai Marina, Business Bay and The Lagoons,” informs Abad.

The challenge for most buyers is to arrange for the down payment plus registration costs of about 30 per cent. “If this was to be reduced to 15 per cent, we would see an even greater shift to ownership in this market,” suggests Chimnani.

However, the moot question is whether a person earning Dh10,000 a month is eligible for a mortgage. Provided the customer does not have any major loans (personal, credit card and auto), s/he would be eligible for a house loan of up to 25 years, subject to age criteria which restricts payments to the age of 65.

“People earning Dh10,000 and above can apply for a mortgage. The minimum salary requirement for a mortgage is Dh10,000. However, there are only a few banks who do mortgages for clients with Dh10,000 income and, therefore, options for these clients are limited. Majority of the banks require a minimum salary of Dh15,000 and above,” says Carol Monis, head of mortgages, MortgageMe.ae, a group of mortgage brokers in Dubai.

She adds that “most of our mortgage clients are end-users who fall into an income bracket of Dh20,000 to Dh25,000”.

Dhiren Gupta, managing director, 4C Mortgage Consultancy, adds in the same vein that the average income group buying property in Dubai is around Dh25,000 to Dh35,000 and they are primarily buying mid-priced property worth of Dh1.5 million to Dh2 million.

“With such income, they can easily qualify for a loan, barring they do not have pre-existing liabilities and age limitation is not a barrier. Moreover, banks are more comfortable to funding such profiles wherein the property will be utilised for self-use,” concludes Gupta.

3 Dec 2017

Sheikh Mohammed signs VAT Executive Regulation

The Ministry of Finance, MoF, Monday announced that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT.

The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Commenting on the milestone, Younis Haji Al Khoori, Undersecretary of MoF, said, “Today’s signing of the Executive Regulation by the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, marks a new milestone in the application of an efficient taxation system in line with best international standards with the ultimate objective of improving performance of primary sectors and enhancing social welfare.”

The first title of the Regulation includes the definitions of terms used, while the second title deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

The third title of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration.

Meanwhile, the fourth title looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, title five discusses profit margins and explains how to calculate VAT based on profit margins, while title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from value added tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

The eighth title of the Regulation then addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In title nine, the Executive Regulation address Designated Zones in article (51), while title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. The following titles 11 includes article (55) on apportioning input tax and article (56) on adjusting input tax after recovery, whereas title 12 addresses the capital asset scheme in article (57) and adjustments within the capital asset scheme in article (58).

Title 13 of the Regulation includes article (59) on tax invoices, article (60) on tax credit notes and article (61) on fractions of the fils. Then in title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before title 15 goes into recovery of excess tax in article (65). Adding to that, title 16 tackles recovery in other cases and includes article (66) on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

The 17th title includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article (72) on keeping records of supplies made. Meanwhile, the 18th and final titles discusses closing provisions.

28 Nov 2017

Real estate risk allocation and insurance tips for Dubai property investors

As an owner-occupier, your primary risk would be damage or destruction to your real estate asset. As such your insurance will likely be for a lump sum amount or full replacement or reinstatement of the asset. Owner-occupiers may also insure for business interruption to cover them for lost income when the premises becomes unusable due to damage. This may be important, for example, where the owner has a mortgage and would have difficulty in meeting the repayments.

An owner would generally take out insurance for third-party risks: for example, where a visitor suffers an injury caused by or occurring on the real estate asset. In transferring ownership of a real estate asset, the buyer and seller will need to establish a clear date for the risk of damage or destruction of the real estate asset to pass. The logical time for the passing of this risk is the date the title is transferred. Generally the seller will cancel the insurance on this date and the buyer will implement its own insurance. There may also need to be a clear position in the sale-and-purchase contract as to what may happen should damage occur between the date of contract and the date of title transfer.

Where a real estate asset is tenanted, the lease contract may expressly address the allocation of risk between the landlord and the tenant and require the parties to obtain insurance.

It is not possible to map out all of the possible variations in such arrangements, however, the following represents a fairly typical allocation of risk and insurance in a retail/office unit context.

Fit-out period
The landlord will generally require the tenant to have or procure contractors all risk insurance as well as worker’s compensation insurance. The landlord will generally require that the landlord is named co-insured and specify the level of cover the tenant must obtain or procure.

Typically the insurance undertaken during the fit-out period will be obtained by the contractor completing the fit-out. The tenant will need to ensure that this insurance is obtained and contains the relevant covenants sought by the landlord under the lease agreement.

Damage and destruction of the building
The landlord would normally obtain all risk building insurance but may require the tenant to insure for damage arising out of the tenant’s or occupiers’ negligence. This could result in double insurance and an alternative approach would be for the tenant to be named as a beneficiary of the landlord’s insurance. This is, however, not the practice in the region.

Landlords will typically exclude liability for any other types of losses sustained by the tenant — for example, economic losses when the tenant is unable to operate from the premises. Were the landlord to face a claim by the tenant in these circumstances, it may be that the landlord’s third-party liability insurance provides a measure of protection to the landlord. As the landlord will exclude liability for the same, the tenant may wish to obtain insurance for business interruption.

As the landlord will be required to cease charging rent for the period the premises cannot be occupied, the landlord may wish to obtain loss of income insurance.

It is common in the context of a commercial office or retail unit lease that the tenant would meet the landlord’s insurance costs as part of the service charges charged to the tenant.

Tenant contents damage
The landlord may specifically require the tenant to insure the tenant’s contents, fixtures and fittings and to name the landlord as co-insured and/or require the insurer to provide a waiver of its right to sue the landlord in any case where the landlord’s negligence causes the damage.

Third-party injury
Third-party injury claims are civil wrongs and accordingly the party claiming damage or injury does not need to establish a relationship in contract with the party causing the harm. Generally, such claims will arise due to the party in control of the area not taking due care to ensure that areas are kept safe.

Accordingly a landlord may wish to insure for any injuries that may occur to third parties in common areas of a building. As the tenant may also exercise control over their premises, the tenant should also take out insurance for such claims.

Other third-party risks
Other third-party risks arise in multi-tenanted buildings in that if a tenant damages the building, this may cause losses to other tenants. The landlord can seek to exclude liability for such claims in the contract with each tenant, but would very likely also cover such risks through their own third-party policies.

As a tenant will have no ability to mitigate the possibility of claims from other tenants in contract, the tenant would need to obtain its own third-party policy to cover such risks.

Developers, investors
Throughout the construction of a project, the contractors will undertake the necessary insurances. As the developer will be paying progress payments throughout the construction, it is in the developer’s interest to ensure that this insurance is in place and that the developer is also co-insured under the contractor’s policy. It is also important to specify clearly under the construction contract when the developer shall be required to accept risk for the property following completion of construction and, therefore, should obtain its own insurance.

If the project involves off-plan sales, then, once the development is completed, the developer will start handing over the units to the investors. Generally, in the case of jointly owned (strata) property, insuring the building, including the usual fitting and fixtures in the units, would be the responsibility of the owners’ association (OA). In cases where there is not a legally established OA, then it may be possible for the developer to obtain a policy that nonetheless recognises the interests of investors as beneficiaries of the policy.

The developer or the OA will need to consider the type of policies they obtain. Generally speaking, such insurance will cover, and may be required to cover by law, full replacement and reinstatement, third-party liabilities and could cover loss of income or alternative accommodation costs.

Investors would typically insure their own contents and improvements. Investors may also wish to obtain loss of rent insurance or insurance covering the cost of alternative accommodation if this is not taken out by the developer or OA.

Summary
This is a general discussion of the risks in real estate and how they may be addressed in contract and through appropriate insurance. As each property and transaction is different, the risks and insurance solutions may differ so it is important that each transaction is assessed on a case-by-case basis. Accordingly, this article should not be treated as advice as to what is required in any particular set of circumstances.

Reporting by Jeremy Scott and Justin Carroll

Jeremy Scott is partner, real estate, and Justin Carroll is senior associate, insurance, at Al Tamimi & Company. The views expressed here are their own.

29 Nov 2017

Not renewing tenancy contract in Dubai? 3 months notice a must

I have been staying in a rented apartment for around last 12 months and do not want to renew the tenancy for another year. I have notified the landlord by giving one month notice of my intention but the landlord insists a notice period of three months. Further, the landlord is asking me to paint the apartment. Surely that comes under wear and tear of living in a rented apartment? What does the law say exactly as I have been reading contradictory reports?

