10 Dec 2017
I am often asked by investors to articulate my “philosophy” of real estate investing. Tough question. My ideal deal is one where it is possible to buy brick and mortar assets at 60-70 per cent of replacement cost. This usually occurs in the aftermath of a banking crisis or economic shock. This was the case in Florida homes in 2009 or Spanish office space in 2010. Another strategy is to “buy, fix and sell”. This was my rationale for East Kent homes as a proxy for King’s Cross, the biggest retail and office development complex in Britain since Canary Wharf and the Docklands in the Thatcher era. Now that towns like Ashford and Folkestone are linked to Kings Cross St Pancreas by high-speed link, rents will rise, bank mortgages will rise, commuter traffic and capital values will rise in East Kent.
I believe the private and public property markets are rarely perfectly correlated, offering exceptional, if rare, opportunities for arbitrage in debt instruments or securitised property. Anybody who does not have a diversified portfolio of real estate investment trusts (Reits) is denying themselves the potential to make money in some of the world’s hottest real estate sectors and themes, easily accessed via an interactive brokers or e-trade electronic brokerage account. For instance, I had profiled Prologis as the ideal New York Reit to benefit from the industrial boom. Prologis was up 28 per cent in 2017. As I assure my parents, both avid property investors, if you think Wharton is expensive, try ignorance! The US desperately needs to build at least 50 million sqft of extra industrial space every year, thanks to the Amazonisation of the world. Even the US Air Force is leasing its vast spaces in Nevada to build mega one million sqft distribution and logistics centres. This is a 20 per cent per annum growth opportunity for at least the next three years. Timing and the right entry price are everything in real estate investing, as is real-time market intelligence. I avoid brokers and mortgage bankers like the plague, just as I do Third World guys who offer to sell me a BMW 7 series for Dh50,000, quick, quick Sahib!
As a partner in Asas Capital, I am proud to have raised the equity capital for a 630-room Park Regis four-star hotel that will provide some of the Gulf’s most intelligent (they trusted me and their trust is sacred) investors a 15 per cent cash dividend in US dollars and a potential 200 per cent return on initial capital on the project’s eventual flotation or trade sale. Saudi Arabia wants five million extra Umra pilgrims by 2020 but Makkah has barely 12,000 branded four-star hotel rooms. This was the macro opportunity of a lifetime and my partners at Asas Capital began work on this project in 2014, when oil was $114 and religious tourism assets dirt-cheap.
I absolutely abhor speculative real estate investments or “buy to let” in markets where a developer can arbitrarily raise service fees at will even when rents fall 20-30 per cent. So a Dh2.5 million, 1,000 sqft one-bedroom flat rents in the Burj Khalifa for Dh120,000 but service fees are Dh72,000. A two per cent net rental yield makes no sense as if I wanted a bank deposit, I would get one.
Demographics and the credit cycle play a crucial role in property investing. So the exodus of executives due to job losses in banking, property, aviation, construction, retail etc. makes luxury a non no for us in Dubai. The only villas that are selling now are owner occupiers in the Dh2-to-3 million range villas in the Dh5 million-plus range will have to take a 40 per cent hit to capital. There is a glut of luxury apartments, high end office spare (a Mazaya building sold for Dh400 a square foot, just above construction cost. That is where I see eventual market equilibrium). Investors in British schools, especially if inspired by Dh120,000 a year pseudo-British public schools, will hemorrhage cash as companies slash education subsidies. Note the many high end schools who violate KHDA rules against discounts by offering “founder fees” or two sibling for one package. When hotel RevPARs fall by double digits, I have only one piece of advice for investors – get out!
I expect the current trend of falling rents to accelerate in 2018 and even 2019. If rents fall by another 20 per cent, many segments of the property micro markets become affordable again, a huge ballast for Dubai’s trade/services economy.
12 Dec 2017
The United Arab Emirates economy is expected to recover gradually next year without suffering a significant blow to growth from the introduction of a 5 per cent value-added tax in January, a senior International Monetary Fund official said.
Natalia Tamirisa, IMF mission chief to the Arab world’s second biggest economy, said Dubai’s spending on preparations to host the Expo 2020 world’s fair would help to boost growth.
On Sunday, Dubai announced a 19.5 per cent leap of spending in its 2018 state budget, largely because of higher allocations for infrastructure.
“We see a gradual recovery for the UAE over the next few years on the back of firming oil prices, a pick-up in global trade, investment for Expo 2020 and easing fiscal consolidation,” Tamirisa said in a telephone interview on Monday.
Non-oil sector growth is projected to rise from 1.9 per cent this year to 2.8 per cent next year, and to continue climbing to between 3.3 and 3.5 per cent in 2020, she said.
The introduction of VAT next month will be a big change for consumers and companies, which have long been accustomed to minimal taxation in the Gulf.
Analysts believe some consumers may rush to make purchases this month to beat the tax, potentially setting the economy up for weakness early next year when the spending fades.
But Tamirisa said the effect was not likely to be large enough to hurt the economic recovery, and that the government looked set to manage the launch of the tax without disrupting business.
“After the initial adjustment we’re expecting smooth operation of the system. The preparations by the government have been quite extensive.”
The IMF’s forecasts assume oil will average over US$62 a barrel next year, based on futures prices, compared to an average of about $54 this year. This should help strengthen the UAE’s finances in 2018 despite looser budgets, Tamirisa said.
The IMF expects the UAE’s consolidated fiscal deficit, including the federal government and all seven emirates, to shrink to 1.3 per cent of gross domestic product next year and gradually disappear in subsequent years, from 2.2 per cent this year and 2.5 per cent in 2016.
Dubai’s real estate market has been slumping for over two years, but Tamirisa described the slump as natural given an ample supply of new housing and an economic slowdown, and said it was not a fundamental threat to the economy.
“Oil prices still play an important role in the economy so it’s normal that they’re still working their way through the market,” she said, adding that the market still looked likely to recover after a period of consolidation.
Banks are much more resilient than they were during the UAE’s property market crash nearly a decade ago, and the fact that rents and real estate investment are not subject to VAT should help the market gain strength in the long term, she said.
11 Dec 2017
Dubai: A 24-hour destination? Not yet.
But the sprawling Dubai Design District (d3) is well on its way to being an 18-hour hub for its people to work, shop and even dine. The only element that’s missing is the living part, and d3 will set that right in time. And when that happens, it will turn into a 24-hour hotspot.
“I think we have already created something for a professional working at d3 to come back later in the evening and dine in,” said Mohammad Saeed Al Shehhi, CEO. “This is what Dubai is providing now — something more than mall experiences. Projects such as La Mer, City Walk …
“When we were putting the plans together. we wanted this place to be a full destination. The third phase of d3 will create that space.”
Currently, d3 has crossed the 7,000 mark in the number of people who turn up at the many offices each day. There are 420 office units in Phase 1.
The first two phases are entirely given up to create offices and workshops for the creative community — the designers, the specialist consultancies with a creative streak in them, and start-ups intent on offering something that is not the norm.
“The Phase 1 works were completed in 2015 and we have 94 per cent occupancy,” said Al Shehhi. “Phase 2 should be complete by end 2019, but we haven’t started on the leasing. By early next year, we should most probably start with the soft bookings.”
In the last three years, d3 has been rated by independent real estate consultancies as among the top performing office destinations in Dubai. That was based on the response generated by the Phase 1 releases. Phase 2 will make room for a campus and a design-focused university with curriculum put together by MIT and Parsons. “We always had in our masterplan space for a university to support the design industry,” said Al Shehhi.
But it will be the third phase that will take d3 beyond the realms of being a hotspot for offices. And create that 24X7 destination.
“The third phase will stretch all the way to the Water Canal,” the CEO said. “That’s under design and we will have boutique hotels and a strip of retail right on the water’s edge.
“This phase will take a further three to five years to build.
“The plans on the residential component are under design. We have a 1.8-kilometre stretch of waterfront and we were lucky to have the widest portion of the Creek in front of us. It makes it important that the masterplan creates opportunities for as much interaction with water as possible.
“We are clear in our minds that the residential component is important. In the planning phase, we spoke to the creatives, asked them what the ideal home would be for you. That feedback gets incorporated into our design.
“When we design the masterplan, we made sure d3 is where we can live, work, play and, now, learn.”
The last one comes from having that design university. For the moment, the on-site campus is “receiving applicants now and they are fitting out classes,” the CEO said. “It’s a great opportunity to have academia right next to the industry alongside the big brands, the SMEs and start-ups. The student gets to see how he can start a business, grow to be an SME and potentially a big brand. It’s all there at their doorstep.”
The whole of d3 across sits three phases will cover 25 million square feet. At full throttle, it will have around 17,000 creatives coming in on a day-to-day basis, including the students and visitors.
