Mapping the UAE’s transformation

Published : 10 Nov 2017 ,      Source : The National

The view of Abu Dhabi's skyline from Fairmont construction site near Marina Mall.

The World Economic Forum has provided access to a treasure trove of digital knowledge tools that identify how we can meet today's challenges and opportunities

The World Economic Forum (Wef) has provided public access to its “Transformation Maps”, which are dynamic, digital knowledge tools which show which key factors are shaping countries, industries and issues such as Climate Change and how they interact with each other.

This has been timed to coincide with its summit in the UAE this weekend; the Annual Meeting of the Global Future Councils 2017 being held in Dubai. Seven hundred leading experts from around the world are participating under the theme The Globalization of Knowledge in a Fractured World, and will seek solutions and develop ideas to foster international cooperation and shared responses to global challenges, the Wef said.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said that the UAE had become a centre for exploring the potential impact of the Fourth Industrial Revolution and pioneer in shaping this future of technological advancement including the development of artificial intelligence.

Work on the transformation maps began in 2015, but the idea for harnessing the flow of information in an increasingly digital world has been in the mind of the Wef for almost 15 years.

This map of the transformation of the UAE is part of this overall effort says Jeremy Jurgens, the Wef’s head of knowledge and digital engagement and the architect of this initiative.

“This knowledge was drawn from our experts in the UAE and via workshops over two years,” he says.

Here are they key factors driving the transformation of the UAE:

Environmental Sustainability and Resource Security

The UAE is seeking to mitigate the effects of climate change with renewable energy sources. The de-carbonization of infrastructure and energy projects, and helping neighbouring countries to grapple with climate change, are also key parts of the UAE government’s strategy.

Diagram
Environmental Sustainability and Resource Security / WEF

Human Capital Development

The UAE is developing talent among its citizenry, especially in the private sector. Here education, the balance of the labour market and behavioural science all come into play.

diagram
Human Capital Development / WEF

The Innovation Imperative

The UAE is planning a future economy that does not rely on natural resources. The oil & gas industry, education, technology and entrepreneurship are some of the critical areas which converge when it comes to innovation as the UAE seeks to shift away from oil dependence.

diagram
The Innovation Imperative / WEF

Regional and Geopolitical Positioning

The UAE is seeking peace through economic development and good governance. Humanitarian action is one of the important factors here as UAE develops a response to violent extremism that goes beyond military intervention.

diagram
Regional and Geopolitical Positioning / WEF

Economic Diversification

Construction and manufacturing can help diversify the UAE’s oil-dependent economy. Economic diversification is a key element of the Vision 2021 programme and new laws for competitiveness, investment in infrastructure and telecommunications have important roles in reaching this goal.

Diagram
Economic Diversification / WEF

Investing in Infrastructure

The UAE’s infrastructure could be the foundation for a bright future especially regarding the development of the digital economy and its impact on transport. The country has pointed the way forward for the broader Middle East and North Africa region.

diagram
Investing in Infrastructure / WEF

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Related News

All you need to know about registering for VAT?

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

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

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

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

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

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

VAT rules VAT rules

VAT rules

 

6 Dec 2017

UAE’s Federal Tax Authority announces full VAT supplies list

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

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

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

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

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

VAT in education

UAE vat in all sectors

 

6 Dec 2017

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

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

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

home buying plan

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

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

qouate

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

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

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

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

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

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

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

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

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

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

3 Dec 2017

Sheikh Mohammed signs VAT Executive Regulation

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

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

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

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

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

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

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

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

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

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

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

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

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

28 Nov 2017

Real estate risk allocation and insurance tips for Dubai property investors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reporting by Jeremy Scott and Justin Carroll

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

29 Nov 2017

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

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

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

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

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

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

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

Know the law

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

 

17 Oct 2017

Making cities an extension of a workplace

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

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

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

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

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

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

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

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

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

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

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

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

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

25 Nov 2017

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

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

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

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

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

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

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

Notes:

Logistics sector

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

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

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

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

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

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

24 Nov 2017

Pay as you throw waste fee for all Dubai buildings soon

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

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

commets

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

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

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

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

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

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

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

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

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

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

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

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

Zone-wise implementation

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

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

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

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

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

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

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

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

Highlights
Dubai will announce a tipping fee soon.

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

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

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

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

26 Nov 2017

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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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