Only in Dubai: The ‘ultimate guarantee’ from real estate developers

Published : 26 Apr 2016 ,      Source : Emirates 24/7

Marwan bin Ghalita, Real Estate Regulatory Agency Chief Executive Officer.

Dh29bn in hand reflects confidence in the market, says Ghalita

Some developers in Dubai are giving 100 per cent construction guarantee, which is the “ultimate guarantee” that any developer can give, Real Estate Regulatory Agency Chief Executive Officer told Emirates 24|7.

“There are developers who have given 100 per cent construction guarantee and this is the ultimate guarantee,” said Marwan bin Ghalita without giving names of the developers.

He revealed that Dh29 billion are being held escrow accounts which reflects confidence of developers and investors’ in the market.

It is compulsory for every developer in Dubai to open an escrow account under Law No. (8) of 2007 concerning escrow accounts for real estate development. All the payment received from investors has to be deposited in it. Money is released by Rera after it assesses the project’s construction having met the required percentage.

Rera chief said they were no longer afraid of projects being stalled, as developers were launching projects to build them than mere selling them.

“Developers want to complete their projects with many of them wanting to start selling only after the project nears completion. This shows that the industry has matured over the time.”

Among the guarantees sought is 100 per cent of the land cost to be paid by the developer, a minimum of 20 per cent of the construction cost to be deposited with Rera with contractors having to pay another 10 per cent of the construction cost.

In the first quarter 2016, 38 new projects were launched in Dubai. In 2015, 46 projects were completed.

The Dubai Land Department has reported Dh55 billion worth of property transactions across all categories in the first quarter 2016.

Ghalita said investors had become very smart and were asking questions on materials used, sustainability, finishes and service charges, which was not previously the case.

We reported earlier that Rera chief wanted developers to cut down on service charges by allocating some portion of the built-up area in their projects to generate revenue.

“My advice to developer is to allocate some of the built-up area for revenue generation. Start with 50 per cent of the service charge going up to 70 per cent of the service charge to be covered from this asset and not from the investor. Hence, the investor will be paying only 30 per cent,” Ghalita had said on sidelines of the Dubai International Government Achievements Exhibition (DIGAE 2016).

View orginal article here

Related News

Dubai reveals plan to launch new real estate festival

Dubai Land Department (DLD) on Monday announced plans to launch of Dubai Property Festival, a three-day sales and purchase event to be held at the Dubai World Trade Centre on April 9–11.

The real estate authority said the festival would coincide with a series of events in Dubai aimed at attracting more global investment to the UAE.

DLD said in a statement that the three-day festival is expected to generate considerable buying and selling activity by hundreds of participants including property developers, brokers, lenders, mortgage providers, investors and home buyers.

Sultan Butti bin Mejren, director general of DLD, said: “DLD plays a vital role in reshaping Dubai’s real estate sector to help drive the economic vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.

“This festival initiative is in cooperation with the International Property Show, and part of our ongoing efforts to support the real estate sector and provide an ideal environment for all relevant parties. We are confident that with this festival and beyond, the real estate sector will continue to grow and contribute to strengthening our economy.”

The festival will be annual event and will be instrumental in attracting and encouraging more buyers to the emirate, he added.

Majida Ali Rashid, assistant director general, said: “We are delighted to launch DPF that will showcase Dubai as one of the top real estate investment destinations in the world. The festival will provide an excellent opportunity for investors, developers and buyers for strategic networking and doing business in a safe and secured environment.”

Most of Dubai’s residential stock of 448,000 homes are leasehold properties, with a large chunk of the villas being owned by UAE and GCC nationals.

Foreigners mostly rent homes although tens of thousands of freehold homes are also owned by foreign nationals, the statement said.

DPF will be part of the Real Estate Investment Week that will see a number of events being held to promote investment in real estate.

8 Jan 2018

Planning to move to Dubai? Top 5 Areas up for a Bargain

Top 5 Cheapest Areas to Rent or Buy in Dubai

Despite a reputation for over-the-top luxury, those who call Dubai ‘home’ often have more modest needs. Propertyfinder Group rounded up the top 5 least expensive communities in Dubai to rent or buy a villa or apartment, so the cash-flow can go toward brunches and epic vacations rather than the rent or mortgage.

  • Jumeirah Village Circle and Al Furjan, the two cheapest areas to rent a villa in Dubai, saw some of the steepest declines in price (-11.8% and -13.9%, respectively), over a six month period between April and October 2017, Propertyfinder Trends data shows.
  • Dubai villa rents have seen the biggest decline in asking prices of all property types, according to the report, with several communities seeing double digit declines.
  • Demand in affordable areas is rising, as are handovers. This means prices are going down as new stock becomes available, and Dubai residents are getting a bargain to boot.

Dubai Land appears several times, and is worth a look as a family-friendly option with lots of brand new units to its name. The area saw some 2,500 handovers in 2017. Dubai Silicon Oasis, Discovery Gardens, and Al Furjan are a similar story: a high rate of handovers, central locations with short commutes, and family-friendly.

Dubai Apartment Rental Rates

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Dubai Apartment Asking Rates

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Dubai Villa Rental Rates

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Dubai Villa Asking Rates

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7 Jan 2018

Dubai Land Department Launches Initiative to Spearhead Growth in Real Estate

Dubai Land Department (DLD) announced the launch of Dubai Property Festival (DPF), a three-day sales and purchase event to be held at the Dubai World Trade Centre April 9 – 11, coinciding with a series of events in Dubai aimed at attracting global investment to the UAE.

The three-day festival is expected to generate considerable buying and selling activity by hundreds of participants including property developers, brokers, lenders, mortgage providers, investors and home buyers. DPF will help to further stimulate the emirate’s buoyant real estate sector.

During a press conference, His Excellency Sultan Butti bin Mejren, Director General of DLD, said: “DLD plays a vital role in reshaping Dubai’s real estate sector to help drive the economic vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. It is the duty of DLD to ensure that growth and prosperity continue in this sector, and help more buyers, investors and tenants to benefit from overall economic growth, as well as contribute to the activity of our economy.”

Bin Mejren added: “This festival initiative is in cooperation with the ‘International Property Show’, and part of our ongoing efforts to support the real estate sector and provide an ideal environment for all relevant parties. We are confident that with this festival and beyond, the real estate sector will continue to grow and contribute to strengthening our economy.”

Bin Mejren concluded: “To encourage new buyers and investors to the real estate sector, I am delighted to announce the launch of DPF in order to provide everyone with the right environment for choosing the best properties offered, finding the best prices, and making the best deals with real estate brokers and developers. The festival will be annual event that forms an inclusive investment platform. It will be instrumental in attracting and encouraging more buyers, providing them with access to new homes, and helping them obtain a comprehensive perspective of availability — ultimately being able to make a wise decision to buy a dream home.”

DLD is constantly promoting and organizing the most suitable real estate investment environment to ensure best practices at all levels of development, marketing, real estate appraisal, buying and selling, and real estate brokerage in order to ensure timely delivery of projects with maximum investment protection.

Her Excellency Majida Ali Rashid, Assistant Director General and Head of the Real Estate Investment Management and Promotion Center — the Investment arm of DLD, said: “We are delighted to launch DPF that will showcase Dubai as one of the top real estate investment destinations in the world. The festival will provide an excellent opportunity for investors, developers and buyers for strategic networking and doing business in a safe and secured environment.”

Rashid added: “The Real Estate Investment Management and Promotion Center seeks to encourage investor confidence in the real estate market, attract investments to the Dubai real estate market and launch a variety of initiatives for investors. For example, our latest initiative was signing an agreement with a real estate brokerage office in China to promote the real estate sector in Dubai that will reach more than 1000 Chinese real estate brokers, with the aim of promoting Chinese investment in the real estate sector in Dubai. Recently we have also signed a similar agreement with a company in India”

Dawood Al Shezawi, Head of DPF Organizing Committee, said: “The Festival will be a game-changing initiative that will help a large number of tenants shift to own their homes and stop paying rent. On an average, a Dubai tenant can own his home by spending eight years of rental expenses in his property instead of paying them to a landlord. DPF will help the end-users make such a transition by encouraging property developers and brokers to offer the best deals and help the tenants to buy properties instead of continuing to rent.”