But is d3 on its way to being one of the pricier parts of the city? “You could say we are choosy about who we take in — they need to be a creative,” said Al Shehhi. “But I won’t say that makes us pricey. We are surrounded by three main highways and in many ways in the centre of Dubai. Yet, if you compare us to the developments around us, we are not pricey.”
Getting creative even with the start-ups
Even with the retailers coming in, d3 has clear preferences for those who can conjure up something beyond the tried and tested.
“To be a true destination, we will need to have those retail concepts that will attract people to come here,” said Mohammad Saeed Al Shehhi, CEO. “Sixty per cent of our concepts are home-grown. If you go to The Lighthouse, it’s two bankers who came up with a brilliant (F&B) concept. There’s OneLife, which is very unique for Dubai; we have Mum’s Table; and we have The Espresso Lab launched by an Emirati entrepreneur.
“At the end of the day, d3 will always be about designers. We want to attract footfalls for our designer tenants. The showrooms we have are not just offices, but creative spaces.”
12 Dec 2017
Investors and end-users in Dubai have never had it better. Developers in Dubai are going all out to woo buyers by offering unique payment plans. They are even acting as proxy lenders by offering interest-free finance options to buyers. With a slew of attractive payment plans in the market vying for buyers’ attention, new developers are launching unique schemes to garner interest.
City Properties, the new kid on the block, has tailormade three finance options for buyers in its debut real estate venture – Al Haseen Residences in Dubai Industrial Park adjacent to Dubai South.
The first standard option is for the cash/mortgage buyers where one pays 30 per cent of the property value till handover and the balance after.
In the second plan, a buyer pays 40 per cent using flexible options until handover. At the time of handover, the buyer can pay 60 per cent of the property value in 120 interest-free monthly payments over 10 years. There is no bank involved.
For instance, if you are buying a studio worth Dh400,000, you initially pay Dh160,000 until handover (40 per cent). The balance Dh240,000 can be paid in 120 cheques of Dh2,000 each over 10 years.
The third option is targeted at investors. After paying the initial 40 per cent of the property’s value until handover, the investor hands over the unit’s property management rights to the developer for 10 years.
“We will ensure that your installments are being paid. At the end of 10 years, you will only have paid 40 per cent and own the unit. We guarantee to pay the balance 60 per cent, inclusive of service charges. The investor also has the flexibility to sell or repossess the unit,” explains Gaurav Verma, CEO of City Properties.
The promoters behind City Properties, which was launched in 2016, have over 20 years’ experience in property management in Dubai and handle over 90 buildings and 5,500+ properties in the city.
The average sales price at Al Haseen Residences is Dh1,000 per sqft, with the service charge pegged at around Dh8 to Dh10 per sq ft.
A studio is priced from Dh400,000, one-bed from Dh600,000 to Dh800,000 and two-bed from Dh850,000 to Dh1.1 million, informs Tauseef Khan, chairman and founder of City Properties.
Construction on the Dh70 million project commenced in June 2017 and will be completed by Q1 2019.
“We have sold 50 per cent of 138 units. The buyer profile is a mix of end-users and investors. We have GCC buyers, Emiratis and a lot of South Asians. We also have a few buyers from the Philippines holding senior positions in the government,” says Verma.
The developer claims it intends to bring quality back into the affordable housing market. “The quality of apartments has deteriorated. Some developers even include parking in the liveable area to boost sales. We don’t intend to cut corners,” contends Khan.
A studio in Al Haseen Residences ranges from 400 to 520 sqft, one-bed from 680 to 850 sqft and two-bed from 950 to 1,000+ sqft. Each unit comes with a covered parking spot.
The development is completely self-funded and located 10 minutes away from Al Maktoum International Airport.
The developer has nine more projects in the pipeline – all adjacent to Dubai South – and more plots in Meydan City. Its second project will be announced in January.
Ruling out fears of oversupply in south Dubai, the CEO says: “We are very bullish about demand for housing in south Dubai closer to the new airport. We foresee a shortage of supply. Al Maktoum International Airport, Dubai Parks and Resorts and Dubai Wholesale City will be responsible for creating a huge number of jobs. That rules out an oversupply situation. Housing needs to develop a lot quicker in that area.”
12 Dec 2017
Rents in the Dubai prime residential rental market have some more room to contract as demand for prime residential decreases from ultra high net worth individual and C-suite occupiers, says Core Savills, a real estate consultancy.
New stock in the upper and mid-prime residential segment are also diluting demand. However, with capital values also softening considerably, some products in this segment still hold stable yield values.
With relatively slower falls in rents in mainstream locations over the last few quarters, the prime segment is expected to be sluggish in moving towards the bottom.
Gross yields continue to be upwards of eight per cent for apartments across most mainstream sub-markets in Dubai, however, some degree of yield compression is expected through further rental decrease.
“As the next cycles of lease renewals inspire relocations, particularly among tenants whose rents are yet to reflect the softening market, we expect rents to continue softening. Although widespread, the magnitude of these drops is expected to remain limited,” says David Godchaux, CEO of Core Savills.
Meanwhile, Dubai’s residential market has completed an entire cycle in the last 10 years and is currently in the midst of its second cycle. After seeing a quick recovery over 2011-2014, rents in Dubai declined again between 2015 to 2017.
According to a report issued by Core Savills, Dubai was able to see a swift recovery in rents due to significant fiscal stimulus from the government which kickstarted growth and fuelled job creation, thus driving up demand for rental property. After reaching a peak in 2014, rents declined again, mirroring the decrease in oil prices.
“Given that Dubai continues to be a fast-growing economy, largely reliant on expatriate tenant demand, that has historically been responsive to Dubai’s economic fluctuations, the speed with which the city traversed its rental cycle is not surprising. As the UAE sees further economic diversification and private sector-led growth, Dubai’s rental cycle is likely to decelerate and lengthen,” observes Godchaux.
Dubai’s prime office market has been outperforming the overall real estate landscape over the last few years due to limited grade A supply and unmet demand from large international occupiers wanting to set up or expand their regional operations. However, the pace of upward movement in prime rents is expected to moderate as the upcoming stock gradually self-adjusts, with new prime stock anticipated to exceed new grade B supply for the first time in the last 10 years.
This is expected to create a healthy balance between supply and demand as more options become available for large corporates to choose from – many have been resorting to purpose-built premises due to limited options available in recent times.
The secondary office market continues to lag due to strong headwinds faced from the large amount of existing and upcoming stock, despite marginal improvements in demand.
“As macro-economic indicators start improving and demand for grade B and C office space starts increasing again, we still expect a significant lag in absorption for the existing vacant stock. We are very cautious about any chance of a recovery in secondary market rents in the next 12 to 18 months,” Godchaux adds.
11 Dec 2017
Real estate consultancy group Freehold Mediation and Information has launched a Dhs5m ($1.4m) endowment scheme to help small-scale property investors and real estate entrepreneurs find solutions to the difficulties they face.
Through the initiative, the Dubai-based company will bear the cost of 400 integrated studies annually, analysing their clients’ real estate situations and providing advice and consultancy services.
FMI’s move is part of the Global Endowment Vision, which has been adopted by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to revive the endowment as a development tool for communities. By launching the initiative, FMI has received the Dubai Endowment Sign from the Mohammed bin Rashid Global Centre for Endowment Consultancy – one of the Mohammed bin Rashid Global Initiatives.
The Dubai Endowment Sign – bestowed upon companies in recognition of their community contribution – gives private institutions a preference for procurements and contracts with the Dubai government.
Dr Hamad Al Hammadi, secretary general of the Mohammed bin Rashid Global Centre for Endowment Consultancy, said: “With the diversity of entities in the private sector, we are designing a variety of innovative endowments that suit the nature of each entity.”
11 Dec 2017
Dubai: The cost of renting apartments and villas around Dubai fell at a much faster rate in recent months, a property analyst has said.
According to a review by Phidar Advisory, accommodation costs across properties in the emirate posted the biggest quarterly decline in October since the slowdown started in the middle of 2014.
The decline continued to hit many communities, including popular areas like Downtown Dubai, where rents dropped by 5.2 per cent at the end of October.
“Rent declines are escalating, largely driven by the combination of weak job growth, new supply handovers and reduced housing budgets,” Jesse Downs, managing director of Phidar Advisory, told Gulf News.
“Wider corporate restructurings and salary adjustments have reduced housing budgets, which exacerbates rent declines and will lead to a reshuffling of pricing.”
The analysis coincided with the trend shown in the Reidin Residential Rental Price Index, which fell from 92 in August 2017 to 90.4 in October 2017. In its most recent report, Core Savills also highlighted that rents for flats in Dubai registered more declines than villa properties.
“The core submarkets of Dubai Marina and the Palm Jumeirah were the weakest performers, with rents dropping by 10 per cent year-on-year. Occupiers across these areas either negotiated lower rents or chose to move to cheaper comparable units.”
