• 1 Nov 2017

    UAE’s Azizi says Palm Jumeirah project to open in Q4 2018

    UAE-based Azizi Developments said on Wednesday it is on track with the construction of Mina by Azizi on Palm Jumeirah, with the project expected to be ready by the last quarter of 2018.

    Architecturally inspired by the traditional Arabic Dhow and the waves, Mina by Azizi, a AED780 million project, will feature 178 fully-furnished and serviced residences, divided into one and two-bedroom apartments, and three and four-bedroom apartments and penthouses.

    Farhad Azizi, CEO, Azizi Developments said: “Investor confidence in the UAE is increasing and is reflected in the registration of 68 projects during the first half of 2017 valued at AED21 billion.

    “Mina by Azizi was established to meet the growing demand for serviced residences specifically on Palm Jumeirah. Azizi Developments is focused on driving growth and capturing this niche segment by delivering unrivalled living spaces for the residential market in Dubai.”

    Azizi Developments previously announced the handover of its AED350 million Royal Bay, a luxury residential property project on the Palm Jumeirah in Augustr, which is also supplementing the growing demand for luxury serviced residences in Dubai.

    These developments are in addition to its AED12 billion Azizi Riviera project in Meydan One, as well as other projects in Dubai Healthcare City, Studio City, Sports City and Jebel Ali.

  • 22 Nov 2017

    Revealed: work starts on $6.8bn 30,000-home Dubai mega project

    UAE-based Azizi Developments has started construction of its AED25 billion ($6.8 billion) Azizi Victoria mega project in the Mohammed Bin Rashid Al Maktoum City – District Seven in Dubai.

    Spread over a construction area of 33 million square feet, Azizi Victoria comprises 105 mid and high-rise residential buildings of 30,000 units of studio, one-, two-, three- and four-bedroom apartments, a retail district and two hotels.

    The buildings will be mixed-use constructions of housing apartments, retail establishments, restaurants and hotels, the developer said in a statement.

    It added that the development will also include educational institutions, high-street retail establishments, hospitality, and outdoor recreation spaces. Construction of the project is expected to be completed in four phases with phase 1 scheduled for May 2019 and phase 2 in July 2019.

    The project is twice the size of the Azizi Riviera canal-development in Meydan One.

    Saeed Humaid Al Tayer, chairman and CEO of Meydan Group, said: “The success of Azizi Riviera has reinforced the need for urban community living spaces in Dubai. The Azizi Victoria is the latest offering resulting from the strategic partnership of Meydan Group and Azizi Developments to cater to this demand. We are confident of a positive response to Azizi Victoria, reflecting the strength and dynamism of the Dubai property market”.

    Mirwais Azizi, chairman of Azizi Developments, added: “Azizi Victoria is our newest offering to those who wish to invest in a unique lifestyle equipped with state-of-the-art community facilities. Situated in the heart of Dubai, Azizi Victoria will further our vision of creating urban living spaces which will revolutionise the meaning of community living in Dubai.”

    The latest announcement comes on the back of the developer’s success at this year’s Cityscape Global and the sellout of Azizi Riviera phase one and two canal-facing projects in Meydan One.

  • 22 Nov 2017

    VAT can prompt UAE residential developers to get more generous

    Dubai: Come 2018, property buyers can expect UAE developers to turn even more generous with their sales incentives, especially on the post-handover payment plans.

    This is so because the upcoming VAT regulations on residential sales offers developers a zero rate on all residential sales within three years of the completion of a project. Any home sale done after those three years will come under the 5 per cent VAT scanner.

    Because of that, developers have a definite timeline before them to complete their sales and not have to pay VAT. This being the case, UAE’s property market, especially the one in Dubai, can expect developers to launch off-plan sales even before they start construction on site.

    Or they could “bring in more attractive payment plans,” said Faisal Durrani, Head of Research at Cluttons. “In extreme cases, a developer or two is offering payment schemes 10 years after handover. But we could see more of that happening as developers ensure they sell all of their stock at a particular building.”

    Interestingly, developers have also been given a VAT-specific reason to finish construction. “They will be able to claim a rebate on the VAT of building materials provided they are able to sell within three years of completion,” said Durrani. “There is an incentive for developers that the schemes they bring to the market can be absorbed. But how people claim rebates need to be worked out.