Most of Dubai’s residential stock of 448,000 homes are leasehold properties, with a large chunk of the villas being owned by UAE and GCC nationals. Foreigners mostly rent homes although tens of thousands of freehold homes are also owned by foreign nationals; most foreigners in the UAE live in leasehold properties, despite high rents.

DPF will be part of the Real Estate Investment Week that will see a number of events being held to promote investment in real estate. An Investor Roundtable will help investors from different countries network with key stakeholder to discuss ways to boost investment.

8 Jan 2018

Dubai’s Azizi Developments To Deliver Seven Projects by Mid-2018

A.E. real estate developer Azizi Developments says it plans to handover seven projects ahead of schedule in the first half of 2018 in Dubai’s Al Furjan residential development. Combined, the projects are worth $49 million and will add more than 2,000 homes to Al Furjan, according to the company.

Azizi Developments, the real estate investment arm of Azizi Group, was one of the first developers to start construction in Al Furjan, a community in Jebel Ali.

The company’s brisk project delivery schedule goes against the trend set by other local developers in recent years, as the regional real estate market weathered a downturn caused by low oil prices. Against that backdrop, local developers regularly delayed the handover of projects in an effort to keep prices more favorable by limiting supply.

Many local real estate industry watchers are now warning of potential oversupply as momentum for residential developments picks up. A number of developers launched new mega residential projects in the U.A.E. in 2017, raising the prospect of potential oversupply on the back of sales achieved through more attractive payment terms, according to a report released last year by JLL-MENA, a financial and professional services firm specializing in real estate.

For Azizi Developments, the impending delivery of multiple projects in Al Furjan in 2018 is a continuation of where the developer left off last year. In December 2017, it handed over two apartment projects in Al Furjan, which took 20 months to complete. The two projects combined comprised 543 units and were valued at about $125 million by the company.

Also in December, Azizi Developments announced it would invest $2.48 billion across its operations in the U.A.E. in the coming year, an increase compared to its investments in 2017.

7 Jan 2018

Dubai will have a ‘festival’ for property sales too

Dubai: A three-day Dubai property sales ‘festival’ will be launched in April, with price discounts from developers and even a possible waiver of fees from participating banks on mortgage registrations at the event. The Dubai Land Department is providing its official stamp to the three-day event, which opens April 9. It is being organised by a private entity.

There will also be property auctions — either online or at the venue — for ‘distressed’ properties, from developers or investors who want to make an exit. But the Land Department itself will not directly be putting up any distressed properties on its database, a senior official said.

All developers with projects backed by escrow accounts will be allowed to sell at the Dubai Property Festival (DPF), according to Dawood Al Shezawi, head of the DPF Organising Committee. Whether the properties are ready units or off-plan sales will be up to the developers and participating brokers to decide.

The three-day opens up a sales calendar for the property market in the first-half of the year, and in line with what Cityscape Global does during its September/October run. The plan is to make DPF into an annual event. (It was in September last that developers exhibiting at Cityscape in Dubai were allowed to sell from their stands. This came about after nearly a decade when no such direct sales were allowed.)

It will be interesting to see how much of a price discount or incentives developers are willing to give. Already, the market is seeing developers with offplan sales subsiding by extending payment plans to well after handover, with two to five years being the average. Some have even extended payments to 10 years after handovers.

And Dubai property prices are not seeing upward movements… in such a situation will developers be willing to undercut their prices further? What could happen is developers pushing inventory from their older projects at special prices during the April event.

“Much in the same way that retailers leverage the Dubai Shopping Festival, developers could do the same with the DPF,” said Anuj Jain, head of sales operations at Sobha, which has ongoing projects at MBR City.

Property buyers at the Festival could see participating banks ‘waive’ processing fees. Land Department officials declined to say whether they would consider waiving or halving the 4 per cent registration fees during the event.

The festival could also be a marker on how quickly transaction volumes in Dubai’s property market build up this year. The first-half of 2017 recorded one of the best runs in recent years, and to a great extent, the pace was maintained in the second-half as well.

Developers who participated at the launch event for the festival also sounded out some concerns. Salem Al Moosa, the developer of Falconcity, said there ought to be better coordination between banks and developers when it comes to funding.

“Financing for developers is slowing down, and if one developer gets into a problem, it is instantly assumed that everyone else is facing a similar situation. Why should this be the case for developers who have got nothing to do with it?”

8 Jan 2018

Special Report: It’s a renter’s market in 2018

Dubai: Property pundits posit Dubai’s residential rental rates will go even lower in 2018 as cash-strapped tenants opt to relocate to cheaper new digs or haggle with existing landlords to trim rental costs.

With upwards of 20,000 new residential apartment units expected to arrive on the Dubai skyline in the new year, supply and demand pressures will push rents even lower, suggests statistical analysis by seasoned property consultancy firms.

20,000 new flats expected to arrive in the Dubai market this year

The downward trend comes close on the heels of a 12 per cent drop in rental prices across Dubai this year.

While market professionals waited for a price correction in mid-2017 that never materialised, experts tell Gulf News that a growing number of landlords are now resigned to a protracted price slide evidenced by more tenants succeeding in securing monthly rent savings.

In its latest third quarter UAE Real Estate Report, property firm Asteco noted that “yearly changes were nominal with decreases of 4 per cent on average across all quality bands. Business Bay and Dubai Marina led the price declines with a drop of 8 per cent, followed by Dubai Sports City, International City and Jumeirah Village at 7 per cent.

Dubai: Biggest rent declines
Dubai Marina: 19%
Downtown Dubai: 18%
Bur Dubai and Sports City: 16%
Jumeirah Village / Deira: 15%
Source: Asteco third quarter 2017 report

“Rental rates softened by 4 per cent over the quarter. Whilst this was less pronounced than projected, the annual change since Q3 2016 amounted to 12 per cent, which can be largely attributed to increased supply,” the firm stated.

“Despite increased government spending in infrastructure, hospitality and retail in the run-up to the Expo 2020, market sentiment remains low largely due to the bearish outlook in terms of oil price and global economic recovery,” the report stated.

The downward trend comes on the heels of a 12 per cent drop in rental prices across Dubai this year.

Keeping tenants

In an interview with Gulf News, Asteco managing director John Stevens said the rental market for flats would appear to have some way to go before correcting itself towards higher prices and believes rents will continue to slide somewhat into at least the first quarter of next year.

“I think, realistically, you have to think rents are still going to drop,” said Stevens. “In terms of the rental market, I would say the market has not bottomed out.”

With an additional 14,000 units handed over in 2017 in Dubai, more supply has opened housing stock making tenants spoilt for choice.
More choice in the market also means lower rental rates and as more tenants approach the time in the new year to renew their rent renewal contracts, “most people are getting rent reductions”, Stevens said.

Smart landlords are realising that it is better to keep a tenant than face vacancy periods of months at a stretch and losing money, he said, noting “there is an element of chasing the market down for keeping tenants. People will move for a few thousand dirhams”.

The hardest-hit sector for property owners leasing out their apartments is in the high to luxury end segment of the property market, Steven said.
Biggest rent declines as recorded by Asteco in the third quarter were in Dubai Marina and Downtown Dubai at 19 per cent and 18 per cent, respectively.

In the affordable range of properties in Dubai, the biggest drops in rent prices were observed at 16 per cent in Bur Dubai and at 16 per cent in Sports City and at 15 per cent in Jumeirah Village and Deira.