Rents for apartments had dropped by only 0.9 per cent in August, according to Phidar, but the pace picked up to 2.6 per cent in September and 3.8 per cent in October. For townhouses and villas, rents fell by 1.1 per cent in August to 2.7 per cent in October.
“It has been escalating. In fact, for apartments, October’s data shows the biggest quarterly drop since the market started to decline in mid-2014,” said Downs.
Despite the rental declines in many areas, including those in the city centre, tenants who are constantly on the lookout for ways to save money on accommodation costs continue to move farther away.
“The new housing, often in outlying areas, is drawing relocation from key existing communities, which is driving up vacancies in some of the traditionally most popular areas,” said Downs.
However, there are still some landlords out there who are hesitating about lowering their asking prices. Downs said this is leading to “long void periods and lost income.”
“In many cases, it’s more rational to reduce the rent and fill the unit. Landlords often think their units in popular areas are immune, but nothing is fully immune now.”
“Rents across the city are interconnected. From studios to villas, central locations to the suburbs, everything is interrelated, to some degree. Eventually, rents will adjust downward in all areas and the market will reach a new equilibrium. Sometimes it takes a few months, or more, to find the equilibrium, “ she said.
12 Dec 2017
Dubai: The pressure on rents will continue to be intense across Abu Dhabi city, with next year likely to see them drop by a further 5-7 per cent.
This year, residential rents are down by 10-12 per cent and more than the forecasted 8 per cent, says Cluttons in its latest update.
The reason for the continued tightening of rents stems from many factors. The obvious one is the weakened demand brought on by job losses in key sectors. Plus, recently completed buy-to-let properties is pulling in quite a bit of buyer interest.
Then, there is the question of new and steady supply becoming available. “The sheer volume of rental stock means tenants are spoilt for choice, which is driving void periods and vacancy rates up,” the report notes. “We are aware of a number of prominent buildings where vacancy rates are as high as a third in some cases.”
But where landlords have “demonstrated sensitivity to market conditions, absorption rates still remain healthy”. (Even in the freehold offplan space, this is in evidence, with Aldar recording significant take-up for its mid-market Water’s Edge apartments on Yas Island.)
More developers will have to learn to play it smart, even pick up tabs from what their counterparts in Dubai did when faced with such a situation in 2016. “Developers may be forced to turn to the lettings market to generate incomes from unsold stock,” Cluttons states.
But there could be a downside to this for the wider market – this will likely “further depress any chances of a rebound in rental value growth”.
Among key locations, Al Reef Downtown had a 17 per cent drop in rents over the last 12 month, with two-bed leases down by as much as Dh25,000. And one-beds are Dh15,000 down from levels in Q3-16.
“With household finances under pressure due to a reduction in housing allowances, the removal of various subsidies and the impending introduction of VAT in January 2018, tenants are focused on value for money,” said Edward Carnegy, Head of Cluttons Abu Dhabi in a statement.
No respite for Abu Dhabi’s office rentals either
With less demand from key business and government enterprises, office rentals in Abu Dhabi could tread even lower.
Existing tenants are making full use of the market situation. “With increasing vacancy across the market, the majority of landlords are seeking to retain existing tenants where possible, typically agreeing improved terms at renewal,” said Edward Carnegy, Head of Cluttons Abu Dhabi.
Rent-free periods and easing of payment terms are becoming standard features. Some landlords are willing to go further, even offering to fit out the interiors for those tenants seeking relocations.
“We are seeing fairly significant churn from public sector and related entities, with at least 50,000 square metre requirements currently in the market.”
Cluttons states that top-tier office buildings have had rent drops, with the Aldar HQ building seeing a 2.8 per cent softening and International Tower by 3 per cent.
Prime office rents could end the year down 5 to 10 per cent from last year and likely to do a repeat in 2018.
11 Dec 2017
UAE-based Azizi Developments announced on Monday the completion and handover of two premium serviced apartment projects in Al Furjan – Candace Acacia Serviced Residences by Azizi, and Candace Aster Serviced Residences by Azizi valued at AED460 million ($125.2 million).
Candace Acacia is valued at AED240 million and spans a construction area of 335,246 square feet and includes 316 units of studio and one-bedroom apartments.
Candace Aster is valued at AED220 million with a construction area of 259,757 square feet and includes 227 units of studio and one-bedroom apartments.
Al Furjan is one of Dubai’s fastest growing residential neighbourhoods. The new metro line named Route 2020 will serve seven additional stations and will connect Al Furjan to Dubai Investment Park, Discovery Gardens, Jumeirah Golf Estates and will eventually service the Al Maktoum International Airport.
Farhad Azizi, CEO of Azizi Developments, said: “Candace Acacia and Candace Aster were conceptualised to meet the growing demand for premium living spaces in Al Furjan. Serviced apartments are an important category for Azizi Developments and one that we will aggressively tap into in the coming years in emerging residential neighbourhoods in Dubai.
“In this regard, we have seen that Al Furjan is emerging as a premier residential real estate destination in Dubai, offering a comfortable community lifestyle to residents.”
Azizi Developments said that in the last three years it has delivered over 800 units across eight projects in Al Furjan, and is expected to complete a further nine projects in the area before 2020.
12 Dec 2017
Prolonged economic headwinds has seen Abu Dhabi’s real estate market continuing to stagnate during 2017, with the majority of sale and lease activity driven by affordability and incentives being offered by landlords and developers, according to Cluttons.
Weaker economic growth has taken a toll on the hydrocarbon sector in particular, which has been a key driver of demand in the residential and commercial markets in the emirate historically, the consultancy said on Tuesday.
Faisal Durrani, head of research at Cluttons said: “The nervousness we have been reporting on for almost three years is well entrenched in the market at present.
“Saying that, we are seeing some positives emerge that may help to boost economic growth, including the recent announcement by ADNOC to invest $109 billion in its gas downstream growth strategy over the next 5 years.
“This will likely filter through to the UAE capital’s real estate market in the form of fresh demand for residential and commercial property. However, in the short term we anticipate that both tenants and buyers will continue to err on the side of caution and activity will continue to be driven by affordability and favourable payment terms offered by landlords and developers.”
Cluttons Winter 2017/18 Abu Dhabi Property Market Outlook said subdued growth in the oil and gas sector continues to undermine overall activity in the office market.
The public sector on the other hand, which includes government departments and other quasi government entities, appears to be mobilising in response to the weak rents, with a range of requirements in the market.
While some are looking to consolidate, others are attempting to upgrade from older offices.
Edward Carnegy, Head of Cluttons Abu Dhabi said: “We are seeing fairly significant churn from public sector and related entities, with at least 50,000 sqm requirements currently in the market. This is attributable to various drivers including consolidation exercises, upgrading offices from older legacy locations and the availability of new office supply to enable such relocations.
“These factors are all framed by a requirement to cut cost and drive efficiency. Similarly, corporate occupiers are still consolidating, cost cutting and requiring increased lease flexibility.
“With increasing vacancy across the market, the majority of landlords are seeking to retain existing tenants where possible, typically agreeing improved terms at renewal. New tenants are being offered a range of increased incentives to win them into buildings, such as rent-free periods and payment terms. We’ve also seen a small number of landlords fitting out premises for tenants, removing a substantial barrier for relocation.”
Cluttons’ report also highlights the reduction of headline rents across the city. Even the top-tier Grade A buildings have seen rents weaken, with the Aldar HQ building (-2.8 percent) and International Tower (-3 percent) both registering falls in headline rents in Q3.
Cluttons said it expects office rents to remain under pressure across Abu Dhabi during 2017 and 2018.
Durrani said: “Prime office rents appear to be on track to end the year roughly 5-10 percent down on this time last year and it is our view that a similar pattern is likely during 2018.”
12 Dec 2017
Investing in real estate for the first time can seem a very daunting task, particularly for first-time buyers. However, real estate investment can also be a great asset, and a steady income source.
Saad Audeh, Managing Director of Campbell Gray Hotels and Audeh Group put together a list of tips for first-time buyers to keep in mind when looking for real estate in the region.
Location is key
When looking at where to invest in a city, location and accessibility is key. Proximity and connectively to main squares, good shopping areas, great health facilities and dining will always be a positive whether you are buying the property for personal use or as an investment.
If buying for yourself, decide on the kind of lifestyle you’d like to be around and choose the location accordingly. For example, residential communities offer a different vibe to a modern partment in Downtown Dubai.
Should I say yes to brands?
Branded residences are a great option for first-time buyers as they are usually managed and linked to a prestigious development group and offer additional services and amenities to regular homes and apartments.
They are also a safer investment option when compared to others, especially for international investors or first-time investors, as they offer brand recognition and trust. While they tend to be slightly more expensive than others, the pros are worth the extra investment.