    “Clearly, if they are unable to sell within three years, that project is not a success. Developers in Dubai have been so used to the “build and they will come” mentality. VAT will go some way in making sure the stock developers bring in can be absorbed. That’s a bit of a sea change for developers in Dubai.” According to Sailesh Irani, Director at Sun & Sand Developers, “All VAT payments made by a developer to a building material supplier can be offset. That eventually comes through as a credit in the developer account.”

    The surge in off-plan sales was there for the better part of this year, and it’s only over the last four weeks that there has been some drop in such activity. Market sources say that the period before, during and after Cityscape Global in Dubai recorded higher than average off-plan launches, and that developers might be taking a bit of a breather now.

    “It could be that developers will need to think about building more affordable projects, to be reasonably sure of completing sales within the stipulated time,” said Durrani. “When we are talking about prime properties, those between Dh1,500-Dh2,000 a square foot, is the segment that is seeing the sharpest correction now.

    “Thankfully, the days of speculative developers have gone. These one-off developers were weeded out because of regulatory changes, the doubling of registration fees, implementation of escrow, etc..”

    But, according to Cluttons, the super-prime end of the Dubai market is more or less unaffected. The wealthy are still making those multi-million dollar purchases.

    But a potential headache looms — “The Chinese are currently the fourth largest buyer demographic in Dubai property outside of GCC nationals. But there are restrictions on how much they can take out of China and spend overseas — right now, it’s set at $100,000 (Dh367.300) per person each year.

    “There could be stricter policing by Chinese authorities over whether these levels are being breached. The property markets in Canada, the UK and Dubai could be affected if this policing gets serious.”

    BOX

    Dubai developers need to give serious thought to affordable options

    The VAT guidelines are clear — no VAT on residential units at buildings within three years of their completion. But for developers to be extra sure, they need to rethink their offer mix.

    Sticking with upscale projects — at Dh1,500-Dh2,000 a square foot — as their preference comes with a risk. There is already a sizeable supply of such properties in the marketplace. More of the same could have difficulty landing buyers.

    “The affordable issue is yet to be addressed in full — the Dubai Land Department has been thinking about a quota system,” said Faisal Durrani of Cluttons. “In this, a certain proportion of the project is made affordable — but it’s not clear whether it’s affordable for tenants or buyers.

    “They aim to have these in central locations and not the outskirts. It could mean a separate building or the affordable part is done on a lower floor. But it remains to be seen how it’s played out in a market like Dubai. Abu Dhabi has done it, with the Municipality allowing landlords to convert buildings, provided they meet certain criteria like size, location, proximity to bus stops. These are targeted at people earning less than Dh6,000 a month.

    “The rents they can charge must only be a third of the tenant’s income. And the landlords are being guaranteed an yield of 30 per cent. A yield of 30 per cent — that’s probably too hard to resist.”

  • 21 Nov 2017

    How UAE Investors Can Diversify their Portfolio

    The UAE’s economy is looking a lot stronger than it was at the beginning of the year. The IMF recently raised its growth projections to 3.4 percent in 2018, up from 1.7 percent in 2017. The oil price has also recovered to above $50 a barrel, which is encouraging for anyone in the Middle East. While this is all good news for investors in the UAE, it doesn’t mean there are no further risks on the horizon.

    Why Diversify?

    The UAE economy is very closely tied to the energy industry and to Dubai’s Real Estate Sector. Both industries have had their ups and downs in the last decade. While things are looking up, it’s still a good idea for residents of the UAE to consider diversifying their investments. Investors can diversify by region and by sector or industry. Almost any investment in the UAE is going to be influenced by the Real Estate and Energy market – so diversifying means looking at other regions and other sectors.