The secret to keeping rental properties at full vacancy during the deepening price slump would appear to be keeping rental rates attractive for what’s on offer, Stevens said.

“In Dubai, in all honesty, if it’s priced right, it will rent,” he said, adding that tenants are much more informed than ever before with a slew of online property-related websites to compare listings and area rentals.

The new Dubai Land Department’s rental index [https://www.dubailand.gov.ae/English/Pages/rental-increase-calculator.aspx], for example, allows visitors to its website to search each area of the city for do some comparison shopping for leasehold properties.
Jesse Downs, managing director of Phidar Advisory, told Gulf News that all signs now point to the rental market experiencing reduced rates for the short term.

testimonials

“I think rates are going to keep declining over the next year at least. What we are experiencing is a return to sanity,” said Downs, who agreed that cautious investors in a weaker economy combined with slowed employment growth and incoming supply are mitigating factors.

Downs said that the rental market correction now at play has long been coming after years of runaway increases where rents were increasing by 30 per cent.

The latest market correction has seen rents level off to rates that are more realistic, she said.
With a renters’ market, “it could present a good time to move within the next year. Tenants are moving to new buildings with better quality and better price”.

Downs said landlords were holding on up until late summer hoping for the market to turn around in their favour but saw the writing on the wall and started agreeing to rent reductions.

It appears Sharjah tenants, for the most part, are staying put amid falling rents across the country.

“There has been this obstinancy on their part … but there was no recovery this summer,” Downs said.

Asked to speculate as to the scope of a further slide in rental prices in the new year, Downs said the Dubai market could see a double-digit decline in a continuing trend ahead.

rental-prices

7 Jan 2018

Homefront: ‘My property agent is forcing me into a maintenance contract. Is that legal?’

We recently moved into a villa and had listed a number of issues to be fixed prior to moving in, which our estate agent agreed would be done. After moving in there were still some issues outstanding so the estate agent sent the maintenance company back and they found more issues wrong. Now the agent is saying we have to take out a maintenance contract with the maintenance company before the outstanding work is finished – this is bearing in mind the work had already been paid for by the landlord. After some investigation, we discovered that the agent is also the manager of the maintenance firm and is trying to force us into an annual contract with her company to get all the repairs completed. Is there a legal precedence on this? Could there be a conflict of interest considering the agent is basically holding clients to ransom by holding back completion of work until the tenant signs a contract with her maintenance company? SB, Dubai

Of course there is a conflict of interest here. If you wish to apply and pay for a maintenance contract, it is surely up to you which company you use, you certainly should not be forced into any agreement with a third party company you are not happy with.

I would involve the landlord at this stage, to inform him about the outstanding maintenance issues that have yet to be completed but paid for by him. Let him know that the agent is acting in this shady way, then wait to hear what happens. The landlord has a duty of care to you as his tenant so has to deal with major maintenance issues, let the landlord contact the agent and deal with him.

I moved out of my flat and handed over the keys to my landlord. He promised me in an email that my rental security deposit would be returned by a certain date. However, the landlord id delaying the payment of the deposit by claiming he is waiting for a security deposit from the new tenant. What can I do to get my deposit back? NA, Dubai

I suggest you arrange a face-to-face meeting with the landlord. At this meeting you will need to explain to him that your rental agreement has come to an end and it is not allowed for him to delay the return of your deposit just because he is waiting for a new tenant to pay their deposit. Your situation is totally separate and if he doesn’t agree or continues to delay, I suggest you inform him that you will file a case at the Rental Dispute Settlement Centre.

The landlord has certain responsibilities to you as his tenant and delaying payment is not the correct way to behave. In reality, getting these relatively small deposit sums back can be quite challenging and it is because they are relatively small that some landlords think they can get away with the games they play.

I know that the Land Department and the Real Estate Regulatory Authority are looking into improving the way the rental deposit is held and then returned. Unfortunately for you, these changes are sometime in the future, so in the meantime, communication and mediation is the only clear way of resolving your dilemma.

Mario Volpi is the chief sales officer for Kensington Exclusive Properties and has worked in the property industry for over 30 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [email protected]

3 Jan 2018

So what will happen to Dubai’s real estate market in 2018?

Developers will be tempted to reduce the size of apartments to make their price tag more affordable in 2018 as finding value for money remains a priority for buyers, according to a high-profile brokerage firm.

Mario Volpi, chief sales officer of Kensington Properties, said this trend has already started in locations such as Dubai South, Dubailand and Jumeirah Village Circle and will continue this year.

“In my opinion, one of the trends for 2018 will be affordability, but affordability will have to come at a cost and I’m not referring to financial terms,” he said in a report published by LuxHabitat.

“Whilst we are currently experiencing a somewhat challenging property market, where prices are naturally soft but in order for developers to keep the ticket prices of residential property at what can be described as affordable to the average person, the actual size of the finished unit will also have to be reduced,” he added.

“We have seen this trend already occurring by many of the current developers in locations such as JVC, Dubai South and Dubailand. Building smaller units will continue next year as this trend will guarantee the property’s affordability tag. Buyers or investors will now have to get used to smaller sized property units when choosing the ‘affordable’ option.”

In the same report, Alexander von Sayn-Wittgenstein, luxury sales director, Luxhabitat, said: “For buyers in 2018, check the developer’s reputation and take location and completion dates into consideration while negotiating price. As for sellers, the prices are expected to flatten further so don’t be in a hurry to sell your property just yet. Renting it would be a good option instead.”

Paul Spargo, commercial director, Propertyfinder, said the trend of decreasing prices across the market is likely to continue, although they are likely to slow compared to previous years.

He added that transactions – especially for the middle-income segment – are expected to remain strong during 2018.

Matthew Gregory, head of property sales, dubizzle, said the Dubai sales market in 2017 appeared to be close to the bottom of its current cycle.

“Whilst some areas experienced a decline in price per square foot, we do not anticipate that the sales prices will decline significantly in 2018,” he said.

He added that despite a high number of planned projects in 2017, only approximately half of those units scheduled for completion were actually delivered by the end of the year.

“We predict a similar trend to continue in the next two to three years as there is an expected 120,000 units planned for completion by the end of 2020. With historically low materialization rates combined with the influx of sales due to demand driven by Expo 2020, it is unlikely that all of these units will be delivered on time, making it less likely for a disruption in the supply-demand equilibrium in 2018.”

Haider Ali Khan, CEO, Bayut, said he believes 2018 will present more opportunities for buyers and tenants as more inventory arrives on the market.

“This year was a buyers and renters market, with sales prices and rents sliding across several areas. As we move into 2018, further inventory will float on to the market and provide even more attractive opportunities, piquing the interest of a larger base of consumers to start considering owning a home in the UAE. The growth in the economy coupled with more affordable housing options, should provide for a healthy and positive trend for 2018,” he said.

6 Jan 2018

For off-plan, Jumeirah Village and Dubai South are top picks

DUBAI: Property buyers in Dubai were chasing affordable options in 2017, with Jumeirah Village Circle (JVC) and Dubai South recording the highest number of off-plan transactions among the city’s freehold communities. JVC, which already hosts a sizeable resident base, figured in 2,161 deals and followed by the fast-developing Dubai South enclave, which did 2,095.

Figuring in third place as the most sought after off-plan location was the pricier Downtown, where 2,039 apartments were bought direct from developers last year, according to data from GCP-Reidin, the property services firm. (At the Downtown, another 607 ready units were also bought during the period.)

For ready properties, mostly sold in the secondary market, Dubai Marina retains its prime position, with 1,860 units, and followed by International City, which figured in 1,227 deals through the year. But the latter saw a 21 per cent drop in volumes compared to 2016.

In dirham terms, overall citywide off-plan sales during 2017 weighed in at the Dh28.63 billion mark, while ready transactions added another Dh19.51 billion.

