“Most of the financed buyers are taking loans on an 85 per cent loan-to-value, which means the balance is from their own cash,” said Chadrakant Whabi, CEO of Acrohouse Properties. “Finance is normally given on net selling price; the additional 2 per cent brokerage fee and 2 per cent transfer charges are paid for by the buyer, which is the normal market practice.” (It is market practice that buyers step up with the additional payments even though the rule is that the registration charges are to be borne equally by the buyer and seller.)

The hike is to come into effect on October 6, according to the Dubai Land Department.

“A sale agreement usually takes between 30 to 45 days to be completed in mortgage financing deals due to lengthy bank formalities that need to be completed,” Whabi said.

As things stand now, the buyer puts up the security deposit of 10 per cent while signing the MoU. But, with the hike coming into effect, there is “a risk of this being forfeited if the buyer does not arrange the funds before the agreed transfer date, usually between 30-45 days,” said Whabi.

This could impact agreements signed before the announcement date but where the transfer has not taken place.

“The seller might not pay or share these extra charges as they stick to their net selling price,” said a market source. “Banks are not willing to fund the extra charges as it’s not their policy to fund transfer charges.

Crunch phase

This leaves the finance buyer to arrange for the extra 2 per cent, which is more than 10 per cent of the capital he has saved for his property investment in most cases (if the buyer has taken an 85 per cent loan, he would normally be required to arrange a 15+2+2 per cent payment initially) within days.

This is the crunch phase as everything will depend on the number of days left for the transfer to be effected. Otherwise, the buyer runs the risk of losing his entire security deposit placed on the property.

“While the authorities would have justifiable reasons for increasing the charges, implementing it at such a short notice has created some concerns in the market,” said Whabi. “This could have been avoided if reasonable time was given to buyers and sellers to adjust to the new charges.”

According to Khawar Khan, research manager at Knight Frank, “In recent years, such “cooling” measures have also been introduced in other markets. Indeed, both Singapore and Hong Kong have implemented a number of policies since 2009, albeit with varying degrees of success.

“This is reflected in the fact that, in annual terms, in the second quarter of 2013, prices continued to see double-digit rises in Hong Kong, while Singapore saw a relatively modest increase of 4.5 per cent — a sharp slowdown compared to mid-2010 levels.”

Source: gulfnews

The current rent dispute body — known as the Judicial Committee — hears about 100 cases a week and a judgement could take up to three months.

Eight of the new committees represent the court of first instance, while the other two committees will oversee any appeals. The Decree issued earlier makes it clear that any judgments of less than Dh100,000 will be binding on both parties in a dispute. As and when the legal team is expanded further, it is possible that the new Centre could take up to 600 disputes a week, officials said.

Before it reaches the first instance level, the parties involved in a dispute can press their contending claims with the ‘Conciliation and Reconciliation’ department.

Top officials at Dubai Land Department, under which the new entity will function, said fast-tracking the resolution of rental disputes required the creation of a new “judicial arm” for the local estate sector, similar to what the Real Estate Regulatory Agency plays on the regulatory side.

As of now, the legal fee — 3.5 per cent of the contractual value — will be similar to what exists at the existing rent dispute agency. However, whether the new entity requires its own fee structure could be decided once the services are launched, said Sultan Butti Bin Mejren, director-general at Dubai Land Department.

The Centre will, however, not take up disputes involving lease-to-buy contractual agreements nor will it cover long-term lease disputes and properties falling within free zones. There will be multiple branches of the Centre located in Dubai apart from the main one in the Dubai Land Department premises.

In the latest data with the Dubai Land Department, transaction values exceeded Dh160 billion in the year to date from 44,000 deals compared with Dh90 billion for the same period last year. It was Dh145 billion for the whole of 2012.

“The registration fee hike will slow down speculative moves on quick profit taking, which is never a healthy thing in a property market,” said Sultan Butti Bin Mejren of Dubai Land Department. “Last Thursday alone we had registrations of Dh1.2 million and that has never happened in the Department’s 50-year history.

“The decision to hike the registration charges has been in the works for some time and pre-empts warnings expressed by the IMF over the build-up of another property bubble. But Dubai’s property market has attained far more maturity and the buying and selling has been taking place on actual projects.”