    How to Diversify

    There are several avenues investors can go down to invest around the world. Some brokers offer trading in contracts for difference (CFDs), which are a really simple instrument to gain direct market exposure. The advantage of a CFD account is that one platform gives an investor access to several
    asset classes, including shares, forex and commodities. Since the AED is pegged to the US Dollar, investors may want to diversify into currencies like the Euro and Japanese Yen. As far as sectors go, investing in large tech companies is a good way to diversify away from energy and real estate. Companies like Amazon, Google and Tesla are disrupting industries around the world. Their performance is driven by innovation rather than global growth. That’s important for UAE investors, as the local economy is closely linked to global growth and energy demand. Breaking free of those links can mean your investments are safer.

    buffallo

    ETFs

    A good way to get diversified exposure to a country or sector is by investing in an ETF, or exchange-traded fund. The following are a few of the ETFs to consider. The Nasdaq 100 ETF, which is traded on the share code QQQ, gives investors exposure to some of the biggest tech companies in the world. It’s a great way to invest in global tech companies in one trade without having to pick and choose individual companies.

    For exposure to Japan, the iShares MSCI Japan fund (share code: EWJ) invests in the 370 largest companies in Japan. While the fund is priced in US Dollars, the exposure is in Japanese Yen. That means the fund performs well if Japanese stocks are performing, or if the Yen appreciates. The Japanese currency is often viewed as a safe haven that does well when volatility increases.

    coins

    The European economy is now recovering well and any investor with a global portfolio should own some European investments. A good ETF with Euro exposure is the SPDR STOXX Europe 50 ETF. This fund invests in the largest 50 companies in Europe, including Nestle, Novartis and HSBC.

    Any investor should hedge their bets. And, when doing so they should look at the types of investments they don’t already own, and that differ from what they do own. For UAE investors, the ETFs listed above provide a good mix of sectors and regions that may still perform if the UAE economy hits another bumpy patch.

UAE’s Azizi says Palm Jumeirah project to open in Q4 2018

UAE-based Azizi Developments said on Wednesday it is on track with the construction of Mina by Azizi on Palm Jumeirah, with the project expected to be ready by the last quarter of 2018.

Architecturally inspired by the traditional Arabic Dhow and the waves, Mina by Azizi, a AED780 million project, will feature 178 fully-furnished and serviced residences, divided into one and two-bedroom apartments, and three and four-bedroom apartments and penthouses.

Farhad Azizi, CEO, Azizi Developments said: “Investor confidence in the UAE is increasing and is reflected in the registration of 68 projects during the first half of 2017 valued at AED21 billion.

“Mina by Azizi was established to meet the growing demand for serviced residences specifically on Palm Jumeirah. Azizi Developments is focused on driving growth and capturing this niche segment by delivering unrivalled living spaces for the residential market in Dubai.”

Azizi Developments previously announced the handover of its AED350 million Royal Bay, a luxury residential property project on the Palm Jumeirah in Augustr, which is also supplementing the growing demand for luxury serviced residences in Dubai.

These developments are in addition to its AED12 billion Azizi Riviera project in Meydan One, as well as other projects in Dubai Healthcare City, Studio City, Sports City and Jebel Ali.

1 Nov 2017

Revealed: work starts on $6.8bn 30,000-home Dubai mega project

UAE-based Azizi Developments has started construction of its AED25 billion ($6.8 billion) Azizi Victoria mega project in the Mohammed Bin Rashid Al Maktoum City – District Seven in Dubai.

Spread over a construction area of 33 million square feet, Azizi Victoria comprises 105 mid and high-rise residential buildings of 30,000 units of studio, one-, two-, three- and four-bedroom apartments, a retail district and two hotels.

The buildings will be mixed-use constructions of housing apartments, retail establishments, restaurants and hotels, the developer said in a statement.

It added that the development will also include educational institutions, high-street retail establishments, hospitality, and outdoor recreation spaces. Construction of the project is expected to be completed in four phases with phase 1 scheduled for May 2019 and phase 2 in July 2019.

The project is twice the size of the Azizi Riviera canal-development in Meydan One.

Saeed Humaid Al Tayer, chairman and CEO of Meydan Group, said: “The success of Azizi Riviera has reinforced the need for urban community living spaces in Dubai. The Azizi Victoria is the latest offering resulting from the strategic partnership of Meydan Group and Azizi Developments to cater to this demand. We are confident of a positive response to Azizi Victoria, reflecting the strength and dynamism of the Dubai property market”.