Pursuant to your questions, we assume that the rented apartment where you are staying is situated in the Emirate of Dubai. All tenancy contracts in the emirate fall under the ambit of the Law no. 26 of 2007, Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai. Subsequently some provisions of the said law have been amended by Law No. 33 of 2008.

Article 14 of the law states: “Where either of the two parties to the lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than ninety days before the date on which the lease contract expires, unless otherwise agreed by the parties.”

Moreover, Article 14 of amendment states: “Unless otherwise agreed by the parties, if either party to the Tenancy Contract wishes to amend any of its terms in accordance with Article 13 of this law, that party must notify the other party of same no less than ninety days prior to the date on which the tenancy contract expires.”

In the event your tenancy contract states that you need to provide a three months of notice period not to renew the tenancy contract, then Article 14 of Law No. 33 of 2008 should be applicable.

You are bound to return the apartment to the landlord in the same condition as provided by the landlord at the time of renting it to you, other than normal wear and tear. This is in accordance with Article 21 of Law No. 26 of 2006 regulating the Relationship between Landlords and Tenants in the Emirate of Dubai, which states: “Upon the expiry of the term of the Lease Contract, the tenant must surrender possession of the real property to the landlord in the same condition in which the tenant received it at the time of entering into the lease contract except for ordinary wear and tear or for damage due to reasons beyond the tenant’s control. In the event of a dispute between the two parties, the matter must be referred to the Tribunal to issue an award in this regard.”

Know the law

Where either of the two parties to a lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than 90 days before the date on which the lease contract expires, unless otherwise agreed by the parties.

 

17 Oct 2017

Making cities an extension of a workplace

This year’s Knight Frank “Global Cities Report” looked at what constitutes best-in-class across all aspects of property: encompassing building design, occupier trends, place making, investment strategy, and mix of uses. However, success in real estate is often achieved by being on the ground where economic growth is strong.
This raises the question — what does a best-in-class city economy look like?

The answer is increasingly about having the culture, diversity, lifestyle, and opportunities necessary to draw talented people. While employers can provide a micro-location — the workplace — where these factors are brought together, they must similarly exist at a city-level to generate the critical mass of skilled and creative people necessary to feed growth for successful firms.

This creates a self-fulfilling prophesy in which the most talented people want to live there. In turn, the best employers locate there to tap that high value workforce.

The cities that genuinely achieve this are those in the lead ranking of global cities. Locations are losing businesses, jobs or investment to places that are.

In today’s world the cities that are successfully earning the right to be called a global city are those at the forefront of the tech and creative revolution, which is demonstrated by economic growth. Since 2007, the GDP of Berlin, with its thriving technology scene, has expanded by 19 per cent, whereas in finance-oriented Frankfurt output grew by just 5.9 per cent, according to Oxford Economics.

Similarly, in the US we see tech- and R&D-oriented cities like San Francisco (17.6 per cent GDP growth since 2007) and Boston (15.2 per cent) outperforming locations like Chicago (6.2 per cent) and Miami (6.6 per cent). However, note the level of growth seen since 2007 in cities such as London (21.2 per cent) and New York City (11.5 per cent).
Both were finance-led cities back in 2007, and which successfully re-weighted towards technology and the creative industries in the last decade. This arguably makes adaptability a greater strength than a large tech exposure. If the technology sector moves into a downturn, we will find out whether Berlin can quickly reposition itself towards the next rising industry.

To a property investor London and New York City offer the security of having proved themselves capable of reinvention. The picture that we see emerging is that the ability of a city to draw in fast rising tech and creative firms is defined by whether the location has the ability to become a city that offers inspiration and contains as much wow-factor as a Google office. If it hopes to draw firms of that calibre …

A city must provide the ambitious with a stage they want to succeed on, because impressing bohemian friends in the cool part of town is more important than pleasing any boss.

So logically the next and final question is simple, is Dubai a global super city?

It certainly does not lack the wow-factor, but Dubai is much more than the eye-catching commercial and residential real estate it is renowned for. In recent years, Dubai has excelled in attracting young international talent, but mainly to the worlds of finance and business.

Now Dubai is seeking to diversify by offering the kind of culture, work hubs and social spaces that see a new generation of creative pioneers who consider working and living in Dubai in the way they might in London, Berlin or New York. These amenities come in many package, from its offering of world-class lifestyle in locations such as DIFC, to the cultural offerings at Dubai Opera and Dubai Design District, The Dubai World Cup and Art Dubai.
All of this is underpinned by a population that contains over 200 nationalities.

These factors combined with Dubai’s strategic location and business credentials continue to produce results. The population has grown by over 85 per cent over the last decade and GDP by 29.5 per cent over the same time period. Dubai is certainly seen as a global city by both businesses and by employees.

To maintain its global city status, Dubai must continue to be an open, diverse and vibrant place to live and work to ensure it continues to excel as of one the world’s super cities. At a time where many developed economies are facing populist pressure to step back from globalisation, Dubai’s openness to it will mean it will continue to be a regional hub for global business.

25 Nov 2017

V Nagarajan: Norms for inherited property while filing the income tax return

I have inherited ancestral property in Bengaluru after the demise of my parents. My sister and myself are the legal heirs. Will it be included as deemed rent in the IT return? How do we treat this while submitting IT returns? Please clarify. Anantkumar, Dubai.

When you own two or more properties and if any property remains vacant and not self-occupied by the owner, it will be treated as a ‘deemed let out’ property. A notional rent will be computed for income-tax purposes. Since you and your sister are the owners of the inherited property, you will have to declare the notional rent in respect of the ancestral property in the proportion of your respective share in the property.

I sold a flat bought in Hyderabad in 2016 and reinvested in another flat this year. However, the possession of this flat is expected only in 2018 now as the developer has delayed the project. Do I have a remedy against the developer now? Hidayath, Sharjah
It is not clear whether the project has been registered under RERA or whether the project comes outside the purview of RERA depending on the regulation in Hyderabad. However, RERA insists that in case of delay in completion of projects, liability imposed on the developers to pay interest to the consumer is a direct remedy available to you.

The Act now obliges the developer to park 70 per cent of the project funds in a dedicated bank account. This will ensure that developers are not able to invest in numerous new projects with the proceeds of the booking money diverted to another project. Additionally you have a remedy through consumer redressal forum to seek compensation for deficiency in service which includes delay in giving possession of the house.

Our parents died without leaving a Will for the property. While the legal heirs are now disputing over the property, one or two beneficiaries are willing to relinquish their rights. What is the legal remedy to resolve this issue? Ramesh Krishnan, Dubai.

If your parents died intestate and there is a dispute between the legal heirs, they will have to approach a competent court, having jurisdiction to settle the dispute. As you mentioned, if some beneficiaries are willing to relinquish their rights to a property in favour of another legal heir, banks and other debtors may insist on NOC from other legal heirs.

Notes:

Logistics sector

The government has given infrastructure status to logistics sector. This is likely to attract more funding at competitive rates. The government has been working for quite some time to attract more investments into transport and logistics as part of efforts to bolster infrastructure development in the country.

The infrastructure status would help the logistics sector get credit at competitive rates and long a long-term basis, as rising logistics cost impacts global competitiveness of exporters. Logistics costs of exports are very high in India and so Indian goods are less competitive.

The definition of logistics includes industrial parks, warehouses, cold storages and transportation. Logistics infrastructure includes multimodal logistics park comprising inland container depot (ICD) with minimum investment of Rs 50 crore and minimum area of 10 acre.

A cold chain facility having an investment of at least Rs 15 crore as well as warehousing facility with investment of minimum Rs 25 crore would come under logistics infrastructure, in both cases, the facilities should also have a minimum required area.

Chennai is one of the top 10 global automotive clusters, and this sector continues to attract interest across various automotive ancillary units. The automobile and engineering companies already established in the state are actively deploying their expansion plans. Large original equipment manufacturers (OEMs) are insisting that their suppliers set up their facilities near their plants to enable them to maintain inventory support for just-in-time production.
For the current financial year, TN has a potential investments pipeline of over INR 19,033 crore. Since 2015, the state has seen over 46 investment proposals with cumulative investments of approx. INR 37,381 crore.

The resulting employment commitment from industries is over 30,000 direct jobs in the semi-skilled / skilled and unskilled categories. Apart from industrial activities, the logistics and warehousing industry is extremely upbeat in the state and keeping the market active.