In 2017, the gap between off-plan sales and those for ready in the secondary market widened considerably. Based on GCP-Reidin data, there were only 11,536 ready units sold as against 21,884 in off-plan. Clearly, all those developer-backed incentives — with post-handover payments being particularly decisive — continue to tilt sales in the off-plan direction. (Post-handover plans accounted for nearly two-thirds of all off-plan launches in Dubai last year).

Expect more of the same this year. Off-plan releases are likely to see a return to form after a relatively slight run in the fourth quarter of 2017, during which only 3,818 units were released. As against that, the third quarter of the year saw 18,267 units released and second quarter accounted for 12,513 units.

“Sure, the fourth quarter of 2017 was when there was some brakes applied on the number of launches,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Remember that entire communities were launched in the fourth quarter, such as the ‘Azizi Victoria’ (at MBR City). Yet the number of unit launches does not reflect that, primarily because developers have a staggered sales policy.”

VAT element
There is also the value-added tax (VAT) sentiment to check on. Some developers, such as Danube Properties, have stated they will wait on the next launches until a clear picture emerges on whether potential buyers are likely to hold back or not. (As such, all residential sales are exempt from VAT, but consumers typically turn over-cautious whenever a tax element is rolled out.)

“It will be interesting to see if sentiment — and launches — are affected in the first and second quarter of 2018,” Lakhani said. “Direct developer financing is fuelling off-plan sales. In the ready market for the most part, developers are still absent and where present, catering to investors rather than end users.”

If new off-plan launches have a subdued first-half, it will give developers with ongoing sales some leeway in trying to find buyers. And without having to wonder what sort of incentives the new releases will have. Even if indirectly, VAT will have given Dubai’s property market some sort of a breather.

Offices suddenly turn hot property in Dubai
* Investors spent the last three months of 2017 snapping up strata-titled offices and this way try to pre-empt having to pay VAT on such transactions. December was the best month for office sales during 2017, with 210 deals being recorded, and ahead of November’s tally of 126. In all, 1,417 office units were sold in Dubai last year

* Business Bay offices were the most sought after with 105 units sold in December

* In 2017, the first quarter was the most busy sales-wise, when a combined 9,145 units (ready and off-plan) being sold in Dubai. Even though deal flow during November was weak, the fourth quarter of 2017 still managed to see 8,544 units sold

* In value terms, the first quarter of 2017 recorded the highest figure, at Dh13.68 billion, according to GCP-Reidin data. In second place was the Dh12.73 billion in the third quarter.

3 Jan 2018

Latest News


Dubai’s most expensive communities to rent or buy

Emirates Hills is the most expensive villa community to buy or rent a property in Dubai, according to Propertyfinder Group, which has analysed the emirate’s priciest areas.

According to the real estate portal, those looking to buy in the luxury villa community would shell out Dh2,604 per square foot to live there. Palm Jumeirah takes second position at Dh2,437 per sq ft, while The Lakes community, which sits next to Emirates Hills, comes in third at Dh1,369.

“Even with real estate prices dropping across the country, luxury living still comes at a premium,” Propertyfinder Group said in a report on Monday.

property-prices

A square foot in Emirates Hills costs 243 per cent more, and in Palm Jumeirah 221 per cent more, than the median asking price in Jumeirah Village Circle, the least expensive area in Dubai, Propertyfinder said.

The three top communities for purchasing villas are also the top three most expensive villa communities to rent, with Emirates Hills costing tenants Dh80 per sq ft, Palm Jumeirah Dh75 per sq ft and The Lakes Dh74 per sq ft.

Residential sales and rental prices in the UAE continued to fall between April and October, encouraging renters to consider buying properties, according to Propertyfinder Group’s 2017 Trends study released last month. Real estate prices and rents in the UAE have fallen over the past two years due to the economic slowdown, job cuts and lower housing allowances amid an increase in supply in some communities.

Mario Volpi, the chief sales officer at Kensington Exclusive Properties, said Emirates Hills continues to attract wealthy buyers “due to its exclusionary and privileged trademark and it has been the ambition of many to own a villa in this sought after community”.property

Those looking for a deal on a luxury apartment may also struggle. Downtown Dubai, the most expensive apartment community to rent in, costs tenants Dh117 per sq ft, also making it the most expensive rental community in the emirate overall, 31 per cent more costly than Dubai’s median rental price of Dh89 per sq ft.

Old Town was close behind at Dh115 per sq ft and The Views, which is located next to the Greens, comes in at Dh109 per sq ft.

Buying an apartment in a luxury area is also a costly option with Downtown Dubai the most expensive community at Dh2,132 per sq ft, followed by Old Town at Dh1,965.

“Downtown apartments command a higher rate per square foot than the average due to the fantastic lifestyle the area has to offer,” said Mr Volpi. “It is already a world-class destination but it continues to be further developed and improved upon. Having the Burj Khalifa, dancing fountains, world’s largest mall, Dubai opera etc. all in close proximity, will obviously be the magnet to attract the well-heeled of Dubai.”Property

Luxury areas such as Emirates Hills and Downtown Dubai, though, are not immune to price declines, in line with the overall market, according to Mr Volpi. Rents in downtown were on average 15 per cent higher in December 2016, compared with December 2017, he said.

“The trend for residential rents in 2018 is for a continuation of softening prices,” said Mr Volpi. “There is likely to be more potential downward movement for Downtown due to the larger available choice of apartments and the likelihood of more inventory being released.”

15 Jan 2018

VAT could impact property market in 2018, increase costs, JLL says

The introduction of value added tax (VAT) will bring volatility and uncertainty to the UAE’s property sector, which is expected to continue to decline in 2018 amid increased supply in some segments of the market, according to broker JLL Mena.

The five per cent levy, introduced on January 1, does not apply to residential rents and first supply of new homes, but is already adding pressure to an already subdued property market, which suffered declines last year.

“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact,” said Craig Plumb, Head of Research at JLL MENA.

“Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges.”

Weak economic growth, jobs cuts, lower housing allowances and increase in supply hit the UAE’s property sector last year as both rents and prices continued to slide in some segments of the market.

In Dubai, apartment prices in the fourth quarter dropped 4.2 per cent year-on-year, while villa prices dipped 2.4 per cent year-on-year, according to JLL. Declines were steeper in Abu Dhabi, with apartment prices plummeting 14 per cent year on year in the fourth quarter and villa prices plunging 12 per cent year-on-year.

Nevertheless, off-plan residential sales in Dubai rose to their highest level in 2017 since the 2008 financial crisis, with their share of total transactions rising to 60 per cent in 2017 from 10 per cent in 2010 thanks to attractive payment plans by developers. A total of 25,600 off plan properties were bought in 2017, compared with more than 34,800 sales recorded in 2008.

The UAE government introduced VAT this year as part of plans of shoring dwindling government income from oil. The levy is creating complications in some sectors in its early days of implementation, including real estate.

“One of the main complications for the construction sector will be the treatment of goods delivered after 1 January 2018 where prices have already been fixed,” said JLL. “The main concern for contractors will be the impact of VAT on cash flows, which could lead to a downward revision in payment times in construction contracts.”

An expected oversupply in the property market is another concern in 2018. In Dubai, around 570,000 units of new supply could enter the market by 2020, representing an average annual increase of 8 per cent, according to JLL.

“The recent activity in the [Dubai residential] market suggests that confidence has returned to both investors and developers, however it is worth noting that the number of new launches are significantly below their peak levels in 2006/2007 and the volume and the value of sales are also below levels recorded during 2013/2014,” the report said.

“As the market absorbs additional units, it is expected that prices will continue adjusting (downwards) with occupancy levels following a similar trend as supply growth outpaces potential demand.”

15 Jan 2018

Rents fall in popular areas of Dubai, Sharjah

Dubai: Existing as well as new tenants are successfully negotiating hefty discounts from landlords as house rents rates continue to drop sharply in Dubai and Sharjah, real estate agents and residents told Gulf News on Monday.