Lifestyle benefits and amenities
When buying property, you want to make sure to get the most out of your budget. Always look for developments that offer access to premium lifestyle benefits such as a swimming pool, gym, on-site car washing and parking spaces as well as state-of-the-art and energy efficient electrical and water amenities. These will help you save costs in the long run while also driving up resale value.
Rentability and return on investment (ROI)
If you are looking to rent out the property when you are not using it yourself, or perhaps thinking of selling it later, then you need to ensure that the development will get you a good return on investment (ROI). Homes that are centrally located and offer added lifestyle benefits will always be more attractive and easier to rent out.
In the UAE, accessibility to metro stations and bus stops along with shopping centres, schools and medical facilities is key, especially if you’re looking at renting out the property later.
Short term vs. long term rentals
While long-term rental contracts offer stability, short-term rentals can offer higher yields in the long run. This is especially great if you want to use the property personally during certain periods of the year as a holiday home. Instead of keeping the property locked up for the remainder of the year, you can get some financial gain.
6 Dec 2017
Dubai: The lights have gone on at the seahorse-shaped Jumeirah Bay, Dubai’s next big destination for luxury living.
The first component of that experience — a Bulgari hotel and right on the waterfront — opened its doors wide on Wednesday (December 6) and to be followed shortly by the branded residential component spread across six buildings.
An overnight stay in the hotel will come at Dh4,000 to Dh5,000 ($1,333), of course depending on whether it is the peak season or not.
Resorts and Residences
The hotel component will feature 121 keys, with 50 being for the super-premium suites and villas. Meraas is the master-developer of Jumeirah Bay and also of the hotel and residences.
This is the first hotel — and residences — bearing the Italian jeweller’s name anywhere in the Middle East.
As such, there are only five Bulgari hotels in the world and to be followed shortly by a sixth, in Shanghai.
By 2020, the one in Moscow will have opened and another five are in the works, in New York and Beverley Hills among others.
But one thing Bulgari will not do is be associated with “100 hotels and become a player in the hotel industry,” according to Silvio Ursini, Executive Vice-President of Bulgari and head of Bulgari Hotels & Resorts.
“It took us 15 years to get to three hotels and now five. We wanted to create something that’s not too big or businessy. Our hotels are for those who want the hotels of old, where everything was crafted to perfection. That’s what we’ve delivered in Dubai.”
Earlier this year, Bulgari struck some of the priciest deals for off-plan units in Dubai — two of the Bulgari Residences there fetched Dh60 million and Dh50 million, respectively.
The homes are part of the 1-7 million square foot Bulgari Resort and Residences development.
Meraas Holding, a Dubai-based real estate and development company, signed an agreement with Bulgari Hotels and Resorts to bring the luxury brand to the emirate. It will be the hotel company’s fifth property after those in Milan, Bali, London and Shanghai.
The Bulgari Resorts at Jumeirah Bay island, a six-million-square-foot mixed-use development is sculpted in the shape of a titanic seahorse.
Besides the rooms and suites in the main hotel buildings, there will also be 20 hotel villas and a marina. The marine complex will cover an area of 1.7 million square feet.
The hotel is expected the third designer hotel in the UAE, followed by the Armani Hotel in Dubai and the Palazzo Versace.
The Bulgari property in Dubai was designed by Italian architectural firm Antonio Citterio Patricia Viel and Partners, which have both traditional and modern themes.
It is part of Bulgari Hotels and Resorts’ plan to have a stronger presence in the Gulf, according to Jean-Christophe Babin, chief executive of Bulgari Group.
DEWA enables to customers to activate, deactivate, or transfer electricity and water services in One Step
6 Dec 2017
Dubai Electricity and Water Authority (DEWA) confirmed that its One Step initiative saves time and effort by reducing the number of steps needed to activate, deactivate, or transfer electricity and water services without needing to visit DEWA’s customer happiness centres. It also provides customers with more smart payment options. DEWA is asking the public to vote for the One Step initiative, which has qualified for the Hamdan bin Mohammed Smart Program for Smart Government, which is managed by Dubai’ the Model Centre, which is a part of The Executive Council of Dubai. People can vote via the website http://vote.dtmc.gov.ae up to Thursday 7 December.
The One Step initiative allows the activation of electricity and water services for DEWA’s customers, once they receive their Ejari contract from one of over 800 real estate companies certified by the Dubai Land Department. It also allows customers to transfer their accounts when moving to new accommodation within Dubai while keeping their security deposits. Their registered information is kept on file, removing the need to submit any additional documents or visit a DEWA Customer Happiness Centre. Customers can also deactivate electricity and water services, and get their final bill, using DEWA’s smart app or website. Customers can easily request a refund of their deposits and have them transferred directly to their bank accounts, using the IBAN number, or receive a cheque by express mail to their registered local address.
The initiative also provides smart payment options and easy payment plans. Bills can be paid in instalments, with no interest or additional charges, if they use credit cards from Emirates NBD or Mashreq Bank.
6 Dec 2017
The Great Recession of 2008-09 convinced me, like many other observers, that the city-state of Dubai’s razzmatazz — Go skiing in the boiling heat! Gawk at the world’s tallest building! — was but a desert mirage. I lambasted Dubai in a 2009 article for “hucksterism and fast talk,” running a “trompe l’oeil economy,” and suckering outsiders with Ponzi-scheme real estate deals. It appeared to be only a matter of time until the whole edifice collapsed.
But that did not happen. The leaders learned from their mistakes, addressed major flaws, and oversaw Dubai’s roaring back bigger, bolder and brassier than ever. To learn how this happened, I have annually visited Dubai (one of seven polities making up the United Arab Emirates, somewhat like the United Kingdom’s four countries) since 2015.
There I found not hucksterism but something rarer and far more impressive: capitalism. And not just capitalism but raw, unfettered capitalism with few regulations, minimal taxes, and emasculated trade unions.
The emirate sits among some of the richest oil and rentier states in the world; nearby Qatar has a per capita annual hydrocarbon income of about $500,000 per Qatari national. Neighboring Abu Dhabi’s income per national is over $400,000.
But Dubai has few hydrocarbons and revenue from them amounts to a measly 2 percent of the emirate’s income. The rest comes from hustling. The commercial ventures come on fast and furious: real estate, air traffic, tourism, free zones, media, ports, transshipment and smuggling, education, financial services, high-tech and scientific research.
The result has been a huge increase in people and wealth. Fifty years ago, the population was about 60,000; now it is just under 3 million, an increase of 50 times, perhaps the largest demographic growth on the planet. Meanwhile, per capita income (including the 94 percent of the population that is foreign) has reached $29,000. This is what locals call the Dubai Miracle. The analyst Mehran Kamrava calls Dubai an “emerging global city.” I call it an entrepot, comparable to Hong Kong and Singapore.
As befits capitalist boosterism, emirate leaders obsess over breaking world records, such as the most buildings above 300 meters, the busiest airport for international passenger traffic, and the fastest police car. As a vulnerable emirate surrounded by rapacious states like Iraq and Iran and filled with disenfranchised expatriates, it has sought safety in soft power, from tourism to international arbitration.
Yet, this is capitalism with a difference, where the state plays a major role. Dubai’s leaders, and especially Emir Mohammed bin Rashid Al Maktoum (b. 1949), have directed the economy through direct ownership and a strong guiding hand. As a foreign money manager described the situation to me, “Dubai has mixed origins. The mother, a capitalist, manages the expats and small companies. The father, a socialist, manages the locals and big companies.”
The rights of subjects are strictly limited and those of the expatriates virtually nil; foreigners can be dealt with however the government chooses. Tough laws are unpredictably enforced, meaning that nearly everyone is susceptible to arrest at any time, though, so long as discretion is maintained (one Emirati told me, “Here, hotel rooms are the dating scene”), punishment remains more potential than actual. The prevailing sentiment leaves politics to the wisdom of the ruling family — which, all things considered, has been wise.
Thus does Dubai fit the “Asian model,” where the “tigers” of Hong Kong, Singapore, Taiwan, and South Korea grew rich with limited freedoms and pervasive government involvement in the economy. Then came the People’s Republic of China; Deng Xiaoping’s 1962 declaration that “It doesn’t matter whether the cat is black or white, as long as it catches mice” became the spirit behind the “Socialism with Chinese characteristics” that he launched in 1978.
If other tigers democratized, the Chinese Communist Party maintained its dictatorship through four decades of remarkable economic growth. The success of its state capitalism has proven so impressive a competitor to the free market that regimes in Russia, India, and Turkey have emulated China, as Time puts it, by “building systems where government embraces commerce while tightening control over domestic politics, economic competition, and control of information.” This is also what Crown Prince Mohammad bin Salman’s Vision 2030 aspires to for Saudi Arabia.
Dubai boisterously fits this new model of undemocratic wealth-building. Its distinctive outer trappings matter less than its core structure, which fits a well-established and regrettably viable model.