24 Nov 2017

Pay as you throw waste fee for all Dubai buildings soon

Dubai: A new ‘pay as you throw’ waste fee is coming soon for Dubai buildings, Gulf News has learnt.
All buildings in Dubai will soon be charged for waste collection as Dubai Municipality has decided to outsource the service to the private sector, Gulf News can reveal.

A senior municipality official confirmed that the civic body would stop the waste collection and transportation service to all buildings that are considered as business — whether commercial or residential — after it announces the proposed tipping fee.

commets

Then, the building owners or property management companies will have to make a contract with private companies approved by the municipality for collecting and transporting waste to landfills, said Abdul Majeed Abdul Aziz Al Saifaie, director of the Waste Management Department.

A circular in this regard was sent out to building managements in different parts of Dubai recently, a copy of which was obtained by Gulf News. The circular says the building management companies have to make the waste collection contract with the private service provider before December 1.

The circular also contains the list of companies that have successfully complied with the requirements of the department and thus permitted to carry out their respective waste management-related activities like garbage collection, transportation and disposal services.

However, Al Saifaie said the plan has now been deferred.

“We were supposed to announce the tipping fee first, which we are going to do soon. We will give a maximum of six months for the buildings to make the contract after the tipping fee is announced,” he said.

The official did not provide the date of announcing the tipping fee which will be levied per tonne of garbage from the companies transporting waste to landfills. However, he estimated the move to outsource the waste collection service by the middle of next year. The move is part of the emirate’s integrated waste management plan and strategy to reduce the generation of waste going to its landfills.

However, the plan to introduce the new fee even for residential buildings is a deviation from the earlier plan the municipality had.

Earlier, the municipality had stated that the tipping fee will be levied for waste sent to landfills from private companies, that is, commercial services.

However, Al Saifaie said all buildings renting out spaces — whether for commercial or residential purposes — will be considered as a private business.

“Till now, we have been serving all these buildings for free,” he pointed out.

Dubai has so far been charging only Dh10 gate fee per trip from trucks dumping waste at its landfills.

“The owners [of the buildings from where waste is collected] have not been paying anything. How can we serve them for free when there is a tipping fee [on companies transporting waste]? That is why once the tipping fee will be introduced, these buildings are going to be charged [for waste generation],” he explained.

Zone-wise implementation

He said the municipality will implement the waste collection fee zone wise.
“We have not finished the zoning yet. But we will try to work it out with companies to choose three companies for each zone and offer the best price. We will make sure that they [building managements] won’t be ripped off by any of these companies [collecting waste].”

Currently, different waste management companies are charging different rates for their services. However, the official said the municipality will issue guidelines on the charges.

Asked if building managements will pass on the new fee to the tenants who are already paying five per cent of their rent as housing fee that is meant for civic services, Al Saifaie said:

“That is between the building management and the tenants. What people need to understand is that your waste generates pollution. So, we need to collect and treat the waste. The municipality continues to provide waste treatment services for free for all.”

The civic body has also been investing on recycling services and is working on a waste-to-energy plant which is expected to start operation in the second quarter of 2020.

All these new moves are part of the efforts to reduce the per capita solid waste generation per day to 900 gram as per the UAE’s National Agenda 2021. Dubai has also set its target to reduce 75 per cent of rubbish going to landfills by 2021.

The UAE has one of the highest waste generation rates, with each person in the country estimated to produce from 1.9kg to 2.5kg of waste everyday.

Dubai generates 8,200 tonnes of municipal solid waste per day, according to figures released in 2016.

Highlights
Dubai will announce a tipping fee soon.

This will be imposed on companies collecting and transporting waste to landfills.
Dubai Municipality will then completely stop waste collection and transporting services and outsource it to private sector.

All Dubai buildings — commercial and residential — will then have to make contracts with private firms for waste collection.

This will be done zone wise, with three companies assigned to provide services in each zone.
Buildings will be charged for waste collection by these companies which they will use to offset the tipping fee that they will have to pay to the municipality.

It is not known if the building managements will pass on the burden to occupants who generate waste.

26 Nov 2017

Latest News


Dubai realty gets Chinese boost

UAE real estate, particularly that of Dubai, is steadily gaining interest among savvy Chinese investors. This extends to the brick-and-mortar assets, contracting industry as well as construction finance.

The Chinese were the fourth most active real estate investors in Dubai in the first half of 2017, according to consultancy Knight Frank.

A recent Knight Frank report rated the UAE as having the third highest potential among 67 countries to make use of China’s ‘Belt and Road Initiative’. It identified the UAE as the ‘Hub of the Belt’.

Chinese contractors have a big presence among the top 5 contractors in the UAE. They also provide construction finance. The China State Construction and Engineering Corporation ranks as the second biggest contractor in the UAE with projects worth of almost $3 million. It has 16 ongoing projects.

Knight Frank estimates that of the total contract value of future projects in the UAE (both projects in the design and execution phase from 2018-20), Chinese firms account for 6 per cent of total value of contracts. In Dubai, this is slightly higher at 7 per cent and from 2019 to 2020, it is expected to increase from 7 to 9 per cent.

“There are an increasing number of Chinese buyers, however, it’s important to note that we’re not going from a low figure of Chinese investors to a high one. There has always been considerable Chinese investment in Dubai real estate, it’s just that at the moment, we’re seeing more coming in than in recent times. If you walk in to any of the major developers’ sales centres, you will see a large amount of Chinese buyers looking to make a purchase,” says Lewis Allsopp, CEO, Allsopp & Allsopp.

“In the past two decades, more than 8,200 real estate transactions have been completed by Chinese buyers and roughly one quarter of those transactions took place in the past two years alone, bringing in more than Dh3 billion,” explains Jason Hyes, founder and CEO, LuxuryProperty.com.

PH Real Estate estimates that it has seen a 10 to 15 per cent increase in the number of Chinese buyers approaching it.

“Chinese buyers accounted for about 3 per cent of all sales in Dubai in 2017. They are taking a lot of construction projects and bringing in a lot of financing. They are bringing in a lot of their own people as well for these projects. As those people tend to get familiar with Dubai, they will want to buy homes for themselves. That trend is bound to grow,” forecasts Craig Plumb, head of research, JLL Mena.

Identifying China as a sizeable target market, most Dubai developers have tie-ups with Chinese brokerages in mainland China and they spend a lot on marketing on roadshows and exhibitions in China.

“The larger developers in tune with the needs of their Chinese clients. Most developers now have either a Mandarin-speaking department or at least have a marketing strategy geared towards attracting new Chinese buyers,” reckons Myles Bush, CEO, PH Real Estate.

“Emaar, for example, has launched a Chinese website to market its properties and is offering special incentives to investors for Chinese New Year. The government has also launched its own initiatives to promote Dubai properties to the Chinese market. Last year, the Dubai Land Department entered into an agreement with the marketing company behind one of China’s leading property portals to promote Dubai property in China,” Hayes points out.

There are Chinese agents stationed in Dubai as well. “We work closely with a few Chinese agents, one of whom had 20 clients fly in from China last week and who between them bought 13 properties in one week,” says Allsopp.

With Dubai being one of the few global cities where investors can enjoy 8 to 10 per cent on their real estate returns, the Chinese are likely to continue to inwardly invest into the market.

“Chinese buyers are smart investors and they are very aware that it’s a buyers market. The majority of Chinese clients we deal with are looking for high-performing rental returns rather than trophy assets. An example of this over the past week was when my team brought in a commercial floor for sale in DIFC that is currently returning a 9.5 per cent yield; within one day of advertising, seven Chinese buyers called us for more information,” observes Bush.

“Chinese buyers are savvy and know what they want. In the majority of cases, they are investors and cash rich. They are looking in affordable projects, good deals, up-and-coming areas, top locations, etc. Generally, they are looking to tick the boxes of most investors, something that is popular, will provide a good return, should see good capital appreciation and offer a good exit strategy if needed,” concludes Allsopp.

12 Feb 2018

Secondary, off-plan property sales in Dubai continue at a good clip

Contrary to the notion that sales in Dubai have slowed down in January at a noteable rate, a breakdown and analysis of total number of transactions in the secondary and off-plan market shows otherwise.

Ready villas/townhouses
According to Property Monitor data, the number of transactions in the secondary market has remained consistent between October 2017 to January 2018. For villas/townhouses in the secondary market, the total number of transactions between October to December ranged from 167 to 182 transactions per month, whereas in January, 164 transactions were recorded.