Mirwais Azizi, chairman of Azizi Developments, added: “Azizi Victoria is our newest offering to those who wish to invest in a unique lifestyle equipped with state-of-the-art community facilities. Situated in the heart of Dubai, Azizi Victoria will further our vision of creating urban living spaces which will revolutionise the meaning of community living in Dubai.”

The latest announcement comes on the back of the developer’s success at this year’s Cityscape Global and the sellout of Azizi Riviera phase one and two canal-facing projects in Meydan One.

22 Nov 2017

VAT can prompt UAE residential developers to get more generous

Dubai: Come 2018, property buyers can expect UAE developers to turn even more generous with their sales incentives, especially on the post-handover payment plans.

This is so because the upcoming VAT regulations on residential sales offers developers a zero rate on all residential sales within three years of the completion of a project. Any home sale done after those three years will come under the 5 per cent VAT scanner.

Because of that, developers have a definite timeline before them to complete their sales and not have to pay VAT. This being the case, UAE’s property market, especially the one in Dubai, can expect developers to launch off-plan sales even before they start construction on site.

Or they could “bring in more attractive payment plans,” said Faisal Durrani, Head of Research at Cluttons. “In extreme cases, a developer or two is offering payment schemes 10 years after handover. But we could see more of that happening as developers ensure they sell all of their stock at a particular building.”

Interestingly, developers have also been given a VAT-specific reason to finish construction. “They will be able to claim a rebate on the VAT of building materials provided they are able to sell within three years of completion,” said Durrani. “There is an incentive for developers that the schemes they bring to the market can be absorbed. But how people claim rebates need to be worked out.

“Clearly, if they are unable to sell within three years, that project is not a success. Developers in Dubai have been so used to the “build and they will come” mentality. VAT will go some way in making sure the stock developers bring in can be absorbed. That’s a bit of a sea change for developers in Dubai.” According to Sailesh Irani, Director at Sun & Sand Developers, “All VAT payments made by a developer to a building material supplier can be offset. That eventually comes through as a credit in the developer account.”

The surge in off-plan sales was there for the better part of this year, and it’s only over the last four weeks that there has been some drop in such activity. Market sources say that the period before, during and after Cityscape Global in Dubai recorded higher than average off-plan launches, and that developers might be taking a bit of a breather now.

“It could be that developers will need to think about building more affordable projects, to be reasonably sure of completing sales within the stipulated time,” said Durrani. “When we are talking about prime properties, those between Dh1,500-Dh2,000 a square foot, is the segment that is seeing the sharpest correction now.

“Thankfully, the days of speculative developers have gone. These one-off developers were weeded out because of regulatory changes, the doubling of registration fees, implementation of escrow, etc..”

But, according to Cluttons, the super-prime end of the Dubai market is more or less unaffected. The wealthy are still making those multi-million dollar purchases.

But a potential headache looms — “The Chinese are currently the fourth largest buyer demographic in Dubai property outside of GCC nationals. But there are restrictions on how much they can take out of China and spend overseas — right now, it’s set at $100,000 (Dh367.300) per person each year.

“There could be stricter policing by Chinese authorities over whether these levels are being breached. The property markets in Canada, the UK and Dubai could be affected if this policing gets serious.”

BOX

Dubai developers need to give serious thought to affordable options

The VAT guidelines are clear — no VAT on residential units at buildings within three years of their completion. But for developers to be extra sure, they need to rethink their offer mix.

Sticking with upscale projects — at Dh1,500-Dh2,000 a square foot — as their preference comes with a risk. There is already a sizeable supply of such properties in the marketplace. More of the same could have difficulty landing buyers.

“The affordable issue is yet to be addressed in full — the Dubai Land Department has been thinking about a quota system,” said Faisal Durrani of Cluttons. “In this, a certain proportion of the project is made affordable — but it’s not clear whether it’s affordable for tenants or buyers.

“They aim to have these in central locations and not the outskirts. It could mean a separate building or the affordable part is done on a lower floor. But it remains to be seen how it’s played out in a market like Dubai. Abu Dhabi has done it, with the Municipality allowing landlords to convert buildings, provided they meet certain criteria like size, location, proximity to bus stops. These are targeted at people earning less than Dh6,000 a month.