6 Dec 2017
Shrugging off concerns about oversupply, Dubai’s top real estate developers sounded bullish about the sector’s outlook for 2018. As Expo 2020 nears, demand and prices are projected to rise, with investors flocking to cash in on the higher yields that Dubai offers.
The senior executives were speaking on the sidelines of the Khaleej Times Infrastructure & Real Estate Excellence Awards held in Dubai on Tuesday.
“As we get closer to Expo 2020, it will create more jobs and more people will come in for investment. In addition to Dubai being a safe haven in the region, it is always a magnet for investments. We’ll see improvement next year in terms of demand and prices,” said Muhammad Binghatti, CEO of Binghatti Developers.
“It is always encouraging when supply comes from big developers such as Emaar, Dubai Properties and Nakheel as it reflects the trend and direction of the market,” he added.
Oversupply no concern
Rejecting any concerns about oversupply, Binghatti said when the right developer brings a right product into the market, there is no need to be concerned.
“It is no secret that there is huge cash in the market, but investors are waiting for the right opportunity. With many real estate funds coming to invest in Dubai, in addition to individual investors, there is going to be a lot of movement in the market. Dubai provides yields between eight to 12 per cent, which you can hardly find anywhere else in the world.”
Binghatti anticipates most demand next year to be for the mid segment.
Niall McLoughlin, senior vice-president, corporate communication and marketing, Damac Group, is also sanguine about Dubai’s property market for next year.
“We anticipate the 2017 trend to continue in 2018. We projected Dh7 billion worth of sales for this year and are on track to beat that. We have seen stabilisation in the market and it is behaving in a mature way. When a developer comes to the market, he needs to bring in differentiated product. You have to bring in products with different price points. We have been lucky that products we brought to the market have been received very well,” said McLoughlin.
The developer aims to hand over 3,000 units this year and around the same number next year.
“We sold more units in 2017 than in 2016. If you go to other major developers, you see the same trend. We have recorded increase in sales; even our competitors have seen an increase in sales, so we are quite bullish. You need a right product in the right location to drive prices,” added McLoughlin.
He revealed that there has been an increase in the number of customers from China and CIS countries.
Sandeep Jaiswal, deputy CEO, sales and marketing, Azizi Developments, believes 2018 will be promising with Expo 2020 around the corner. “Next year, we are looking at double digit growth in all aspects. That has been the case this year as well,” he said.
Higher returns than London
“Dubai is one of the best markets in the world in terms of returns. In London, property offers around three to four per cent returns; in India, it’s 2.5 to three per cent returns on rental. In Dubai, you are guaranteed to get minimum seven to eight per cent yields. If you’re selling at the right location, it can even go up to 10 to 12 per cent,” added Jaiswal.
Azizi Developments aims to deliver more than 1,000 units in 2017 and at least 1,500 units for the next year.
6 Dec 2017
Recent geopolitical developments on the regional front and new residential legislation in Dubai – with a prime focus on affordable housing – are both likely to impact the emirate’s property market, according to leading international real estate consultancy, Cluttons.
The geopolitical changes across the region are set to draw attention to the UAE and Dubai, in particular, from regional investors seeking an investment safe haven, stated Cluttons in its Dubai Winter 2017 Property Market Outlook.
The report also welcomes the Dubai government’s recently announced plans to legislate, through planning, the provision of affordable homes in some of Dubai’s core locations.
Faisal Durrani, the head of research at Cluttons, said: “Overall market conditions in the emirate have been relatively healthy. Going forward, we see regional developments and local legislation playing a big part in Dubai’s property market.”
“We believe that Dubai Government’s initiative to focus on affordable housing is extremely positive and is a watershed moment for the emirate. The change will help Dubai avoid some of the lessons learned by more developed cities around the world, especially with regards to curtailing the emergence of poorly connected, low income neighbourhoods that are segregated from the rest of the city, as is the case in many other global metropoles,” stated Durrani.
“While exact details around the legislation are yet to be confirmed, we expect to see a balanced approach between the presumed establishment of quotas around the provision of affordable housing that is both built-to-rent and built-to-sell, so that both aspiring buyers and tenants, priced out of city centre locations, can benefit,” he added.
On the residential market, Cluttons said overall prices slipped by 1.9 per cent in the three months to the end of September, following on from the 1.5 per cent drop in Q2.
The annual rate of change at the end of Q3 stood at -5.6 per cent. Villa values experienced their weakest performance in almost two years, with prices falling by 2.8 per cent in the three months to the end of September.
Apartment values on the other hand experienced a drop of 1.3 per cent on average, taking the change during the first nine months of the year to -5.5 per cent. No submarket registered growth during Q3, said the Cluttons report.
Murray Strang, the head of Cluttons Dubai, said: “These markets, in particular, have faced competition from surrounding developments that are newer, cheaper and often more affordable, especially for those looking for rental options.”
“Arabian Ranches has faced stiff competition from nearby Nshama, while Al Furjan and the second phase of units at DIP have improved the amount of choice for would-be buyers and investors in the Jebel Ali area,” noted Strang.
According to Cluttons, transaction volumes remained relatively stable, with the number of deals during the first nine months standing 4.6 per cent higher last year. The volume of villa deals however slipped by 1.6 per cent over the same period to 874 between January and September 2017.
The supply pipeline on the other hand continued to strengthen, with nearly 30,000 units announced during the three days of Cityscape Global in September, it stated.
Durrani pointed out that a total of 79,738 units are likely to be completed over the next three years.
The corresponding growth in population, which usually averages 5 per cent per year, should see a further 441,000 new people added to the city, he stated.
According to the Dubai Statistics Centre, the average household size in the emirate is 4.2 family members, which would translate into demand of roughly 105,000 units over the next three years.
“While it may appear that supply and demand are well matched, particularly as 30 per cent to 40 per cent of the announced supply is likely to be delayed, or rephased, as has been the case historically, our concern remains centred on the fact that the vast majority of planned supply is designed to cater to the high-earning segment of the population,” he added.
On the office market, Cluttons said it remained very stable, with 13 submarkets monitored seeing no movement in headline upper limit rents during the last year.
Paula Walshe, the head of corporate international services, said: “Dubai’s office market has been far more resilient than its regional peers, owing to the diverse nature of occupiers, which of course is linked to the emirate’s heavily diversified economy.”
“With the market remaining fragmented and the impending introduction of VAT, office rental rates have held up reasonably well in many submarkets,” he noted.
According to the report, outside DIFC-owned stock, beyond core DIFC buildings, rents have shown some weakness, although where vacancy rates are sub 5 per cent, they have held up reasonably well.
“We expect the completion of Gate Avenue in spring 2018 to enhance the attractiveness of many of the more competitively priced peripheral buildings which will now be connected into the amenities around the DIFC core. This has prompted developers to move forward with plans to bring forward new space, such as the $1-billion ICD Brookfield Place, which is due to complete in roughly 18 months’ time,” stated Walshe.
“The building is positioning itself as the next generation Emirates Towers, offering unrivalled amenities and facilities that are expected to aid its pre-letting,” she added.
The technology-media-telecoms (TMT) sector remained amongst the most active, the report highlighted.
Cluttons believes the resilience showcased by Dubai’s office market will persist as the end of 2017 approaches.
“Next year is also expected to be another stable one for the city’s office market, for the most part, with any declines likely to be contained at 4 per cent to 5 per cent at most,” revealed Strang.
“The main upside risk for the market remains the impact of the Expo 2020 and the potential of the mega event to create fresh demand for office space as companies expand, or set up shop in greater numbers across the emirate to help deliver the ambitious construction and infrastructure projects in the run up to the event,” he added.-TradeArabia News Service
5 Dec 2017
2017 was a year of change in the Dubai real estate market, where we witnessed real estate trends transform to new and refreshing positions, off-plan sales revive market sentiment and an abundance of supply open the doors for many affordable opportunities in the sales market and offer more options and lower rents in the rental market.
More affordable properties
The current momentum in sales activity is driven by a larger proportion of end-users than before, particularly first-time buyers, who are entering the market enthused by lower prices and encouraged by attractive payment plans offered by some developers.
Off-plan sales has dominated 2017, accounting for 68 per cent of all sales transactions to date and has increased by 55 per cent year on year. As of November 27, there have been 18,657 off-plan apartment sales transactions. The most popular unit types for off-plan apartment sales were one-bedrooms, accounting for 39 per cent of these sales transactions and studios accounting for 36 per cent of the transactions.
As per the Property Monitor database, the top five areas for off-plan apartment sales to date are (in order):
> Jumeirah Village Circle covering 11 per cent of the transaction volume with the top three projects being Ghalia Constella, Belgravia and Bloom Heights.
> Business Bay covering 11 per cent of the transaction volume with the top three projects being Aykon City, Bayz by Danube and Damac Towers by Paramount.