For villas/townhouses in the secondary market, the top three areas generating sales volume in October 2017 were Emirates Living with 37 transactions, Arabian Ranches with 27 and Reem (Mira) with 17. Emirates Living witnessed an increase to 50 secondary market transfers while Arabian Ranches remained relatively constant with 25 transactions in January. Between November 2017 and January 2018, Emirates Living and Arabian Ranches remained the top two generating sales volume areas in the secondary market.

In January 2018, the average sales price according to the Property Monitor Index for a villa/townhouse in Emirates Living was Dh2,387,083 for a three-bedroom, Dh3,164,500 for a four-bedroom and Dh6,785,714 for a five-bedroom. While in Arabian Ranches, the average sales price for a villa/townhouse was Dh3,212,986 for a three-bedroom, Dh3,475,000 for a four-bedroom and Dh4,293,648 for a five-bedroom.

Between November 2017 and January 2018, Town Square overtook Reem (Mira) as the top area in sales volume due to its attractive middle-range price point. In January 2018, the average sales price for a villa/townhouse in Town Square was Dh1,612,083 for a three-bedroom and Dh1,913,750 for a four-bedroom.

Secondary market – apartments
Apartments in the secondary market were transacting at a much higher rate with the total number of transactions between October to December ranged from 782 to 851 transactions per month, whereas in January, 706 transactions were recorded.

For apartments, the top three areas generating sales volume in January 2018 were Dubai Marina with 134 transactions, Dubai Sports City with 103 and International City with 92. From October to January, Dubai Marina and International City remained among the top three areas with relatively consistent numbers of transactions.

In January 2018, the average sales price according to the Property Monitor Index for an apartment in Dubai Marina was Dh1,309,216 for a studio, Dh1,243,892 for a one-bedroom and Dh1,931,498 for a two-bedroom.

In Dubai Sports City, the average sales price for an apartment was Dh614,464 for a studio, Dh801,172 for a one-bedroom and Dh1,252,020 for a two-bedroom.

Interestingly, Dubai Sports City almost doubled its sales volume from 54 transfers in October to 103 transfers in January due to an influx of new supply. One of the handovers towards the end of 2017 was Elite Sports Residence 10, which generated 50 secondary transferred sales in January 2018.

Off-plan market
In the off-plan market, there was a slight decrease in the total sales volume for villas/townhouses between October 2017 and January 2018. However, the sales volume for apartments are in line with and consistent with that of 2017. Between October and January, the sales volume for apartments in the off-plan market have ranged from 1,650 to 1,850, except for December which had 2,169 transactions.

The top three areas generating off-plan sales volume for apartments in January 2018 were Meydan One with 227 off-plan transactions, Business Bay with 186 and Jumeirah Village Circle with 168. All 227 off-plan transactions for Meydan One are in Azizi Riviera, with the first phase scheduled for completion in Q1 of 2019.

In January 2018, the average sales price according to the Property Monitor Index for an apartment in Azizi Riviera is Dh519,267 for a studio, Dh855,329 for a one-bedroom and Dh1,396,306 for a two-bedroom.

Similar to Azizi Riviera, the average sales price for an apartment in Jumeirah Village Circle is Dh622,354 for a studio, Dh823,098 for a one-bedroom and Dh1,459,577 for a two-bedroom.

Priced slightly higher, the average sales price for an apartment in Business Bay is Dh1,176,036 for a studio, Dh1,339,818 for a one-bedroom and Dh1,595,294 for a two-bedroom.

13 Feb 2018

Wacky Jenga-style resort that cost £1 BILLION to build set to open its doors in Dubai

  • Work on the Royal Atlantis Resort & Residences started more than four years ago
  • The resort complex will feature a mix of living areas, with apartments starting at a whopping £1.4million
  • There will also be 795 guest rooms with on-site amenities including spas, gyms and fine dining restaurants

Catering to the super-rich, a £1 billion resort complex is set to open its doors on the shores of the Arabian Sea in Dubai.
Work on the Royal Atlantis Resort & Residences started more than four years ago and it is expected to welcome guests in late 2019.
Renderings of the finished design show it looking almost like a game of Jenga, with giant blocks of apartments precariously stacked 43-storeys high.

Work on the Royal Atlantis Resort & Residences started more than four years ago and it set to welcome guests in late 2019

The resort complex will feature a mix of living areas, with apartments starting at a whopping £1.4million

The resort complex will feature a mix of contemporary-styled living areas, with apartments starting at a whopping £1.4million.

But if your bank account doesn’t quite cater to this, perhaps you can just visit the exclusive Royal Atlantis as a guest.

As well as the 231 residences, many of which are decked out with private pools and terraces, there will be 795 luxury guest rooms and suites.

On-site amenities will include a 24-hour concierge, spas, gyms, fine dining restaurants and a private beach club.

There will also be around 90 swimming pools dotted around, so visitors can keep their cool in the desert heat.

The Royal Atlantis Residences’ director, Mr Issam Galadari, said: ‘Taking resort living to new luxury heights, The Royal Atlantis Resort & Residences responds to a calling from a highly discerning, affluent, international demographic seeking a new class of offering, currently not available elsewhere in Dubai’

On-site amenities will include a 24-hour concierge, so you can get cocktails delivered to your private pool

The Royal Atlantis, which is located next to the famed Atlantis resort on Dubai’s man-made palm-shaped island, was masterminded as part of the emirate’s drive to build up tourism revenue.

Commenting on the project, Royal Atlantis’ global sales agent, Maria Morris, said: ‘Our international clientele is outwardly seeking this next level of luxury in the prime market in Dubai, and The Royal Atlantis Residences delivers on all these requirements.

‘Now is the optimum time for property buyers to purchase in Dubai. Stabilizing property prices, infrastructure developments such as the expansion of the Dubai Metro, excellent investment opportunities and a buoyant economy are proving to be a dynamic combination.’

The Royal Atlantis, which is located next to the famed Atlantis resort on Dubai’s man-made palm-shaped island, was masterminded as part of the emirate’s drive to build up tourism revenue

The Royal Atlantis Residences will have views of the Arabian Sea or across the waters of The Palm towards the Dubai city skyline

The Royal Atlantis Residences’ director, Mr Issam Galadari, echoed Morris’ words, adding: ‘Taking resort living to new luxury heights, The Royal Atlantis Resort & Residences responds to a calling from a highly discerning, affluent, international demographic seeking a new class of offering, currently not available elsewhere in Dubai.

‘The high-net-worth global citizen is ready for the new dawn of residential experience. The development will become the new landmark of Dubai and will support the “Dubai Plan 2021” in positioning the city as one of the best places to live in the world.’

The Royal Atlantis Residences will have views of the Arabian Sea or across the waters of The Palm towards the Dubai city skyline.

Dubai, part of the United Arab Emirates, has positioned itself as a destination for over-the-top luxury and opulence.

Tourism is a major source of revenue for the emirate, which is preparing to host the World Expo in 2020.

Dubai, part of the United Arab Emirates, has positioned itself as a destination for over-the-top luxury and opulence. Tourism is a major source of revenue for the emirate, which is preparing to host the World Expo in 2020

 

 

20 Feb 2018

When property prices are no more in square feet

A new trend is becoming evident in the Dubai property market. Investors are placing more emphasis on the entry price of properties as opposed to the price per square foot. For instance, units that were previously advertised below Dh1,000 per sqft are being promoted as below Dh500,000 for studios or Dh1 million for one-beds to encourage takeup.

“Yes, the entry price is becoming important for investors as a key psychological factor in a market increasingly driven by price and competing marketing announcements from a few developers engaged in a race to bottom. Price per square foot is becoming relatively less important because it requires deeper market understanding. Sadly, this is encouraging more of the lower quality stock to be built and marketed at very low price points, where the size and quality are sometimes compromised to achieve that low entry point,” says David Godchaux, CEO of Core Savills, a consultancy.

Developers are also using this strategy to attract end-users to consider purchasing properties that are coming in at a certain price point.

“There is a huge demand from the end-user for affordable housing, whether it is already complete or still under construction. By advertising at under Dh500,000 or Dh1 million, it is appealing to the end-user to show what you can get for under a certain milestone in price,” remarks Lewis Allsopp, CEO of Allsopp & Allsopp.

Some developers use this strategy to hide the fact that their units are relatively smaller in size or that they have a very limited number of units available at that price point.