“The rents they can charge must only be a third of the tenant’s income. And the landlords are being guaranteed an yield of 30 per cent. A yield of 30 per cent — that’s probably too hard to resist.”

22 Nov 2017

How UAE Investors Can Diversify their Portfolio

The UAE’s economy is looking a lot stronger than it was at the beginning of the year. The IMF recently raised its growth projections to 3.4 percent in 2018, up from 1.7 percent in 2017. The oil price has also recovered to above $50 a barrel, which is encouraging for anyone in the Middle East. While this is all good news for investors in the UAE, it doesn’t mean there are no further risks on the horizon.

Why Diversify?

The UAE economy is very closely tied to the energy industry and to Dubai’s Real Estate Sector. Both industries have had their ups and downs in the last decade. While things are looking up, it’s still a good idea for residents of the UAE to consider diversifying their investments. Investors can diversify by region and by sector or industry. Almost any investment in the UAE is going to be influenced by the Real Estate and Energy market – so diversifying means looking at other regions and other sectors.

How to Diversify

There are several avenues investors can go down to invest around the world. Some brokers offer trading in contracts for difference (CFDs), which are a really simple instrument to gain direct market exposure. The advantage of a CFD account is that one platform gives an investor access to several
asset classes, including shares, forex and commodities. Since the AED is pegged to the US Dollar, investors may want to diversify into currencies like the Euro and Japanese Yen. As far as sectors go, investing in large tech companies is a good way to diversify away from energy and real estate. Companies like Amazon, Google and Tesla are disrupting industries around the world. Their performance is driven by innovation rather than global growth. That’s important for UAE investors, as the local economy is closely linked to global growth and energy demand. Breaking free of those links can mean your investments are safer.

buffallo

ETFs

A good way to get diversified exposure to a country or sector is by investing in an ETF, or exchange-traded fund. The following are a few of the ETFs to consider. The Nasdaq 100 ETF, which is traded on the share code QQQ, gives investors exposure to some of the biggest tech companies in the world. It’s a great way to invest in global tech companies in one trade without having to pick and choose individual companies.

For exposure to Japan, the iShares MSCI Japan fund (share code: EWJ) invests in the 370 largest companies in Japan. While the fund is priced in US Dollars, the exposure is in Japanese Yen. That means the fund performs well if Japanese stocks are performing, or if the Yen appreciates. The Japanese currency is often viewed as a safe haven that does well when volatility increases.

coins

The European economy is now recovering well and any investor with a global portfolio should own some European investments. A good ETF with Euro exposure is the SPDR STOXX Europe 50 ETF. This fund invests in the largest 50 companies in Europe, including Nestle, Novartis and HSBC.

Any investor should hedge their bets. And, when doing so they should look at the types of investments they don’t already own, and that differ from what they do own. For UAE investors, the ETFs listed above provide a good mix of sectors and regions that may still perform if the UAE economy hits another bumpy patch.

21 Nov 2017

VAT can prompt UAE residential developers to get more generous

Dubai: Come 2018, property buyers can expect UAE developers to turn even more generous with their sales incentives, especially on the post-handover payment plans.

This is so because the upcoming VAT regulations on residential sales offers developers a zero rate on all residential sales within three years of the completion of a project. Any home sale done after those three years will come under the 5 per cent VAT scanner.

Because of that, developers have a definite timeline before them to complete their sales and not have to pay VAT. This being the case, UAE’s property market, especially the one in Dubai, can expect developers to launch off-plan sales even before they start construction on site.

Or they could “bring in more attractive payment plans,” said Faisal Durrani, Head of Research at Cluttons. “In extreme cases, a developer or two is offering payment schemes 10 years after handover. But we could see more of that happening as developers ensure they sell all of their stock at a particular building.”

Interestingly, developers have also been given a VAT-specific reason to finish construction. “They will be able to claim a rebate on the VAT of building materials provided they are able to sell within three years of completion,” said Durrani. “There is an incentive for developers that the schemes they bring to the market can be absorbed. But how people claim rebates need to be worked out.