> Downtown Burj Khalifa covering 10 per cent of the transaction volume with over 1,500 units sold in the Downtown area and over 300 units sold in the Opera District.
> Al Furjan covering eight per cent of the transaction volume with the top three projects being Azizi Residence, Azizi Plaza Serviced Apartments and Roy Mediterranean Serviced Apartments.
> Dubai South covering eight per cent of the transaction volume with the top three projects being The Pulse, Mag 5 Boulevard and Emaar South.
To date, there have been 3,957 off-plan villa/townhouse transactions. The most popular types were three-bedrooms, accounting for 54 per cent of the transactions and two-bedrooms accounting for 24 per cent of the transactions.
As per the Property Monitor database, the top five areas for off-plan villa/townhouses sales to date are (in order):
> Town Square covering 31 per cent of the transaction volume.
> Arabian Ranches 2 with 27 per cent of the transaction volume.
> Dubai South with 18 per cent of the transaction volume.
> Mohammed Bin Rashid City with 11 per cent of the transaction volume.
> Reem Mira with 3.6 per cent of the transaction volume.
The secondary market accounted for 32 per cent of the sales transactions in 2017. Prices in established communities with limited upcoming supply have held stronger than emerging locations even as marginal price declines continue. One of the main reasons sales activity in the secondary market has been low this year is due to prices still trading at a premium and sellers not very motivated to negotiate. However, in Q4, sellers have started to budge on their pricing which has caused an increase in secondary sales.
According to Lewis Allsopp, CEO of Allsopp & Allsopp: “From our statistics this year, we can see that our average sale price has been at Dh2,566,709 and that 55 per cent of our buyers have been ‘end-users’ and 45 per cent buying for investment. We can also see that 52 per cent of purchases have been made using a mortgage. The type of properties that we have seen the most activity in this year are apartments and small villas, which fits the profile perfectly of a first-time buyer.”
This year, we have seen the shift in power from the landlord to the tenant. Due to new supply, rent declines for residential properties in Dubai have been more pronounced than sales price declines over the last 12 months.
According to Property Monitor’s database of rental contracts, no area or property type was immune to the declining trend. Areas with more supply are obviously impacted higher but other established, mid-market locations are also affected as consumers are shifting and opening their options to areas they never considered before. With new supply coming into the market in suburban communities, we are seeing tenants shift from established communities to like-for-like product in suburban communities at a cheaper price over multiple cheques. According to Property Monitor, four cheques annually are now the average, with 42 per cent of villa/townhouse contracts negotiated with four cheques and 54 per cent of apartment contracts were done with four cheques.
According to the Property Monitor Supply Tracker, which tracks supply in real time, there are a little over 13,000 units expected to be completed by end of the year. A majority of these projects will most likely get pushed to Q1 2018. However, there are quite a few projects which are looking to be very near completion in Al Quoz, Business Bay, Jumeirah Village Circle, Sports City, Al Furjan and Town Square.
According to the Property Monitor Supply Tracker, in 2018, over 40,000 units are expected to be completed. The areas with most supply expected to be completed in 2018 are:
> Mohammed Bin Rashid City with over 3,800 units.
> Jumeirah Village Circle and Al Furjan, each with over 3,700 units.
> Damac Hills with over 3,200 units.
> Town Square with over 2,500 units.
> Akoya Oxygen with over 2,900 units.
> Deira with over 2,100 units.
> Dubai Marina with over 2,400 units.
6 Dec 2017
In recent months, there has been a lot of feedback regarding the ability of developers to shortchange their customers, either through incomplete disclosure and/or changing the terms of the contract. This issue needs to be highlighted at length such that the customer knows his/her rights from the very outset.
Knowing these rights allows the investor to not be allowed to deviate from the law under the excuse of “market practice”, especially when the law is clear. It is this clarity of the law that in turn should be part of the business practice as well as the market vernacular, such that investors need not be worried about aspects of the law that are clearly defined for their benefit.
In Dubai and Abu Dhabi, developers are mandated to make certain disclosures as part of their sales contract with the investor. These disclosures include the levy of service charges in accordance with the Article 4 of the Direction for General Regulation Concerning Jointly Owned Properties (2010) and Article 15 of Abu Dhabi Law 3/2015.
Developers are deemed to have given these as warranties to the buyer and if there has been inaccurate/incorrect information that has been found for a period not exceeding two years, the developer is liable for damages. In certain cases criminal, in accordance with Article 5 of the Direction for General Regulation Concerning Jointly Owned Properties (2010).
These warranties, as part of a number of others, are considered as such by the law in Dubai for developers under Article 26 of Law 27/2007 to the buyer. In subsequent cases, the penalties that have been imposed on the developer have been strict and prompt, on issues ranging from service fee violations to significant changes in the floor plan from that represented in the sales and purchase contract.
The developer is also mandated to disclose the jurisdiction and the means of dispute resolution. This is critical. It is surprising that in recent times violations have taken place with the developer and investor approaching competing dispute resolution centres and not the ones stipulated In the agreement.
Such warranties are there for the protection of the investor, and allows for the latter to approach any claims in a clear and transparent framework devoid of any surprises.
It is important to remember that when there is a change and/or update of the law, market practices may sometimes follow with a lag. However, that should not be considered as an excuse for its non-application. A prime example is one of transfer fees at the time of changing of hands of the property.
According to Rera guidelines, it is amply clear that both the buyer and the seller should pay 2 per cent each (i.e., share the fees equally). Yet there have been many instances where brokers have insisted as “market practice” having different norms. Investors are advised to check each aspect of the transaction (real estate or otherwise) with the concerned authorities, especially as information has been so widely disseminated across multiple platforms.
It is heartening to note that as a result of these and other mechanisms put in place by lawmakers, there has been a significant reduction in the incidence of developer and investor disputes. What is of further comfort is that the issues are getting resolved in an increasingly transparent and expeditious manner.
Business contracts will always continue to mutate, and complexity of the business transaction will always mean that there will be aspects of the law that will need to be continually updated to deal with changing business practices and innovations. That being the case, what is clear is that the framework in place has left room for sufficient innovation to take place, while safeguarding the rights of the investor.
This has always been paramount for the law and its theory as well as practice in Dubai has made it a model for others to follow.
6 Dec 2017
Dubai : Expat Indians with funds stuck in delayed real estate projects in India now have reasons for hope. The chances of these projects being revived in one form or the other have never seemed better.
For that, they just need to thank Rera, (the Real Estate (Regulation and Development) Act), a set of laws that have empowered property buyers in India like never before.
So, for instance, if an NRI in Dubai has seen nothing on his investment in an off-plan project in Delhi’s NCR (National Capital Region) over several years, that will no longer be the case now. Developers who have made commitments and been paid for that will need to deliver. Period.
If not, they will need to come up with some ways to show they can stick to their contractual obligations. That’s exactly what is happening in India’s property market now. “There has been quite a bit of consolidation happening, with larger, better-capitalised developers taking over languishing projects of smaller players,” said Anuj Puri, Chairman of Anarock Property Consultants. “This process is, understandably, largely happening off-the-record — but it is definitely happening.”
At the same time, “Developers are being very cautious with new launches, taking very close market readings about the likelihood of absorption of new inventory. It makes more sense to them to complete their existing projects and thereby remain Rera-compliant.”
What Rera is doing is clean up many of the inefficiencies in the property market embedded over decades. Principally, it has meant that smaller developers who are in for a quick buck have to vacate the scene … permanently.
According to Rahul Maroo, Senior Vice-President at Mumbai-based Omkar Realtors, “We have been approached by small developers who have cash flow and project delivery problems to take these over. If their land bank is good, we will evaluate how that can be utilised by us in future. We expect to take a few decisions on such land purchases involving stalled projects early next year.
“All affected buyers in these projects will be suitably compensated — the Rera laws are pretty clear about this. In a single act, India’s property market has seen the separation of the good and bad developer.”
Omkar has just launched a Rs17 billion, multi-year residential project in Mumbai’s western suburbs, making it one of the biggest such launches in the post-Rera and post-GST (goods and service tax) era.
But it’s unlikely that a majority of developers in India will go the off-plan way. There is so much of inventory available from earlier launches after the Indian economy put in a few quarters of indifferent growth. Plus, developers need to be reasonably sure they can complete the projects they are launching. The Rera provisions have left them with little choice.
Even without new launches, NRIs in the Gulf have plenty to choose from. And they could even extract some bargains if they negotiate hard enough.
“Currently, buyers have the opportunity of opting for brand-new apartments at almost the same rates that made the secondary sales market attractive previously,” said Puri. “Developers are going out of their way to attract buyers with unprecedentedly attractive deals — an advantage that is not available on the secondary market.”
How big those bargains will be depends on where those projects are. If the NRI’s preference is for NCR, he could receive quite a few compelling offers.