According to real estate agents, the supply is much greater than the demand, giving tenants the leverage to negotiate better rents.

Taking advantage of the market, tenants are getting discounted rents even in prime areas like Bur Dubai, Gold Souq and Garhoud in Dubai, while Sharjah areas like Al Majaz, King Faisal Street and Al Khan have also witnessed significant drops in rent.

The drop has created a new buzz in the real estate market with a lot of people trying to take advantage of the situation, going for cheaper options.
The situation has given one section of the market a field day — the real estate brokers.

  We have been paying Dh95,000 for our two bedroom apartment for the last five years, but this year we could negotiate with the landlord and we got a discount of Dh5,000.”

– Sajjad Ahmad | A trader based in the Gold Souq area for the last five years

“It’s a customer’s market now. The rents have gone down between 20 to 30 per cent in some areas and that has given people an opportunity to either negotiate with their landlords or look for other options, keeping us busy,” said Imran Khateeb, sales manager at Mak Homes Real Estate.

Mohammad Khalid has been living in a studio apartment in Al Baraha for almost six years, paying a higher rent after each renewal, but for the first time last year he was happy to get a discount.

“When I rented this apartment in 2012, I was paying Dh25,000 per year and it kept increasing every year and almost doubled to 43,000 in 2016. Thankfully, a lot of apartments in the building were vacant and I could negotiate with the management for a discount. This year I got further discount and I now pay Dh32,000,” said Khalid, an Indian expatriate.

Gold Souq, one of Dubai’s busiest commercial districts, where the demand for a commercial or residential property never goes down, the tenants are finally getting some relief.

“We have been paying Dh95,000 for out two bedroom apartment for the last five years, but this year we could negotiate with the landlord and we got a discount of Dh5,000. Though it is not significant but getting a discount in Gold Souq is not easy because there is always a demand, but the situation is changing now,” said Sajjad Ahmad, a trader based in the Gold Souq area for the last five years.

The situation is not much different in Sharjah either.

Yasir Muallim has been living in a two bedroom apartment in the HSBC Building on King Faisal Street for 15 years and has seen both the highs and lows of the real estate market.

“I have lived in the same apartment for 15 years now. I first rented it for Dh34,000 and has paid as high as Dh50,000 when the market was booming. Last few years I have been paying Dh44,000 but this year I got a reduced rate of Dh40,000,” said Muallim, who is a senior manager with a leading watch retailer.

Shiva Kumar, another long time Sharjah resident, got an event bigger discount.

“I have been staying in the same apartment for 18 years and I was paying Dh46,000 last year. This year during the renewal they offered me 44,000 but I could negotiate with them and get an additional 2,000 dirhams discount,” said Kumar, who is based in Jamal Abdul Nasir Street for the last two decades.

In Al Khan, another sought after area in Sharjah, Abu Mousa got a discount of Dh4,000 for his one bedroom apartment.

Real estate agent Salahuddin Sarfaraz says that the slump is not restricted to a few areas or the residential properties alone.

“Even the commercial properties are going at lower price in prime locations like Port Saeed near Deira City Centre. We used to rent out offices in Port Saeed for around Dh130 per square feet, but now it is going for around Dh100 per square feet and it might go even lower,” said Sarfaraz, General Manager of Jukaku Real Estates.

He added that even areas like Bur Dubai and Al Mankhool, which always had availability issues resulting in increasing rents, are seeing a slump now.
“There was a time when we would struggle to find a single apartment available in Bur Dubai, now the situation has changed, so a two bedroom apartment is now available for between Dh85,000 and Dh80,000 down from Dh110,000 to Dh120,000,” he added.

Another area that, according to Sarfaraz, has seen a big hit is Jumeirah, where villas are hardly finding any takers.

“In Jumeirah, a 3-4 bedroom villa that was earlier going for 250,000 per year is now available for Dh180,000, still the availability is very high. There is a similar situation in Garhoud and Mirdiff, customers are getting picky since there are a lot of options,” added Sarfaraz.

15 Jan 2018

Revealed: Dubai’s most expensive communities

Downtown Dubai and the nearby Old Town community are the most expensive areas to rent and buy apartments, according to new research from Propertyfinder Group.

According to the research, the most expensive area to buy an apartment is downtown Dubai, with an average price per square foot of AED 117 ($31), followed by Old Town at AED 115 ($31), The Views at AED 109 ($29), DIFC at AED 102 ($27) and Dubai Marina at AED 99 ($26).

Similarly, Downtown Dubai and Old Town were found to be the most expensive areas to buy an apartment, with average prices of AED 2,132 ($580) and AED 1,965 ($534) per square foot, respectively, followed by Palm Jumeirah at AED 1,838 ($500), DIFC at AED 1,796 ($488) and Dubai Marina at AED 1,570 ($427).

For villas, Emirates Hills was found to be the most expensive community to rent, with an average price per square foot of AED 80 ($21), followed by Palm Jumeirah at AED 75 ($20), The Lakes at AED 74 ($20), The Springs at AED 62 ($16) and Dubai Land at AED 61 ($16).

Emirates Hills, Palm Jumeirah and The Lakes were also found to be the most expensive areas to buy villas, with average prices per square foot of AED 2,604 ($708), AED 2,437 ($663) and AED 1,369 ($372), respectively. The top five were rounded out by Jumeirah Islands with an average price per square foot of AED 1,313 ($357) and Meadows, with AED 1,220 ($332).

Modest declines in rent
Regarding rents, in the Propertyfinder report group chief commercial officer Lukman Hajje wrote that “while a few communities have witnessed modest increases, the majority have seen the low single digit percentage declines in asking prices over the past six months.”

“This can be directly attributable to the level of new stock being handed over,” he added. “Many of these developments were sold to investors, some of whom had hoped to make a capital gain and flip or sell at or prior to completion.”

Hajje noted, however, that many of these speculators into buy to let investors, which affects not only individual developments but surrounding areas with similar price points.

15 Jan 2018

Dubai housing headed for oversupply?

With Dubai developers on a project launch spree in 2017, several thousands of units are expected to be released to the market by 2020. This could result in a situation where supply outpaces demand.

According to a JLL report on Monday, 570,000 units of new supply could enter the market by 2020, representing an average annual increase of eight per cent. Citing an Oxford Economics study, JLL says Dubai’s population is expected to grow an average of three per cent per annum. This suggests that market absorption rates will be less than the levels of new supply and thus a large number of residential units may be left vacant.

However, going by the past few years, it is unlikely that all these projects will complete on time. JLL believes only 40 per cent of the total proposed supply of residential units in Dubai has actually materialised over the past five years.

The total residential stock in Dubai is estimated at 491,000 units at the end of 2017. Key projects which were completed include Duja Tower in Trade Centre (679 units) and The Polo Residence in Meydan (598 units). 2018 will likely see up to 17,000 apartments entering the market, estimates the consultancy.

Although 2017 witnessed a slew of project launches in Dubai, their number was significantly below peak levels seen in 2006/2007 and the volume and value of sales were also below levels recorded during 2013/2014.

Both sales prices and rents declined over the year, but the rate of decline slowed over Q4. As the market absorbs additional units, it is expected that prices will continue adjusting (downwards).

JLL reckons that one of the major drivers of the more subdued market has been the slowdown in economic growth. The start of 2018 could see a reduction in activity in the real estate market due to uncertainties around the value-added tax (VAT).

“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact. Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges,” said Craig Plumb, head of research at JLL Mena.

The majority of residential sales were concentrated in the off-plan sector, where developers offer attractive prices and payment plans. A total of 25,600 off-plan properties were purchased in Dubai in 2017, with 2017 set to record the highest level of off-plan sales in Dubai since 2008, explains JLL.

Abu Dhabi
There were 3,000 residential units delivered in Abu Dhabi during 2017, with 88 per cent of completions being apartments, bringing the total stock to approximately 251,000 units.