“Clearly, if they are unable to sell within three years, that project is not a success. Developers in Dubai have been so used to the “build and they will come” mentality. VAT will go some way in making sure the stock developers bring in can be absorbed. That’s a bit of a sea change for developers in Dubai.” According to Sailesh Irani, Director at Sun & Sand Developers, “All VAT payments made by a developer to a building material supplier can be offset. That eventually comes through as a credit in the developer account.”

The surge in off-plan sales was there for the better part of this year, and it’s only over the last four weeks that there has been some drop in such activity. Market sources say that the period before, during and after Cityscape Global in Dubai recorded higher than average off-plan launches, and that developers might be taking a bit of a breather now.

“It could be that developers will need to think about building more affordable projects, to be reasonably sure of completing sales within the stipulated time,” said Durrani. “When we are talking about prime properties, those between Dh1,500-Dh2,000 a square foot, is the segment that is seeing the sharpest correction now.

“Thankfully, the days of speculative developers have gone. These one-off developers were weeded out because of regulatory changes, the doubling of registration fees, implementation of escrow, etc..”

But, according to Cluttons, the super-prime end of the Dubai market is more or less unaffected. The wealthy are still making those multi-million dollar purchases.

But a potential headache looms — “The Chinese are currently the fourth largest buyer demographic in Dubai property outside of GCC nationals. But there are restrictions on how much they can take out of China and spend overseas — right now, it’s set at $100,000 (Dh367.300) per person each year.

“There could be stricter policing by Chinese authorities over whether these levels are being breached. The property markets in Canada, the UK and Dubai could be affected if this policing gets serious.”

BOX

Dubai developers need to give serious thought to affordable options

The VAT guidelines are clear — no VAT on residential units at buildings within three years of their completion. But for developers to be extra sure, they need to rethink their offer mix.

Sticking with upscale projects — at Dh1,500-Dh2,000 a square foot — as their preference comes with a risk. There is already a sizeable supply of such properties in the marketplace. More of the same could have difficulty landing buyers.

“The affordable issue is yet to be addressed in full — the Dubai Land Department has been thinking about a quota system,” said Faisal Durrani of Cluttons. “In this, a certain proportion of the project is made affordable — but it’s not clear whether it’s affordable for tenants or buyers.

“They aim to have these in central locations and not the outskirts. It could mean a separate building or the affordable part is done on a lower floor. But it remains to be seen how it’s played out in a market like Dubai. Abu Dhabi has done it, with the Municipality allowing landlords to convert buildings, provided they meet certain criteria like size, location, proximity to bus stops. These are targeted at people earning less than Dh6,000 a month.

“The rents they can charge must only be a third of the tenant’s income. And the landlords are being guaranteed an yield of 30 per cent. A yield of 30 per cent — that’s probably too hard to resist.”

22 Nov 2017

UAE named MENA’s top residence by investment country

The UAE has been ranked as the Middle East and North Africa’s top residence-by-investment program for the third consecutive year, according to a new study.

Henley & Partners, the global residence and citizenship advisory firm, said the UAE has continued to rise in its annual Global Residence and Citizenship Programs (GRCP) 2017–2018 report.

However it cautioned that the upcoming implementation of VAT could impact the UAE’s residence program and how it will perform in the future.

It showed that the UAE ranked 11 globally out of 20 programs analysed with a score of 59 out of 100.

This represents an increase of two positions from last year and four positions from 2015, up from positions 13 and 15 respectively.

The report said: “The UAE offers a high quality of life and a high level of security for its residents. It is an excellent place to do business and provides easy access to the Middle East region.”

It added: “Additionally, citizens and residents of the UAE are not subject to personal income tax, capital gains taxes, or net worth taxes; however, VAT will apply from 2018 onwards.”

The trend for acquiring an overseas home is being driven by not just by individual and family quality of life, but also for tax purposes, investment returns, freedom of travel and the resultant business opportunities.

Marco Gantenbein, managing partner of Henley & Partners in the Middle East, said: “The UAE continues to be an attractive residence destination and consistently ranks highly in our annual indexes.