“Quoting a total price rather than price per square foot is a mere marketing strategy targeting first-time home buyers with one figure, giving a clearer picture on affordability without the need to have to calculate the size multiplied by price per square foot. Savvy investors, however, look beyond the total price or price per square foot. They look for great locations, reasonable unit size, practical layouts, decent quality, fair payment plans, affordable down payments, easy mortgage payments, well-connected infrastructure, good amenities/facilities, the developer’s track record, and, of course, the potential total returns on the investment,” informs Haider Tuaima, head of real estate research at ValuStrat.

This marketing strategy is mostly being used for smaller ticket sizes and targeted at first-time home buyers who were previously unable to afford a property in Dubai due to higher prices per unit. When it comes to mid to upscale properties, investors are still driven by the price per sqft, insist market observers.

“The main reason is that the investor is looking at the final price as his tenant is going to pay him as per 1-bedroom, 2-bedroom, etc., in a specific location. There is no incentive for the buyer to buy a big unit and pay more but get a similar rent. This trend has advanced since 2012, when the market started moving towards more compact units with smart floor plans from some key developers, which allow the unit to be efficient with minimum space lost in corridors and other wasted areas,” observes Sanjay Chimnani, managing director, Raine & Horne Dubai.

Short-term investors are also attracted to the entry price point rather than the cost per sqft. Such marketing strategies are also mostly offered in outer areas.

“Short-term investors are drawn to the outer areas, and yields combined with entry price points are the key factors considered. Indeed, there may be a few good deals to be made, but today’s high return is not always a good indicator of tomorrow’s yields – on the back of the very important supply expected to be handed over in the next 3 years at low price points. In outer areas, this short-term strategy may result in a few disappointed buyers, finding themselves locked between falling rents and decreasing capital values, making their investment illiquid in the mid term,” warns Godchaux.

Meanwhile, long-term investors are more careful, selecting developers with a strong reputation and track record, especially when buying off-plan. Location is also one of the most important factors for these investors, as long-term capital value is more likely to be retained in central areas.
“Investors are intelligent and savvy people. They are not going to purchase something at a low yield or something with little chance of capital appreciation or something with a questionable exit strategy just because it is advertised at being under a certain price point,” explains Allsopp.

Discerning investors in Dubai consider location, occupancy in the area, price, size, net yields and payment plans before making a purchase.

“Investors are becoming more conscious of the full life-cycle of their investment [rather than just counting on the short-term capital appreciation followed by the exit]. Hence, they are more interested in the quality of construction, amenities, connectivity, service charges, rental potential and exit options,” says Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons Mena.

Meanwhile, sellers are adapting to the new market reality. “This is evident through the constant downward correction in prices to meet the current demand and investors’ price sensitivity,” adds Vucinic.

20 Feb 2018

Dubai’s real estate slump to last until 2020 – S&P

DUBAI, Feb 20 (Reuters) – Dubai real estate prices could decline by 10 to 15 percent over the next two years, hit by new supply, geopolitical risks and the introduction of value added-tax in the United Arab Emirates, S&P Global Ratings’ analysts said on Tuesday.

The grim prediction came after Dubai residential prices fell by 5 to 10 percent in 2017, and the weak property market has also begun to hurt earnings of the emirate’s top property developers.

“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” said Sapna Jagtiani, S&P’s credit analyst for corporate and real estate ratings.

Rents in both residential and retail markets will also remain under pressure, and hotels will be forced to accept lower average daily room rates to maintain occupancy levels, S&P said.

Property prices are down 16-19 percent from their peaks of over three years ago, National Bank of Kuwait said in a report this month.

Jagtiani told reporters that Dubai’s Expo 2020 could benefit the property market due to the potential increase in economic activity on the back of the expected arrival of 25 million visitors and new residents.

However, she cautioned the property sector ran the risk of “overbuild,” the effects of which would be felt beyond 2020.

Property consultancy Jones Lang LaSalle’s 2017 report suggested the planned residential supply in Dubai would grow by 9 percent in 2018 and 7 percent in 2019.

Emaar Properties reported a 16 percent slide in fourth-quarter net profit on Feb. 14, as costs weighted on Dubai’s largest listed developer.

It followed results from fellow developer DAMAC Properties that showed a nearly 47 percent plunge in net profit for the quarter.

Jagtiani said geopolitical risks, such as the standoff between Qatar and some of its powerful Gulf neighbours, would weigh on sentiment, even though Qatari investors were not among the top 10 property investors in Dubai.

Qatar, a tiny but rich Gulf Arab state, has been isolated over the past seven months by trade and travel sanctions imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt over accusations – denied by Doha – that it supports terrorism and regional rival Iran.

Jagtiani said the real estate downturn would not be as severe as that experienced in 2009 due to prudence among lenders and tighter regulation of the property market.

House prices in Dubai in 2009-2010 plunged more than 50 percent from their peaks, pushing Dubai close to a debt default.

20 Feb 2018

Dubai property market ‘continues to show growth’, says Damac’s Sajwani

Dubai’s property market continues to show signs of growth with increasing demand returning to the market, according to Damac Properties chairman.

The luxury developer reported a net profit of $762 million in its yearly profits announced earlier today (a drop of 25% on last year), which was based on sales worth $2 billion (AED7.5bn) during the year.

Hussain Sajwani, chairman of Damac Properties, said the company’s yearly figures showed there was a “returning demand” in the property market in the emirate, adding that the company’s outlook was positive in the medium to long term.

“Dubai’s property market continues to show growth as increasing demand returns to the market, and this is reflected in our booked sales,” said Sajwani.

“Our medium to long term outlook remains positive, with continued local demand as well and stronger interest by international investors. Our major projects in Dubai including Damac Hills, Akoya Oxygen and Aykon City continue to appeal to expats and international investors alike, while our diverse product portfolio continues to attract a wide variety of buyers for our off-plan and ready properties,” he added.

Damac delivered 20,236 units as of December 31 2017, which it described as “a milestone for the company and the industry as a whole.”

Construction continues on over 6,500 villas, apartments at Akoya Oxygen, along with its golf course, and community infrastructure. The community’s amenities, including wellbeing facilities, retail outlets, as well as hospitality, food and beverage elements, are in various stages of planning and progress.

14 Feb 2018

What oil price reverse means for Dubai property

As we close the books on Q4 of 2017 and reflect on the most recent quarter, it’s clear that major political events to the west, and OPEC oil controls limiting production, have put pressure on and spooked the UAE market.

Why is it the market continued to weaken in 2017? The macroeconomics largely come down to world affairs and basic supply and demand.

The UAE’s economic growth will accelerate to 4.4 per cent in 2018 as global growth is expected to pick up steam from 2017, driven by rebound in investment, manufacturing and trade, as reported by the International Monetary Fund (IMF).

Raising its outlook for the global economy, the IMF said in its latest World Economic Outlook that growth is expected to rise to 3.6 per cent in 2018, with: “buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way.

Stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply, have helped commodity prices recover from their troughs in early 2016.”

For the seven oil-exporting countries in the Middle East, the UAE’s real GDP growth forecast, which was cut to 1.5 per cent in 2017 is seen accelerating to 4.4 per cent in 2018, at the fastest pace in the region as expected by the IMF.

The UAE economy has been resilient to the impact of the slump in oil prices as it has benefited from a relatively diversified economy, excellent infrastructure, political stability and ample foreign assets, according to the Institute of International Finance.

The introduction of VAT five percent has further diversified revenues. The move is expected to bring higher inflation, at least temporarily. The short-term impact will be offset by the long-term benefit VAT will bring to the regional economies.

There is an urgent requirement to diversify government revenues. VAT is a measure that will allow more stability, given that the outlook for crude prices remains volatile.

Although oil plays a major role in the availability of credit from banks and many buyers in Dubai real estate are from countries solely dependent on oil, the impact is not that significant. From a buyers perspective, this is a good time to buy real estate in Dubai, because of lower prices and steady yield, and once the oil price starts to rebound this will only further a positive impact on the real estate price.

19 Feb 2018

Dubai property price declines set to continue until 2020

A three-year downturn in Dubai’s property market will likely continue until at least 2020, Standard & Poor’s said Tuesday, citing low oil prices, the introduction of VAT and a Gulf diplomatic crisis.

A glut of housing units and weak demand were also key reasons for the decline, the credit ratings agency said in a report.

The emirate’s real estate sector has been on the slide since 2014, when crude oil prices crashed, dealing a harsh blow to many Gulf investors.

Home prices dropped more than 15 percent between then and mid-2017.The downward trajectory continued through to the end of last year, the S&P report said, with prices of residential units falling a further five to ten percent.

It said the introduction of a value added tax and a prolonged crisis between Qatar and its Gulf neighbours, including the United Arab Emirates, had also put pressure on real estate prices.