Future supply is expected to shift to the New Islands (Saadiyat Island, Reem Island, Yas Island and Raha Beach), comprising more than 60 per cent of projects currently under construction. By 2020, 12 per cent of the total residential supply in Abu Dhabi will be on New Islands, compared to eight per cent in 2017. This trend is predominantly driven by the high number of apartment completions on both Reem Island and Al Raha Beach.

Limited future supply is expected to enter the main Abu Dhabi Island representing approximately 57 per cent of the total residential supply in Abu Dhabi in 2020 compared to 62 per cent in 2017.

Both apartment and villa sales prices saw slight declines over the last quarter of 2017, while rents remained flat for both segments. Investor sentiment has been negatively impacted since 2014 when oil prices started declining.

Sharjah
Congestion in the older residential locations in the western parts of the emirate has led a significant shift in population to more eastern locations.
A big change in the Sharjah residential market results from changes to the property ownership laws introduced in 2014 to allow non-Arab expatriates to purchase property. This has resulted in the development of a number of master-planned communities, including Al Zahia, Tilal City, Nasma Residences, Al Mamsha, Aljada and Sharjah Waterfront City.

The vast majority of the residential units in Sharjah are apartments (89 per cent), with only 11 per cent of the current stock comprising villas.
There have been announcements to construct around 30,000 additional residential units across Sharjah in coming years.

The average price of apartments sold in Sharjah has remained largely unchanged during 2017. Rents in Sharjah have continued to decline (by between six per cent and 10 per cent) over the year. This has been driven by softening of rents in Dubai, which has reduced the movement of tenants from Dubai to Sharjah. Sharjah continues to be an affordable residential destination, with average apartment rents 30 to 40 per cent lower than comparable mid-market products in Dubai.

15 Jan 2018

Dubai real estate plans to attract global investors

The Dubai Land Department (DLD) has embarked on an aggressive campaign to attract global investors to deploy funds in Dubai real estate this year.

The two-pronged campaign involves organising more editions of the Dubai Property Show internationally and taking out more road shows in key global cities all through 2018.

“With the increase in residential supply in Dubai, we need to bring in new investors to absorb the inventory,” said Sultan Butti bin Mejren, director-general, DLD.

The DLD will organise editions of the Dubai Property Show in London, Shanghai, Mumbai and Moscow. The regulator will also take out property road shows in Europe (Dublin, Antwerp and Monte Carlo), Africa (Cairo, Nairobi and Dar es Salaam), North America (Chicago and Dallas), Middle East (Kuwait, Amman, Riyadh and Jeddah) and Asia (Beijing, Singapore and New Delhi).

Each city in the global promotion plan has been meticulously selected based on feedback from developers.

Majid Saqer Al Marri, senior director, real estate promotion department, real estate investment management and promotion centre at DLD, said: “All developers, banks and registration trustees will support us in providing services to investors. We will promote both off-plan and ready properties in Dubai which have all the necessary approvals, licences and escrow accounts in place. Our message to overseas investors is that Dubai can offer yields of seven to 11 per cent compared with the three to five per cent you get in other global cities.””

“The developers and other exhibitors will decide what sort of incentives need to be offered,” said Kalpesh Sampat, managing partner at Gulf Sotheby’s International Realty. “But we have seen it done at earlier overseas roadshows.”

This initiative comes on the heels of the announcement of the Dubai Property Festival in April which is set to attract both international investors as well as residents.

Majida Ali Rashid, assistant director-general and head of the real estate investment management and promotion centre, said the DLD received 10,000 visitors at the Shanghai, Mumbai, Moscow and London editions of the Dubai Property Show last year, with the majority being investors. The value of bookings and sales made at these exhibitions reached nearly Dh3 billion.

The DLD also announced that it would organise the second edition of the Real Estate Tycoon Awards in London in September 2018. “We aim to recognise individuals and organisations who have elevated Dubai’s global standing as a real estate destination in the world,” added Al Marri.

Replying to a question on promoting Dubai real estate in Pakistan, Al Marri said: “We took into consideration different markets globally. We are waiting to explore more events in Pakistan. Pakistanis are among the top ranked investors in Dubai property.”

Discussing the impact of the value-added tax on Dubai investors, bin Mejren said: “VAT will help add value to the UAE’s infrastructure. There will not be a big effect on the property sector. It might have a small effect on commercial real estate.”

15 Jan 2018

A diplomatic solution for selling Dubai to the world

How do you promote Dubai to the world in the time it takes an express lift to travel from the ground floor of the Burj Khalifa to the observation deck?

The 90 second challenge was posed as part of a new programme to help pitch the emirate, handle negative news and encourage foreign investment, taught by the Emirates Diplomatic Academy.

Those taking part included staff from Expo2020, Dubai Chamber of Commerce, the Mohammed bin Rashid Space Centre as well as Nakheel, Emaar, Etisalat, DIFC and Dubai Holding.

The need for such training was explained by Seppe Verheyen, a research fellow on 21st Century diplomacy at the EDA, which is based in Abu Dhabi.

“On negative news, there are always so many misconceptions about Dubai and the UAE when you go abroad. In Belgium, they often ask me if it’s safe or if women can drive cars.”

Another task was to take an example of negative international press and give participants just five minutes to come up with a response.

“We asked difficult questions like whether they had enough staff in the fire department, and immigrant workers,” said Mr Verheyen.

“They’re very good at communicating internally within the UAE but they need practice in communicating with foreign institutions.”

“By not giving them much time for preparation, then the talent will rise up. We’ll then come up with the good communicators, those that need more work and those that shouldn’t communicate.”

To do this well, special skills are required beyond those of the traditional diplomat, said Bernardino Leon, the director general of the Academy and a former senior official at both the UN and the European Union,

“It’s not the typical and traditional communication discussion, the conversation goes on where the connections are between political, strategic and security communications.

“We live in a complex world [where] all elements are interrelated so if you want to communicate successfully, you have to take into account all these inputs.”

The course was created: “Because this country has a fantastic capacity to innovate.

“In the past, communication in politics was about including everyone but today, around the world, you have so many countries where politicians are considered to be part of the problem and they play politics as a division, like US President Donald Trump.

“The UAE is still advocating inclusion, tolerance, understanding, rejecting fanaticism and extremism so I think still here we have many of the answers and values.”

He said improving the efficiency of the UAE’s outreach today was vital given how many of these values were suffering abroad.

“Their message has to be heard beyond,” Mr Leon said. “This is why it’s so important that people attending this course and the communication community in the country is so aware of challenges ahead, because the battle here is really huge.”

Those taking part were mostly in their late 20s to early 40s. At the start of the course some seemed shy or found it hard to hit the right tone in their responses.

“Some have difficulties expressing themselves and some are unable to communicate long ideas very briefly,” said Dr Sara Chehab, another research fellow at the academy.

“They have to introduce themselves in 140 characters at first and not many were able to do so. But they got better at being on the spot, thinking on their feet and being more confident in how they speak which is one of the main outcomes we wanted to see.”

Language was another challenge.“Some are more comfortable in Arabic but the main communication has to be done in English,” she said.

Addressing bad press was also crucial, Dr Chehab said. “One of the things we struggle with in the Middle East is being able to answer criticism,” she said. “This programme is tailored to that.

Unfortunately, Dubai is very stereotyped in the west sometimes in a very bad way so being able to respond to them with a very good image is very important. It should be something all government entities should have because you’re more and more exposed to that.”

Mr Leon also gave a masterclass, explaining that without good communication it is the message that suffers.

“I told them to keep having trust, and make sure you have something really substantial and strong to sell. It was not only a reflection on how politics have evolved, but how political communication can help communication in general and help us overcome the crisis we are going through today.”

Paulo Portas, Portugal’s former Foreign Affairs Minister and Deputy Prime Minister, shared his experiences in another talk. “You can’t rule a country, take decisions and establish major policies without communication,” he said.