“For the third consecutive year, the UAE has increased in ranking, which can be attributed to its high scores across some of the key residence benchmark indicators. Since the launch of the Global Residence and Citizenship Programs report in 2015, the UAE has moved up in ranking significantly, by nearly 20 percent.”

Out of the 20 residence programs reviewed, Portugal’s Golden Residence Permit Program was named the world’s best, with a score of 79 out of 100. It was followed by Austria (78) and Belgium (77).

Similar to the UAE, the tax burden on residents of Portugal is one of the lowest of the residence programs ranked in the report, both on corporate and personal levels. A Portuguese residence permit also offers visa-free access to Europe’s Schengen area.

“Interest in the industry has steadily increased over the past decade and we anticipate that it will continue to do so,” said Gantenbein. “As political instability around the world furthers, we see an increase in demand for alternative residence. Key factors such as the need for global mobility, security and better quality of life are also significantly contributing to the growing interest in alternative residence and citizenship programs.”

20 Nov 2017

UAE residential property to be exempt from VAT, FTA clarifies

The UAE’s Federal Tax Authority (FTA) has clarified that commercial real estate will be subject to the five percent value added tax (VAT), with residential units largely exempt.

In a statement, the FTA noted that the first supply of a new residential building within the first three years following its construction will be zero-rated. Subsequently, all supplies will be exempt, even within the first three years.

All commercial properties, however, are subject to the 5 percent VAT.

FTA added that the owners of residential buildings do not need to register for VAT if they have no other business activities. Those who do, however, are advised to check whether they are required to register or not.

Owners of non-residential buildings are required to register if the value of supplies over the course of the preceding 12 months exceeds AED 375,000, or if the value is expected to exceed that figure in the next 30 days.

While owners of residential buildings will not be able to recover VAT on expenses related to the supply of exempt residential buildings, commercial building owners will generally be able to recover VAT on expenses.

For mixed use buildings, the rent and sale of residential portions of a building shall be treated as zero-rated or exempt – depending on whether it’s a first or subsequent supply – while the rent and sale of commercial parts of the building are subject to VAT.

The tax incurred by the owner of a mixed-us building needs to be apportioned where there is an exempt supply. The portion related to the taxable supply may be recovered.

19 Nov 2017

FTA clarifies regulations regarding VAT for the real estate sector

The Federal Tax Authority (FTA) has clarified regulations pertaining to Value Added Tax (VAT) when it comes to the real estate sector, stating that the supply of commercial real estate (selling or leasing) will be subject to the basic 5% tax rate, while residential units will remain generally exempt, except for the first supply of a new residential building within the first three years of it being constructed which will be 0% rated.

Residential and Commercial Buildings

The FTA defines the supply of real estate as activities that include, among other things, the sale, lease or giving of the right to any real estate.

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings that can be occupied by any person as main place of residence. This does not include any place that is not a building fixed to the ground and that can be moved without being damaged; any building that is used as a hotel, motel, bed and breakfast establishment, hospital or the like; a serviced apartment for which services in addition to the supply of accommodation are provided; and any building constructed or converted without lawful authority.

Meanwhile, a commercial building is any building or part thereof that is not a residential building. Examples include offices, warehouses, hotels, shops, etc.

Supply of Residential and Commercial Buildings

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, including all buildings or parts thereof that are not residential buildings.

Registration for VAT Purposes

The owners of residential buildings do not register for VAT if they do not have any other business activities. However, owners who do have other business activities must check to see whether or not they are required to register.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceed AED375,000 in value, or if it is expected that they will exceed AED375,000 over the coming 30 days.

VAT Recovery

An owner of a residential building will not be able to recover VAT on expenses related to the supply of the exempt residential building. Meanwhile, an owner of a commercial building will generally be able to recover VAT on expenses related to the supply of the building.

Mixed-Use Buildings

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply. The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

18 Nov 2017

Who we are

The team, at Chii Richtown, comprises indigenous experts in renting, selling and managing commercial properties and villas in Dubai, UAE. Established in 2006, the company has over a decade of experience in tracking new property developments and estimating trends in prime market areas that help clients in meeting their requirements. We are currently selling and leasing out properties in all areas of Dubai.We strongly believe if you have a requirement for a home or office space, we will help you find it!

×