According to JLL (India) stats, the NCR currently has the maximum number of unsold units among all the top cities in India. About 200,000 units are currently unsold across the different areas. Greater Noida has the maximum share of unsold inventory, followed by Gurugram.
“There are many reasons for the price decrease in NCR,” said Puri. “To begin with, excessive delay in project construction and possession has hurt buyers’ sentiments and led to subdued demand.
“Many projects have been stalled due to agitations and litigation issues. The massive unsold inventory itself has acted as a sentiment suppressant. Finally, while demonetisation, Rera and GST are potentially positive moves for the industry, they have played a significant role in reduced buyer sentiment, contributing to the price falls.”
But head for the southern cities in India, and a prospective buyer will not get to see to many unsold stock. JLL reckons that the stock has declined by 21 per cent in Hyderabad, 20 per cent in Chennai and 15 per cent in Bengaluru from end 2016 levels.
But, across India, all that unsold stock plus weak demand from domestic buyers make it a good time for expat buyers to put up the cash for a home. And prices too will remain in their favour.
“Prices are likely to remain stagnant for a few more quarters,” said Puri. “Factors such as the huge unsold inventory, recent cases of developers’ bankruptcy or insolvency and the huge number of stalled projects have made buyers sceptical about the market.
“Plus, delay in execution and a dilution of Rera have acted as dampeners for buyers’ confidence. Prices are unlikely to rise near term.”
6 Dec 2017
Dubai: Dubai could see another 80,000 homes being added to its existing stock in the next three years if developers stuck to their build-up plans. But the property market should not be too concerned that this could lead to an oversupply situation.
“The corresponding growth in [the city’s] population, which usually averages 5 per cent per year, should see a further 441,000 new people added,” said Faisal Durrani, Head of Research at Cluttons. “According to the Dubai Statistics Centre, the average household size in the emirate is 4.2 family members, which would translate into demand of roughly 105,000 units over the next three years.”
If so, demand would actually be some steps ahead of supply. But the problem comes in when much of the anticipated supply fails to materialise. “It may appear that supply and demand are well matched — particularly as 30-40 per cent of the announced supply is likely to be delayed, or rephased, as has been the case historically.
“Our concern remains centred on the fact that the vast majority of planned supply is designed to cater to the high-earning segment of the population.”
It would take more than three years before a location such as Dubai South starts having a significant number of affordable homes, both from a sales and rental perspective. But the Dubai government is putting its weight behind new projects with an affordable element about them. And it is bringing in legislation to make sure this happens.
“The change will help Dubai avoid some of the lessons learnt by more developed cities around the world, especially with regard to curtailing the emergence of poorly connected, low-income neighbourhoods that are segregated from the rest of the city,” said Durrani.
“While exact details around the legislation are yet to be confirmed, we expect to see a balanced approach between the presumed establishment of quotas around the provision of affordable housing that is both built-to-rent and built-to-sell, so that both aspiring buyers and tenants, priced out of city centre locations, can benefit.”
But developers and investors will need to keep watch over any sudden shifts in the regional situation, and which could have an effect on real estate demand patterns.
As for now, residential prices slipped by 1.9 per cent in the three months to end September, and this follows a 1.5 per cent drop in Q2-17. Villa prices experienced their weakest performance in almost two years, falling by 2.8 per cent in the three months to end September. Apartment values experienced a drop of 1.3 per cent on average, taking the change during the first nine months of the year to -5.5 per cent.
6 Dec 2017
Dubai: Residents or investors planning to own a property in the UAE would do well to invest their money in Ajman, if they’re looking for great returns every year.
According to research across various communities in the country, the emirate offers one of the highest rental yields in the world, pegged at 9.6 per cent per annum between April and October 2017. Yields are up 0.3 per cent over the same period six months earlier.
Ajman is the UAE’s smallest emirate located north of Sharjah and commuters who live there can reach Dubai in just under one hour, depending on traffic.
When it comes to rental income, other metropolitan areas around the world don’t even come close to Ajman, with yields in cities like New York only estimated to be around 2.9 per cent.
In Geneva, landlords only earn 3.3 per cent of the money invested, while in Tokyo and Hong Kong, the incomes are even smaller, at 2.7 per cent and 2.6 per cent, respectively, according to figures compiled by Global Property Guide.
Rental yield is one of the most important factors that would-be property owners take into account when deciding whether or not a flat or villa is worth the investment.
It is the money made by landlords each year as a percentage of the property cost, so a studio bought in Ajman for just a little over Dh300,000 may provide the landlord an annual gross income of approximately Dh29,000.
The net rental yield may be lower if other expenses, such as landlord insurance, property management fee, among many others, are included in the calculation.
“Rental yield is one of the most important consideration for a would-be property investor. [It] gives an indication of the expected income generated from a property investment,” Lukman Hajje, CCO of Propertyfinder Group, told Gulf News.
Property prices in Ajman are the most affordable in the UAE, with asking prices averaging just Dh30 per square foot for apartments, according to Propertyfinder, which conducted the research.
The company, however, pointed out that besides Ajman, locations across the UAE have held up well through the real estate slowdown.
Rents may be falling but property owners are still getting good returns on their investment.
“Despite continued decline in real estate prices, since market peak in mid-2014, rental yields throughout the UAE remain strong, and in some cases, attract yields that exceed averages around the world.”
The amount of rental yield, however, is not the only factor that buyers should consider before snapping up a property to let.
6 Dec 2017
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.
6 Dec 2017
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:
6 Dec 2017
New legislation which aims to see more affordable homes built in Dubai is a “watershed moment” for the emirate, according to real estate consultancy Cluttons.
It said the move will help Dubai avoid some of the lessons learned by more developed cities around the world, especially with regards to curtailing the emergence of poorly connected, low income neighbourhoods that are segregated from the rest of the city.
Dubai government recently announced plans to legislate, through planning, the provision of affordable homes in some of Dubai’s core locations.
Cluttons also said recent geopolitical developments on the regional front are likely to impact the emirate’s property market as investors seek an investment safe haven.
Faisal Durrani, head of research at Cluttons said: “Overall market conditions in the emirate have been relatively healthy. Going forward, we see regional developments and local legislation playing a big part in Dubai’s property market. We believe that Dubai Government’s initiative to focus on affordable housing is extremely positive and is a watershed moment for the emirate.
“While exact details around the legislation are yet to be confirmed, we expect to see a balanced approach between the presumed establishment of quotas around the provision of affordable housing that is both built-to-rent and built-to-sell, so that both aspiring buyers and tenants, priced out of city centre locations, can benefit.”
Cluttons said residential prices slipped by 1.9 percent in the three months to the end of September, following on from the 1.5 percent drop in Q2. The annual drop at the end of Q3 stood at 5.6 percent.
Villa values experienced their weakest performance in almost two years, with prices falling by 2.8 percent in the three months to the end of September. Apartment values saw a drop of 1.3 percent on average, with no submarket registering growth during Q3.
Transaction volumes remained relatively stable, with the number of deals during the first nine months of the year standing 4.6 percent higher than the same period last year. The volume of villa transactions however slipped by 1.6 percent over the same period.
According to Cluttons, the supply pipeline continued to strengthen, with nearly 30,000 units announced during the three days of Cityscape Global in September.
Durrani added: “Overall, we expect 79,738 units in total to be completed over the next three years. The corresponding growth in population, which usually averages 5 percent per year, should see a further 441,000 new people added to the city.
“While it may appear that supply and demand are well matched, particularly as 30-40 percent of the announced supply is likely to be delayed, or rephased, as has been the case historically, our concern remains centred on the fact that the vast majority of planned supply is designed to cater to the high-earning segment of the population.”
3 Dec 2017
LONDON: The looming introduction of VAT is encouraging Dubai developers to offer more attractive payment plans, according to brokers.
It coincides with a flood of new homes hitting the market following four years of rampant development fueled by developer stage payment financing schemes.
“Residential developers are wary of not being able to benefit from rebates on the cost of construction materials, should they be unable to sell all units in a development within three years of completion,” said Faisal Durrani, head of research at Cluttons, the real estate consultancy.
“This is already driving ever more favorable payment plans, which extend well beyond handover. Positively, it does mean that we may see an end to the “build it and they will come” mentality that has prevailed for a number of years and developers are likely to carry out better market due diligence and bring forward schemes that are better matched to the local socioeconomic environment and, more importantly, better matched to most households’ budgets.”
Phidar Advisory Managing Director Jesse Downs agreed that developers were offering payment plans both on completion and post-handover — and that the introduction of VAT was one possible reason for the attractive terms.
Developers in the UAE are able to benefit from a zero VAT rate on sales within three years of a project completion.
They are also eligible to claim rebates on the cost of building materials within that period — an obvious incentive to handover properties as quickly as possible.
Property broker JLL estimates that as many as 18,000 new units could be handed over in Dubai this year and spiking to 34,000 next year with another 28,000 due in 2019.