“It’s a part of the solution and if you’re not aware of modern techniques and instruments of communication and major risks, you may lose the context, the text and not be able to connect with other’s minds.”

Back home, Mr Portas found himself in the firing line over Portugal’s major financial crisis between 2010 and 2014, which produced 90 per cent negative coverage, he estimates.

“My first duty was to clarify to everybody in the world that Portugal had a problem but we would fulfil the programme, deliver the solution and overcome the crisis,” he said.

“But we had a reputation problem and reputations are built through perceptions. So my first fight all around the world was to explain that we are able to solve the problem. It was a tough moment but we delivered.”

He said transparency was key, “The aim is to have the trust so you have to explain yourself.

“Dubai wants to perfect its communication strategy and it’s a new area for many people. New technologies are surprising for many people so you have to update your information, graduate your techniques and know how to use new communication strategies and instruments to achieve better results in the dialogue with your society and the exterior world.”

Mr Portas said the UAE was one of the countries that understood globalisation and digitisation better.

“It’s a rising power,” he said. “The UAE is more or less like the virtual border between the old and the new world. It’s a sort of United Nations of the world and this is a very modern example. With good ideas in the right moment, you can build a fantastic nation project.”

Mona Al Marri, director general of the Dubai Media Office, believes the programme is needed for the entire country.

“It’s very educational and it’s about knowledge and experience sharing from people in the industry themselves, from politics to business and crises,” she said.

“Today, we are living in the middle of a very disturbed region so we need to be equipped — not just our political leaders and chief executives, but also our government communication employees who are meant to know, not just the agenda and directions of the leadership, but also how to manage them.”

For the Dubai Government, she said, the Emirate was adopting a model of soft power pioneered by Sheikh Zayed, the Founding Father of the UAE.

“We were raised to see Sheikh Zayed, the founding father of the UAE, doing a lot of soft power, so the programme is valuable and it gives us a great network to create for the future.”

13 Jan 2018

Dubai’s the Very Model of a Modern Mideast Economy

For more than 100 years, the Middle East has been defined by oil exploration, production and its boundaries. Now the region is getting repurposed by its aspiration to grow beyond fossil fuel. The shake-up in Saudi Arabia’s royal family was as much about becoming a 21st-century economy as it was about rooting out corruption.

None of the region’s petrostates has moved further from its oilfield roots than Dubai, which has been diversifying its economy since the 1970s. The result is a thriving gateway to globalization with a superior economic outlook.

The largest of the seven United Arab Emirates and home to more than 200 nationalities, Dubai is growing faster than its neighbors as the No. 3 regional tourist destination behind Turkey and Saudi Arabia. Situated within eight flying hours of two-thirds of the world’s population, Dubai has the region’s busiest international airport measured in total passengers and fourth-largest airline based on revenue per passenger kilometer. The city’s 2,717-foot Burj Khalifa is the world’s tallest building, rising above Jebel Ali, the ninth-largest port. The relentless commitment to infrastructure development turned Dubai into the Mideast hub for finance, information technology, real estate, shipping and even flowers.

Moving Ahead
Year-over-year percentage growth in annual GDP
Annual GDP
Oil production, which once accounted for 50 percent of Dubai’s gross domestic product, contributes less than 1 percent to GDP today. The transformation of the economy accelerated as oil surged to a record $147 a barrel in 2008 and continued in the aftermath of the financial crisis when oil plummeted to a low of $26 in 2016, according to data compiled by Bloomberg. The building boom persisted even as Dubai World, the government-owned holding company, sought a “standstill” on debt repayments while it restructured $25 billion of debt in November 2009 and some borrowers fled the emirate as a result.

The credit crunch and ensuing slowdown made Dubai even more determined to overcome the Mideast oil legacy. Energy officials in 2016 said renewable energy will account for 25 percent of the emirate’s needs in 12 years. Sheikh Mohammad Bin Rashid Al Maktoum, vice president and prime minister of the UAE and ruler of Dubai, a year ago said that the renewable percentage will rise to 44 percent by 2050. That’s when Dubai aims to produce 75 percent of its energy requirements from clean sources.

The strategy for making the emirate a green economy included a policy of expanding infrastructure. Even as oil prices declined 50 percent in 2014, construction continued unabated for Expo 2020, which aims to showcase “opportunity, mobility and sustainability” with a specific focus on education, financial capital, logistics, natural ecosystems and biodiversity, among other themes.

All of which is reflected in the stock market, where Dubai is unique in the Persian Gulf. Historically, equity prices of Middle Eastern companies rise and fall with the price of crude. Not in Dubai. Since 2003, when oil began its five-year march to all-time highs, the correlation between share prices of its real estate companies and the oil price declined to 0.3 from 0.7, a transition statisticians characterize as “moving in a similar direction” to “no relation,” according to data compiled by Bloomberg.

An Oil Economy No Longer

Monthly correlation coefficients of Dubai real-estate share prices* and the price of crude

CRUDE OIL PRICES

Between 2009 and 2012, when oil doubled its value, the Dubai stock market appreciated 14 percent and its real estate companies gained 48 percent. With oil down 37 percent since 2013, the Dubai stock market is up 155 percent and real estate firms are 135 percent more valuable, according to data compiled by Bloomberg.

Corporate Dubai is represented by the Dubai Financial Market General Index, consisting of 36 companies. Since 2003, the seven companies that make up the real estate and construction sector of the index produced a 789 percent total return (income plus appreciation), beating the benchmark’s 417 percent as well as the 250 percent return for the 242-member Bloomberg World Real Estate Index. No other market in the Persian Gulf comes close to replicating the performance of Dubai real estate.

Dubai now is poised to be the growth leader among the six countries in the Gulf Cooperation Council, with GDP expanding 3 percent or more this year and in 2019, according to economists surveyed by Bloomberg. Saudi Arabia, which outperformed Dubai in growth in five out of the six years before 2016, remains the laggard.

4 Jan 2018

Dubai real estate sector to soften further in 2018, says Core Savills

Dubai rental rates will continue to decline in 2018 following a challenging few years, with yield compression expected across residential markets in particular, according to the latest report from the consultancy Core Savills.

“Further rental declines, the ongoing strength of the US dollar and the imminent, albeit probably limited, inflationary effects of the introduction of VAT in the emirates are all expected to compress investment yields,” the report said.

Real estate developers’ margins are “precariously shrinking to below viable levels” in the wake of intensified competition on sales prices, particularly in the affordable segment, Core Savills added.

Its report highlighted numerous challenges to Dubai’s real estate market as rental demand remains muted and prices continue to fall. The drivers for yield compression vary according to segment, it said.

Prime residential real estate saw a weakening of prices between 2014 and 2016 and an acceleration of yield compression representing a stark 11.2 per cent decline in 2017. However, comparatively stable rents encouraged tenants to shift towards ownership, driving down rental demand and causing prices to steady last year.

“In the near-term we expect prices to continue stabilising in the prime and upper mid-market segment while the current decline in rents is anticipated to decelerate, allowing yield compression to slow down,” said David Godchaux, the chief executive of Core Savills.

In the affordable and lower mid-market segment, a stronger decline in sale prices and comparatively minor weakness in rents over the same period allowed yields to rise and buyer demand to pick up.

Yields declined by 3.8 per cent from mid-2016 to the end of 2017 – only half of that witnessed in the prime segment.

However, unlike for prime real estate, demand was led by investors not end-users, due to affordability issues. With developers increasingly drawn to this affordable and lower mid-market segment, a bulging supply pipeline currently means high yields for investors are unlikely to be sustained through 2018.

“If rental demand of these projects is insufficient at handover, this supply surge is expected to exert considerable downward pressure on rents, leading to faster yield compression,” Mr Godchaux said.