S&P called the downturn a “correction” but said the sector may start to bounce back when Dubai hosts a six-month World’s Fair in 2020.

“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” it said, adding that rents will likely follow the same trend.

Dubai’s Expo 2020 is expected to attract up to 300,000 visitors a day when it opens in October 2020.

Experts have predicted it will also create around 300,000 new jobs and attract new residents in the emirate city, which currently has a population of three million.

Dubai is slated to spend some $7 billion (5.7 billion euros) on infrastructure projects and $2.9 billion on the expansion of the metro route to the exhibition between now and event’s inauguration.

The property sector and related activities form around 13 percent of Dubai’s gross domestic product, which was $108 billion at the end of 2017.

Between December 2015 and June 2017, overseas investors put up as much as $41 billion to purchase property in the emirate, said the Dubai Land Department in August.

20 Feb 2018

Off-plan sales dominate Abu Dhabi housing market

Off-plan sales are driving the Abu Dhabi housing market as the emirate continues to feel the effects of diminished government spending and sluggish economic growth, according to a new report from international property company Chestertons MENA.

According to the report, off-plan sales activity remained high in Q4, with developers rolling out a number of incentives to attract buyers. The secondary housing market, however, saw a 2 percent decline in apartment sales prices and a 1 percent decline in villa prices, with GCC and Arab nationals dominating both markets.

“Throughout 2017, we saw the effects of a number of economic factors, including low oil prices, reduced government spending, increased stock in the secondary market, a rising cost-of-living and redundancies,” said Ivana Gazivoda Vucinic, head of consulting and research at Chesterstons MENA.

On average, apartment sale prices fell by 2 percent during Q4, with certain areas experiencing a more pronounced decline, such as Reem Island (5 percent), which Chestertons said is a reflection of waning demand.

Saadiyat Island, on the other hand, registered the steepest increase – 5 percent – in apartment sales prices for a second consecutive quarter, partly fuelled by the inauguration of the Louvre Abu Dhabi. On average, prices increased rom AED 1,362 per square-foot to AED 1,430 per square foot on the island, while Reem Island prices fell from AED 1,362 per square foot to AED 1,242 per square foot.

Additionally, average villa sales prices fell by 1 percent in Q4, with the Al Raha Beach Area falling more than 4 percent from AED 1,348 per square foot to AED 1,282 per square foot.

Abu Dhabi’s rental market demonstrated similar trends, with an overall decline in rental prices of 2 percent and 1 percent for apartments and villas, respectively, echoing results from the previous quarter.

“Shrinking company housing allowances and excess rental supply exerted downward pressure on rental prices in the emirate,” Vucinic added. “Vacancies in some locations, such as Al Raha Beach, surged over the quarter as residents downsized their accommodation or moved to more affordable communities.”

Downsizing, however, was positive news for investors, with rents for one-bedroom apartments in Al Khalidiya rising by 7 percent.

In the villa market, Al Reef and Reem Island emerged as preferred locations. In Al Reef, for example, a typical three-bedroom villa could be rented for AED 120,000 a year, with preferential leasing terms for some residents.

In overall terms, the mix of high-performing areas changed in Q4, with Saadiyat Island being the best performing area in the apartment segment and Khalifa City showing positive trends in the villa segment. Mohammed bin Zayed City registered the highest increase in villa rents at almost 2 percent, bucking the wider market trend.

“There is a likelihood of positive economic sentiment emerging from ADNOC’s recent announcement to invest $109 billion in growth strategies,” Vucinic noted. “This plan could be the turning point for Abu Dhabi’s real estate sector as it could generate new jobs and therefore renewed demand for residential property.”

8 Feb 2018

Middle East real estate tycoon warns of a rocky 2019 — but says region is ripe for investment

  • A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions.
  • “If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday.
  • However, he cautioned investors to remain prudent in the longer term.

A mogul of Middle East real estate development, Emaar Properties Chairman Mohamed Alabbar, said that the region has plenty of development opportunities despite geopolitical tensions and difficulties doing business.

“If I was to look at the region as a whole I’m still positive,” he told CNBC at the Milken Institute MENA Summit in Abu Dhabi on Wednesday. However, he cautioned investors to remain prudent in the longer term.

“I’m just careful about what is 2019. I’m just worried that we’ve been having a good time for too long. So I just hope that 2019 goes well … So make sure your balance sheet and debt level is at reasonable levels, so if there’s a shake-up you can handle it,” he said.

Emaar Properties is a real estate development company based in the United Arab Emirates (UAE) which is responsible for developments throughout the country and the wider Middle East, and beyond.

Founded in 1997, Emaar Properties has been responsible for much of the development of Dubai, including the iconic Burj Khalifa, the world’s tallest building. It has also developed shopping malls and residential property, hotels and entertainment venues.

The real estate firm also has developments further afield such as in India and Pakistan.

Speaking to CNBC, Alabbar summarized the outlook for the company.

“My view is that Morocco is doing well for us, I would say Egypt is doing extremely well; Saudi Arabia with all the restructuring going on, it’s going to be a fabulous opportunity. In the UAE, we still expect to grow 20 percent on an annual basis,” he said, noting that the company’s growth in India was recovering and Pakistan was doing “reasonably well” for the firm.

Alabbar said the company had achieved around $5 billion of sales in 2017 and close to $1.8 billion of net profit before depreciation, with the company growing around 20 to 25 percent on an annual basis.

“Trust me, the margins, the opportunities and the growth I’ve been having in the Middle East over the last 20 years — even if you make a mistake, it’s so worth it,” he said, although he noted doing business in the wider Middle East had its challenges.

“Of course if I’m doing business in the UAE, it’s comfortable, it’s safe. But if I have to go to Cairo (in Egypt) I have to know the government, I have to know the mayor of Cairo, the mayor of Alexandria. But that’s what we do, that’s what we’re paid for, that’s what we have to do to grow our business,” he said.

The Middle East is certainly not a region for the faint-hearted. There is ongoing geopolitical turbulence caused by the continuing conflict in Yemen, uncertainty in Syria and Iraq about the possible resurgence of terrorist group Islamic State and internal disputes within the Gulf Cooperation Council (with Qatar being sidelined by Saudi Arabia, Bahrain, the UAE and Egypt), not to mention perceived proxy wars between Saudi Arabia and Iran.

Couple these issues with economic instability, prompted by the lower oil price, and there’s a combustive mix for most businesses. Alabbar said it was nothing new, however, and that the region was ripe for real estate development and infrastructure investment.

“I think that what the Middle East is going through is, unfortunately, not new … But the truth is that the opportunities exist — there are millions of people who have to go to school, they have to shop, they have to find jobs and open new factories, there’s tourism, so therefore that will contribute to economic growth in the whole region.”

Asked about Emaar Properties’ balance sheet, Alabbar said there had been difficult times.

“2007, 2008 and 2009 was very painful and I try not to forget the lesson. And I deal with bankers with a lot of respect but when they come and tell me ‘your balance sheet is not very efficient’ I know that I’m doing a good job. So I like to keep my debt at a very reasonable level. Then again, we have to do business, we have to be aggressive but at the same time we have to keep our eye on the cycle.”

8 Feb 2018

World’s next tallest hotel set to open in Dubai

Dubai: Shaikh Zayed Road will continue to host the “world’s tallest hotel”, with the opening this week of the Gevora built by the Al Attar Group.
The 75-floor structure stands at a height of 356 metres (1,167.98 feet) and has 528 rooms. It is located right near the DIFC cluster and with the Emirates Towers as neighbours.

Gevora and the Al Attar Group hope to take over the world’s tallest hotel mantle from the JW Marriott Marquis Hotel just down Shaikh Zayed Road, which soars to 1,165 feet. The property opened in 2012 and has 1,608 rooms.

Dubai has two other entrants in the tallest hotel stakes, in Rose Rayhann, which stands tall at 1,093 feetk and the Burj Al Arab, at 1,053 feet.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road.

Most of the other hotels in the tall rankings are dominated by Chinese developers and their flagship hotel projects.

Gevora’s opening on February 12 will allow for a better balance to be struck between Dubai and China in hosting these eye-catching landmarks.
The Al Attar Group has multiple high-rise interests along Shaikh Zayed Road; in fact it was among the handful of developers who moved in with projects just as the location on either side was coming into prominence in the early 2000’s.