Phidar estimates that total residential sales volumes were down by about 16 percent year-on-year in the emirate in October.
3 Dec 2017
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.
“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.
“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.
2 Dec 2017
DUBAI — Location, location, location may be the defining factor when it comes to purchasing a residential unit, usually quickly followed by price point and size, but one developer has addressed four overlooked features which can dramatically improve quality of life.
Mada Residences, a 36-storey luxury residential tower in Downtown Dubai with 193 spacious 1, 2, 3 and 4 bedroom luxury apartments, is full of units that not only ticks all the usual boxes when searching for an investment or new home, but also addresses hidden qualities to enhance the overall living experience.
• Delays to your morning commute
Often an overlooked feature when investing in a property; the speed, waiting time and capacity of a lift can play a huge part in your morning routine and less than optimal lifts could cause unexpected delays.
With six specially fitted Kone lifts across three elevator shafts, Mada Residences’ developer, ARTAR Real Estate, has ensured residents a speedy and efficient route from their front door to their car. With a top speed of 4.5 meters per second, resulting in a maximum waiting time of 38 seconds, the Downtown residential tower cuts conventional waiting times for lifts in half.
• Ample space for friends and family
Living in a high-rise residential tower in Dubai poses the problem of sufficient parking for hosting family and guests. Aside from the allotted parking spaces for a property’s residents, and depending on where the tower is located, guest or road-side parking spaces are either very limited, not available or over-priced.
In addition to the allotted parking spaces per unit, Mada Residences boasts an abundance of visitor parking on all podium levels as well as road side parking totaling 276 spaces.
• Protection from the elements
The importance of having a safe and secure home and investment is paramount, and in light of recent government regulations, protection from fire has topped the priority list for investors.
ARTAR’s decision to invest in the building’s cladding, made in Spain from extruded porcelain, was taken months before Dubai authorities recently took action to counter the threat of fires in high rise buildings.
Mada Residences is the first residential tower in Dubai built using specially developed cladding that can resist temperatures of up to 1,200?C.
• Eliminating noise pollution
Living in a cosmopolitan city has its perks, but a residential tower located in a bustling city centre can have some drawbacks. Noise pollution created by nearby roads can severely affect the standard of living standards for residents.
By increasing the thickness of the glass panels from the standard six millimeters to eight millimeters, as well as increasing the space in-between the double glazing to 16 millimeters, ARTAR has increased noise reduction by up to 40%, ensuring a quiet living space for residents.
The luxury tower, a one-minute walk from the new Dubai Mall extension, features a Signature Collection of nine elite 4-bedroom apartments as well as the only two bedroom apartments with maid’s rooms in the Downtown district to be handed over in 2018.
4 Dec 2017
Located in Dubai’s Al Barsha South 3 locality, the freehold development comprises 175 residential units, including studio, one-, and two-bedroom apartments.
Residents will have access to private sundecks, 24-hour secured access with video intercom, and concierge services. Each unit has been fitted with a built-in kitchen, wardrobe cabinets, and bathroom accessories.
Vincitore Palacio has secured quality-control certification from Germany-based auditing and compliance body, TUV Nord.
Vijay Doshi, founder and managing director of Vincitore Real Estate Development Group, said: “We are delighted to present our customers with their dream homes, which will enable them to enjoy luxurious living within their means. Vincitore Palacio is indeed a ‘winning palace’, as its name connotes.
“It is a testament to Vincitore Real Estate Development’s exceptional ability to combine superior construction with affordable prices. Such signature projects backed by respected brands, such as TUV Nord, are rare at this range, which is why Vincitore Palacio offers a niche experience for all its owners.”
The project boasts a double-height lobby, an ornamental façade, designer elevators, a temperature-controlled swimming pool, a children’s pool, a sunlit gymnasium with steam and sauna, a podium-level entertainment area, and a landscaped garden and water fountain.
The building has also been fitted with energy-saving features such as light-emitting diode (LED) luminaries, a glass fibre-reinforced concrete external finishing, and an efficient plumbing system.
Vincitore Palacio’s handover, which was attended by more than 700 people, featured live music, mermaid shows, and fireworks. The project’s UAE-headquartered developer described the event as a significant milestone in its vision of delivering signature real estate projects at affordable prices.
4 Dec 2017
With nearly $33 billion worth of projects in the pipeline for Expo 2020, a first-of-its-kind event in the Middle East, Africa and South Asia region, it’s boom time for the real estate sector in Dubai, said an industry expert.
Making its debut in the Middle East region, the mega international event will positively affect almost all sectors in the emirate such as tourism, aviation, hospitality, and infrastructure. However, the biggest benefactor of the Expo 2020 will be the real estate sector.
The Expo 2020 is likely to draw more than 25 million visitors to the emirate during the six-month period. And the onus is now on the major global players in the real estate, both inside and outside the emirate to finish off their projects in time to accommodate the sea of visitors flying into Dubai.
As with the extra 5-stars hotels needed to serve Expo 2020 attendees, the real estate sector is in for a busy few years, on top of the bulging order books already for new hotels, homes and retail outlets.
It is expected that during the six months of the expo, Dubai will earn a total revenue of $38.1 billion from Expo-related activities with much credit to the real estate sector.
Dubai’s vision is to use Expo 2020 to stimulate growth in its real estate sector and the scheduled Real Estate Projects are the way to achieve this vision. Here is a glimpse of the expo’s effect on real estate sector.
The 15.3-sq-km waterfront city will feature all sorts of new hotels, serviced apartments, mixed-use buildings, and marinas to serve the anticipated crowds.
The developer – Nakheel – will be building a big part of the south island with a whole set of tourist attractions to make residents stay a fully-equipped one such as Night Souk, Deira Mall, and Deira Islands Towers and Boulevard. The $150-million project is scheduled for completion in the third quarter of 2018.
Under the supervision of Dubai’s Municipality, Aladdin City will be built in the middle of Dubai Creek. The project, which will boast commercial offices and hotels in three towers over 34, 25 and 26 storeys tall, is set to become a major tourist attraction.
*Al Mamzar Beachfront project
Developed by Emaar at a cost of $2.72 billion, it is a mixed-use beachfront development in Dubai’s Al Mamzar district. The project comprises 4,000 residential units, 300 hotel rooms, and 250,000 square meters of retail outlets. Al Mamzar Beachfront project is due for completion by the end of 2018.
*Parks and Resorts
With this massive project, which has crossed the $1.034 billion investment-mark, Dubai has taken the entertainment to a whole new level as part of its Expo 2020 preparations. Dubai Parks and Resorts master development includes three major theme parks that aim to entertain the expo’s visitors and make their stay in Dubai a memorable one indeed.
*Mohammed Bin Rashid Al Maktoum (MBR) City – District One
The $8.2 million project comprises apartments, villas, and townhouses and is basically composed of four main components that include top-notch and high-end facilities. According to the developer, this landmark project is expected to be completed by 2019 where it is estimated to provide an integrated environment for the development of entrepreneurship and innovation.
*Al Habtoor City
This landmark project will include three world-class hotels besides three luxurious towers. Featuring Dubai’s first-ever St. Regis, a flagship W Hotel and a new Westin, these five-star hotels are expected to offer more than 1,600 elegant rooms. As for the three residential towers, Noura, Amna (74-storey towers) and Meera (52-storey tower); the buildings are expected to provide a wide variety of real estate products with various styles and sizes that range from stylish apartment to spacious penthouses, three of which are VIP penthouses.
That’s not all, Al Habtoor City will also feature an exceptional range of leisure activities that will include Dragon show, a state-of-the-art tennis academy, and an impressive array of exclusive boutiques and cafés on the boulevard and the waterfront.-TradeArabia News Service
3 Dec 2017
The Dubai Land Department (DLD) gas closed its records department as part of a move towards a ‘smart’ archiving system, according to DLD Director General Sultan Butti bin Mejran.
In a statement, Mejren added that the move represens a “key step” in DLD’s smart transformation strategy.
“DLD will retain its staff from the Records Department to benefit from their accumulated experience in this field,” he added. “They will be trained to handle the new technology or become members of other departments, as they are considered an asset by our Human Resources Department, which plays a vital role in improving our employees’ institutional performance.”
According to DLD, its IT department has converted more than 5 million files and transferred them to the archiving system, including 470,642 ownership contracts, 20,594 for buildings, 135,878 for land, and 313,170 for units.
To retrieve documents, users can scan a unique ‘barcode’, or go through DLD’s smart applications. The system also keeps files for public and private use separate, and allows data to be re-indexed and updated.
“This project is a continuation of our relentless efforts to remain at the forefront of institutional performance and provide a model for what government institutions need to do to keep up with technological progress,” Mejren added.
In October, DLD adopted blockchain technology as part of the ‘Dubai Blockchain Strategy’ launched by the Dubai government.