“Eventually, this contraction in yields will reduce investor demand, in turn pulling sales prices down over the mid-term.”

Dubai’s grade A commercial property market is sustaining steady yields due to strong demand from blue-chip occupiers, the report said. However, once again, a strong office pipeline over the next three years is expected to apply downward pressure on rents and yields.

The warehousing and logistics sector is also struggling to maintain rental levels. The segment has seen dampening levels of demand and rental softening across the board due to a slowdown in trade volumes and low oil prices.

Resulting consolidations among operators are creating an upsurge in supply of logistics units, which is expected to further drive down rents.

Despite ongoing market softening, investment opportunities exist in certain segments of the market, according to the report. International-grade commercial stock is witnessing higher levels of occupancy and steady yields in the range of 9 to 12 per cent, given the relative shortage of such assets, the report said.

Meanwhile, a general “commoditisation of the office investment market” is under way, with real estate investment trusts (Reits) becoming increasingly popular.

“Given that Reit’s represent a notably small share of the UAE’s listed real estate market compared to other global hubs, the sector is expected to continue expanding over the mid-term,” Mr Godchaux said.

“By further integrating real estate and capital markets, Reits will potentially increase funding avenues for developers as well as provide smaller investors access to diversified property investments.”

Dubai is expected to have one of the highest “generation Z to generation X” ratios among global cities in the next 10 years, which will provide a catalyst for migratory and social change and spur growth of the real estate market in future, the report said.

13 Jan 2018

Investors rush to pick up Dubai’s affordable homes

Dubai: Investor alert — buyers rushing to snap up Dubai’s affordable property options need to get a reality check. The higher yields they expect to realise from these may be fleeting.

Because there are too many of these similarly priced homes are getting built now for delivery by 2020, “the high yields expected by many post-handover are unlikely to be sustained”, says a new market update from the consultancy Core Savills. More so, “if rental demand of these projects is insufficient at handover, this supply surge is expected to exert considerable downward pressure on rents (and) leading to faster yield compression.

“Eventually, this contraction in yields will reduce investor demand, in turn pulling sales prices down over the midterm.”

An estimated 120,000 plus properties could be added in Dubai by 2020-21, with about 30-40 per cent deemed affordable. These are units carrying price tags of under Dh1,000 a square foot and with smaller built areas as well (800-1,100 square feet being the norm).

For the moment, investors are piling into this category, thinking they would be able to generate better returns from future rentals.

Between 2014-16, “the stronger decline in (property) prices and only a slight weakness in rents allowed yields in this segment to rise 68 base points representing a relative 8 per cent increase, which worked towards increasing demand,” the report adds. “Most of this buyer demand was led by investor buyers as opposed to end users, who could not afford to shift to ownership due to continued affordability issues.”

For the longer term sustainability of the market, today’s tenants will need to start buying and become end users. But, based on market evidence, these tenants are staying put. And which could be why rents within the mid- to lower-end of Dubai’s residential space have not dropped as much as those in high-end areas did.

As for the high-end areas, prices could stabilise and the rental declines start to slow down, Core reports.

For the overall market, apart from rental declines, factors within the broader economy too could pull down yields. There is the “ongoing strength of the dollar and the imminent — albeit probably limited — inflationary effects of the introduction of VAT are expected to compress investment yields.”
In Dubai’s office realty space, it’s all hunky-dory at the top end. Prime districts — including DIFC, D3, Tecom and One Central for example — all experience high demand, evidenced by steady pre and post-leasing activity, the Core report notes.

“Master developers of Grade A stock have traditionally preferred not to sell due to the high rental demand. Such developers are typically cash-rich and can therefore sustain the leasing cycle, allowing them to hold on to the stock indefinitely.”

As such, there were fewer institutional investors active in this tier due to the limited of investment-grade stock available for sale. Apart from limited stock available for them to buy, they may also be put off by the shorter leasing periods offered at prime commercial property.

“Institutional investors typically prefer investment grade assets that are tenanted by blue-chip occupiers with long-term leases of 15 years or more. The average lease terms for prime occupiers in Dubai, however, are much shorter, ranging from five to nine years, largely due to the 4 per cent transfer fee applicable on the total lease value for a duration above 10 years, which deters occupiers from considering longer term options. “Furthermore, many office complexes within freehold areas are developed and controlled by free zone authorities, while land in onshore areas remains leasehold.”

Reits spice up the action in Dubai’s property market

In the last two years, real estate investment trusts (Reits) have snapped up quite a few high-exposure properties and projects, such as the “purchase of The Edge, Uninest and South View School by ENBD REIT”. According to David Godchaux, CEO of Core Savills, “Given that Reit’s currently represent a notably small share of the UAE’s listed real estate market compared to other global hubs, the sector is expected to continue expanding over the midterm. By further integrating real estate and capital markets, Reits will potentially increase funding avenues for developers as well as provide smaller investors access to diversified property investments.”

13 Jan 2018

Tiger announces Dh10b projects in Dubai, Sharjah

Dubai: Tiger Properties has announced plans to develop 18 real estate projects in Dubai and Sharjah, from 2018 until the end of 2020, at a total cost of Dh10 billion.
The group said it will launch the “The Square” project in Dubai with a total of 400 units, costing Dh500 million, which will be the first of 12 projects to be launched this year.

On the sidelines of a press conference held by the group in Dubai to announce the launch of “The Square” project, Eng. Walid Al Zoubi, Chairman of Tiger Group, revealed the company’s intention to expand its portfolio to include other projects in Abu Dhabi, where a number of projects are being considered for implementation during the next phase as well as plans to implement an integrated city in Ajman.

Al Zoubi noted that during the past year, the company handed over 2,000 housing units for both sale and lease. It is expected that 2,000 new units will be delivered in 2018. The company’s investment plan includes the development of 13 projects in Dubai and five projects in Sharjah.
He referred to the Group’s investments in the hospitality sector, adding that Tiger Group is also plans to enter the education sector for the first time in the UAE.

12 Jan 2018

VAT launch to ‘lure more real estate investors’ to Dubai

The introduction of value added tax (VAT) in the UAE from next month will provide major new incentives for institutional investors to enter the Dubai real estate market, according to the head of one of the country’s largest brokerages.

Firas Al Msaddi, CEO of fäm Properties, believes that the new level of transparency in real estate transactions brought about by the introduction of VAT will provide a vital extra incentive to institutional investors.

From January 1, 2018, the new 5 percent VAT Law will be applied to all products and services in the UAE, unless exempted or zero rated by federal law, and Al Msaadi said he is confident that Dubai real estate will benefit from a more open and clear system in which to invest.

“When you consider the audit related implications of VAT across almost every industry and particularly in real estate, combined with the government initiatives of open source data, the market becomes increasingly attractive to global players,” said Al Msaddi.

“I’ve spoken to numerous fund managers in Geneva, London and other major financial hubs in recent months and they have all indicated that VAT will have a positive impact on the market here and they expect renewed interest in investment opportunities as a result.”

According to the Dubai Land Department, 217 nationalities invested a total of AED151 billion in Dubai’s real estate market between January 2016 and June 2017 and Al Msaddi forecasts a surge of activity from the start of 2018 from sovereign wealth funds, regional asset managers, pension and insurance companies.

“If the new laws help to improve the ethics and integrity around the real estate market in general, that can only be seen as a positive step in my mind, and institutional investors from around the world will take notice of this new system.

“There have obviously been initial concerns about VAT increasing costs for developers, brokerages, landlords and the end user, however, it will not directly affect the sale or rental price of residential properties, but it will have an indirect effect on the market as a whole.”

Al Msaddi added: “If we calculate the current registration fee of 4% for one unit, on average, is AED54,000 and for a building or villa is AED101,000, with the additional 5% VAT applied to registration costs, the average person will pay an extra AED2,700 for a unit transfer and AED5,000 for a building or villa transfer.”

23 Dec 2013

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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