Shaikh Zayed Road shot into prime time prominence with the Emirates Towers, which opened in April of 2000. Prior to that there were just the towers on the opposite side of the Road and near the Crowne Plaza.

Then the freehold boom started in Dubai in earnest and the Burj Khalifa and the many signature towers within the DIFC cluster came into being. And later on there was Business Bay and its line-up of Executive Towers.

Now that the Gevora is all set to open its doors, what next for Dubai’s Shaikh Zayed Road? Is there space left for new builds on what is already an area with the highest concentration of high-rises?

There could well be new possibilities taking shape, with the Dh5 billion Emirates Towers Business Park as a possible destination. And further down the Road, there will be two “super-tall” structures forming part of “Uptown Dubai”, which will be built by the Jumeirah Lake Towers developer DMCC.

10 Feb 2018

Time for Dubai realty investors to get back into luxury

Despite the popular global assumption that the majority of Dubai’s real estate stock and transaction volumes are concentrated in the prime/luxury end of the market, this sector represents just a small portion of the residential market. In fact, only 3 per cent of all residential transactions in 2017 were concluded within this segment.

This may come as a surprise given Dubai’s image as an expensive metropolis with a robust luxury property market. But it is less paradoxical when one considers the large amount of stock that has transacted in the mid- and affordable segments over the past 12 months, overshadowing the prime market that just a few years ago was firmly in the limelight.

In any anomaly one may find opportunity. however, as the market continues to be flooded with new stock in the lower end, the prime/ultra-prime segment may provide better prospects for investors in the coming few years.

Prime and ultra-prime property prices in Dubai are now among the lowest of any comparable global hub. This stance is further intensified by the varied level of price softening witnessed over the last three years across all segments of the market. Prime properties in Dubai are approximately 40 per cent less expensive than Singapore and 50 per cent less than Moscow and Paris.

Dubai’s ultra-prime market is also relatively inexpensive compared to the likes of Shanghai and Tokyo, with average prices almost 60-70 per cent lower, and presents excellent value against prices per square metre in London and New York.

The long-term investment potential in Dubai’s prime segment is reinforced by a nominal tax regime and notably low real estate investment costs. These costs — associated with buying, holding and selling property — can detract significantly from an investment and essentially erode the attractiveness of an asset.

Cities such as Hong Kong carry investment costs of approximately 32 per cent, while costs in Singapore and Tokyo are nearly 20 per cent, representing an additional charge equivalent to almost a quarter of the value just to buy, sell or hold property. With notably low buying and selling fees, and almost no holding charges, investment costs in Dubai amount to just 8 per cent — comparable to Shanghai and Mumbai.

Although these costs are often overlooked by investors, they have a significant impact on any comparison of prospective investment yields in different cities across the world.

The trickle-down effects of continued low oil prices, a strong US dollar and continued geopolitical turbulence have collectively cast a significant dent in the absorption levels in prime stock. However, the upcoming supply pipeline is modest in this sector, with most new stock concentrated in the low-to-mid market segment — an upsurge created on the back of projected demand from Expo 2020.

Given Dubai’s position as a global tourist destination and regional economic hub within five hours flying time of around one third of the world’s population, strong underlying demand for prime and ultra-prime properties is expected to be sustained in the long run.

As the market expands and continues to mature, gaining depth and liquidity in line with population growth, it is likely that demographic pressures will continue to mould the cityscape in a way that accentuates the pull of core areas. These “city centres”, shaped by demographics just as much as by master planning, will also see natural price appreciation driven both by desirability and spatial limitations.

Prime and ultra-prime segments will be the direct beneficiaries of this in terms of price appreciation and stability, although it will also likely trigger further yield compression, positioning Dubai on a par with other global hubs.

At the other end of the spectrum, in most outer areas that are being flooded by lower-priced projects and are free of land constraints, even optimistic demographic growth will be insufficient to drive notable midterm price appreciation, creating a widening gap with prime and ultra-prime prices in central areas.

10 Feb 2018

Articles

All you need to know about registering for VAT?

Dubai: According to the executive regulations on value added tax (VAT) published last week, the mandatory registration threshold is Dh375,000.

This means that anyone with a turnover of Dh375,000 or more is required to register their business for VAT, the Federal Tax Authority (FTA) and Ministry of Finance (MoF) said in the recently release regulations.

The voluntary registration threshold is Dh187,500, with companies of that size or above able to register for VAT too.
The failure of a taxable person or business to submit a registration application within the time frame specified in the tax law is liable for a Dh20,000 fine.

Also according to the executive regulations, companies are able to register as a tax group.

Through this mechanism, more than one company can register for VAT as a group, under a single common control, according to Dubai-based Jitendra Consulting Group. They say that the main benefit of group registration is to simplify the procedures and save costs through consolidated tax returns and a single VAT registration.

The group’s tax returns and payments are carried out by the member who acts as a representative of the group, the FTA has stated. All the members are jointly liable, however.

VAT rules VAT rules

VAT rules

 

6 Dec 2017

UAE’s Federal Tax Authority announces full VAT supplies list

The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax).

These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT in education

UAE vat in all sectors

 

6 Dec 2017

Can you buy a home with Dh10,000 salary in Dubai?

There is a property for every income bracket in Dubai. The lower sales prices and attractive payment plans offered by developers in Dubai are resulting in more first-time home buyers hopping on the property bandwagon. The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.

Even someone with a salary of Dh10,000 can climb onto the property ladder today, provided they can arrange for the up-front payment and registration charges.

home buying plan

“There are enough properties available to cater across a wide range of salary brackets. Prices and accessibility criteria for a home mortgage, traditionally the two biggest barriers for new entrants to the property market, have been lowered, thus resulting in an uptick in market activity,” says Lynnette Abad, partner and head of Property Monitor/Cavendish Maxwell.

Apartments are the achievable properties for salaries between Dh10,000 to Dh15,000.

qouate

“The average one-bedroom apartment in new residential areas such as Dubai Silicon Oasis, Liwan, etc., is worth about Dh600,000 with a down payment of Dh150,000 and Dh30,000 in registration expenses. The buyer has to pay about Dh2,200 a month. This is easily achievable for most people earning Dh15000+ a month. This is much less than their rent,” suggests Sanjay Chimnani, managing director, Raine & Horne Dubai.

This year, the top areas for affordable properties to one with a monthly salary of Dh10,000 are (in order) International City, Jumeirah Village Circle (JVC), Al Furjan and Dubai South, estimates Property Monitor, a real estate intelligence platform.

For someone with a monthly salary of Dh15,000, the top areas with affordable properties are Dubai South, JVC, Business Bay and Dubai Sports City, the consultancy adds.

However, if you are looking to buy a villa or a townhouse, it would require a monthly salary of Dh25,000. “It will fetch you a townhouse in master-planned communities such as Town Square and Reem, Mira. Some of the other top areas in this salary bracket are Dubai Marina, Business Bay and The Lagoons,” informs Abad.

The challenge for most buyers is to arrange for the down payment plus registration costs of about 30 per cent. “If this was to be reduced to 15 per cent, we would see an even greater shift to ownership in this market,” suggests Chimnani.

However, the moot question is whether a person earning Dh10,000 a month is eligible for a mortgage. Provided the customer does not have any major loans (personal, credit card and auto), s/he would be eligible for a house loan of up to 25 years, subject to age criteria which restricts payments to the age of 65.

“People earning Dh10,000 and above can apply for a mortgage. The minimum salary requirement for a mortgage is Dh10,000. However, there are only a few banks who do mortgages for clients with Dh10,000 income and, therefore, options for these clients are limited. Majority of the banks require a minimum salary of Dh15,000 and above,” says Carol Monis, head of mortgages, MortgageMe.ae, a group of mortgage brokers in Dubai.

She adds that “most of our mortgage clients are end-users who fall into an income bracket of Dh20,000 to Dh25,000”.

Dhiren Gupta, managing director, 4C Mortgage Consultancy, adds in the same vein that the average income group buying property in Dubai is around Dh25,000 to Dh35,000 and they are primarily buying mid-priced property worth of Dh1.5 million to Dh2 million.

“With such income, they can easily qualify for a loan, barring they do not have pre-existing liabilities and age limitation is not a barrier. Moreover, banks are more comfortable to funding such profiles wherein the property will be utilised for self-use,” concludes Gupta.

3 Dec 2017

Sheikh Mohammed signs VAT Executive Regulation

The Ministry of Finance, MoF, Monday announced that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT.

The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Commenting on the milestone, Younis Haji Al Khoori, Undersecretary of MoF, said, “Today’s signing of the Executive Regulation by the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, marks a new milestone in the application of an efficient taxation system in line with best international standards with the ultimate objective of improving performance of primary sectors and enhancing social welfare.”

The first title of the Regulation includes the definitions of terms used, while the second title deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

The third title of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration.

Meanwhile, the fourth title looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, title five discusses profit margins and explains how to calculate VAT based on profit margins, while title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from value added tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

The eighth title of the Regulation then addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In title nine, the Executive Regulation address Designated Zones in article (51), while title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. The following titles 11 includes article (55) on apportioning input tax and article (56) on adjusting input tax after recovery, whereas title 12 addresses the capital asset scheme in article (57) and adjustments within the capital asset scheme in article (58).

Title 13 of the Regulation includes article (59) on tax invoices, article (60) on tax credit notes and article (61) on fractions of the fils. Then in title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before title 15 goes into recovery of excess tax in article (65). Adding to that, title 16 tackles recovery in other cases and includes article (66) on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

The 17th title includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article (72) on keeping records of supplies made. Meanwhile, the 18th and final titles discusses closing provisions.

28 Nov 2017

Real estate risk allocation and insurance tips for Dubai property investors

As an owner-occupier, your primary risk would be damage or destruction to your real estate asset. As such your insurance will likely be for a lump sum amount or full replacement or reinstatement of the asset. Owner-occupiers may also insure for business interruption to cover them for lost income when the premises becomes unusable due to damage. This may be important, for example, where the owner has a mortgage and would have difficulty in meeting the repayments.

An owner would generally take out insurance for third-party risks: for example, where a visitor suffers an injury caused by or occurring on the real estate asset. In transferring ownership of a real estate asset, the buyer and seller will need to establish a clear date for the risk of damage or destruction of the real estate asset to pass. The logical time for the passing of this risk is the date the title is transferred. Generally the seller will cancel the insurance on this date and the buyer will implement its own insurance. There may also need to be a clear position in the sale-and-purchase contract as to what may happen should damage occur between the date of contract and the date of title transfer.

Where a real estate asset is tenanted, the lease contract may expressly address the allocation of risk between the landlord and the tenant and require the parties to obtain insurance.

It is not possible to map out all of the possible variations in such arrangements, however, the following represents a fairly typical allocation of risk and insurance in a retail/office unit context.

Fit-out period
The landlord will generally require the tenant to have or procure contractors all risk insurance as well as worker’s compensation insurance. The landlord will generally require that the landlord is named co-insured and specify the level of cover the tenant must obtain or procure.

Typically the insurance undertaken during the fit-out period will be obtained by the contractor completing the fit-out. The tenant will need to ensure that this insurance is obtained and contains the relevant covenants sought by the landlord under the lease agreement.

Damage and destruction of the building
The landlord would normally obtain all risk building insurance but may require the tenant to insure for damage arising out of the tenant’s or occupiers’ negligence. This could result in double insurance and an alternative approach would be for the tenant to be named as a beneficiary of the landlord’s insurance. This is, however, not the practice in the region.

Landlords will typically exclude liability for any other types of losses sustained by the tenant — for example, economic losses when the tenant is unable to operate from the premises. Were the landlord to face a claim by the tenant in these circumstances, it may be that the landlord’s third-party liability insurance provides a measure of protection to the landlord. As the landlord will exclude liability for the same, the tenant may wish to obtain insurance for business interruption.

As the landlord will be required to cease charging rent for the period the premises cannot be occupied, the landlord may wish to obtain loss of income insurance.

It is common in the context of a commercial office or retail unit lease that the tenant would meet the landlord’s insurance costs as part of the service charges charged to the tenant.

Tenant contents damage
The landlord may specifically require the tenant to insure the tenant’s contents, fixtures and fittings and to name the landlord as co-insured and/or require the insurer to provide a waiver of its right to sue the landlord in any case where the landlord’s negligence causes the damage.

Third-party injury
Third-party injury claims are civil wrongs and accordingly the party claiming damage or injury does not need to establish a relationship in contract with the party causing the harm. Generally, such claims will arise due to the party in control of the area not taking due care to ensure that areas are kept safe.

Accordingly a landlord may wish to insure for any injuries that may occur to third parties in common areas of a building. As the tenant may also exercise control over their premises, the tenant should also take out insurance for such claims.

Other third-party risks
Other third-party risks arise in multi-tenanted buildings in that if a tenant damages the building, this may cause losses to other tenants. The landlord can seek to exclude liability for such claims in the contract with each tenant, but would very likely also cover such risks through their own third-party policies.

As a tenant will have no ability to mitigate the possibility of claims from other tenants in contract, the tenant would need to obtain its own third-party policy to cover such risks.

Developers, investors
Throughout the construction of a project, the contractors will undertake the necessary insurances. As the developer will be paying progress payments throughout the construction, it is in the developer’s interest to ensure that this insurance is in place and that the developer is also co-insured under the contractor’s policy. It is also important to specify clearly under the construction contract when the developer shall be required to accept risk for the property following completion of construction and, therefore, should obtain its own insurance.

If the project involves off-plan sales, then, once the development is completed, the developer will start handing over the units to the investors. Generally, in the case of jointly owned (strata) property, insuring the building, including the usual fitting and fixtures in the units, would be the responsibility of the owners’ association (OA). In cases where there is not a legally established OA, then it may be possible for the developer to obtain a policy that nonetheless recognises the interests of investors as beneficiaries of the policy.

The developer or the OA will need to consider the type of policies they obtain. Generally speaking, such insurance will cover, and may be required to cover by law, full replacement and reinstatement, third-party liabilities and could cover loss of income or alternative accommodation costs.

Investors would typically insure their own contents and improvements. Investors may also wish to obtain loss of rent insurance or insurance covering the cost of alternative accommodation if this is not taken out by the developer or OA.

Summary
This is a general discussion of the risks in real estate and how they may be addressed in contract and through appropriate insurance. As each property and transaction is different, the risks and insurance solutions may differ so it is important that each transaction is assessed on a case-by-case basis. Accordingly, this article should not be treated as advice as to what is required in any particular set of circumstances.

Reporting by Jeremy Scott and Justin Carroll

Jeremy Scott is partner, real estate, and Justin Carroll is senior associate, insurance, at Al Tamimi & Company. The views expressed here are their own.

29 Nov 2017

Not renewing tenancy contract in Dubai? 3 months notice a must

I have been staying in a rented apartment for around last 12 months and do not want to renew the tenancy for another year. I have notified the landlord by giving one month notice of my intention but the landlord insists a notice period of three months. Further, the landlord is asking me to paint the apartment. Surely that comes under wear and tear of living in a rented apartment? What does the law say exactly as I have been reading contradictory reports?

Pursuant to your questions, we assume that the rented apartment where you are staying is situated in the Emirate of Dubai. All tenancy contracts in the emirate fall under the ambit of the Law no. 26 of 2007, Regulating the Relationship between Landlords and Tenants in the Emirate of Dubai. Subsequently some provisions of the said law have been amended by Law No. 33 of 2008.

Article 14 of the law states: “Where either of the two parties to the lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than ninety days before the date on which the lease contract expires, unless otherwise agreed by the parties.”

Moreover, Article 14 of amendment states: “Unless otherwise agreed by the parties, if either party to the Tenancy Contract wishes to amend any of its terms in accordance with Article 13 of this law, that party must notify the other party of same no less than ninety days prior to the date on which the tenancy contract expires.”

In the event your tenancy contract states that you need to provide a three months of notice period not to renew the tenancy contract, then Article 14 of Law No. 33 of 2008 should be applicable.

You are bound to return the apartment to the landlord in the same condition as provided by the landlord at the time of renting it to you, other than normal wear and tear. This is in accordance with Article 21 of Law No. 26 of 2006 regulating the Relationship between Landlords and Tenants in the Emirate of Dubai, which states: “Upon the expiry of the term of the Lease Contract, the tenant must surrender possession of the real property to the landlord in the same condition in which the tenant received it at the time of entering into the lease contract except for ordinary wear and tear or for damage due to reasons beyond the tenant’s control. In the event of a dispute between the two parties, the matter must be referred to the Tribunal to issue an award in this regard.”

Know the law

Where either of the two parties to a lease contract do not wish to renew the contract or wish to amend any of its terms, such party must notify the other party of such intent no less than 90 days before the date on which the lease contract expires, unless otherwise agreed by the parties.

 

17 Oct 2017
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