The official added that even with the hike, property transaction fees here are still lower than in most of the mature Western markets as well as those elsewhere in the region, which averages 6.9 per cent.

“The hike proposal was discussed with multiple stakeholders and including those in the property market and not something that was decided unilaterally by us,” said Al Mejren. “What we have to do is take all steps possible to increase its long-term viability,” said Al Mejren.

That the authorities were considering a hike in registration charges was getting traction in the marketplace for some weeks now. It could also partially explain the marked increase in registration volumes of recent days and weeks.

According to Mahendra Pratap, director at SPF Realty’ “Even with the hike the charges here are still on the lower side compared to other markets and beyond the initial reaction, investors will easily adjust to it. And what could happen is that between now and when the hike gets enforced from October 6, local property values could have seen an upward adjustment by the same margin. The market’s momentum is such.”

Meanwhile, Al Mejren added that the Dubai Land Department will prioritise steps to ensure growth rates are sustainable and that other key fundamentals of the property marketplace, such as the rental index, will be under close scrutiny.

Source: gulfnews

A resurgent property market has got developers with extensive interests there to ramp up project activity, while more could be on the way. The Falcon City has already built up scale, while the strictly super-premium Al Barari community is adding to its already extensive list of features and new living spaces.

At the same time, the promoter of City of Arabia – IMG – makes a point of emphasizing that the in-the-making destination is not just about dinosaur and superhero theme parks but will have a residential mix as well.

“The project will largely be developed by IMG Group; however, the masterplan does include plots that have been earmarked for high-rise buildings and some of them have been sold to sub-developers as well,” said a spokesperson for the developer. “With the market conditions improving, some of these sub-developers will commence construction work shortly.

“The masterplan is being reviewed based on current market demands. Pursuant to revisions that may be made based on these reviews and related approvals, sales and marketing [of the residences] will commence.”

According the provisions of the law, the department will work on achieving the government’s strategic objectives for the properties sector by developing property registration systems that keep abreast with those used on the global stage. It will also be responsible for improving its capabilities in regulatory and real estate control operations, as well as managing and developing the rental sector.

The department’s tasks include encouraging real estate investments by providing a suitable environment for investors, in addition to enhancing the contributions of the real estate sector to the emirate’s comprehensive development.

In addition to the duties assigned to the department in line with current laws, it’s duties will also include drawing up policies and plans that are in line with the development of Dubai’s strategic plan to regulate and develop the properties sector. The department is also tasked with putting in place regulatory laws for escrow accounts, real estate brokers and jointly owned property offices.

The department will encourage investments by providing investors with data and information on available opportunities in Dubai, and will also propose necessary initiatives, market legislations and policies to achieve its goals.

But will this, by extension, also impact developer interests? “If investors are buying property with the intention of leasing out, and they see a market situation where rent disputes go in favour of tenants, they might put a pause on their investment decisions,” said Parvez Khan, CEO of Pacific Township Holdings, a developer with a current portfolio of three residential projects including one at the Downtown.

“Rental yields will always have a major say in influencing buyer decisions. But the current sales momentum in the marketplace should be able to take the rental agency creation in its stride. ”

The new entity will not handle tenancy disputes on lease-to-buy agreements — many developers are using this incentive to get people buying into their projects — or the long-term leases.

Clear understanding

The Rental Dispute Settlement Centre announced on Saturday by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President of the UAE and Ruler of Dubai, is set to replace the existing Dubai Municipality’s Rent Committee. The new centre will have authority over rent disputes between landlords and tenants within Dubai and its free zones.

It does not have authority over special judicial committees or courts assigned to settle disputes.

Sallie Bowtell, Senior Associate at Trowers law firm in Dubai, said the new settlement centre is a step in the right direction.

“One of the difficulties with the current committee is that its quite time consuming. It’s good that they will have a specialist community which means disputes can be resolved efficiently,” she said.

She said that clarity over how rents will be calculated would allow both tenants and landlords to budget for the future.

Other challenges are issues surrounding lease agreements and the right to evict tenants.

Currently, landlords have to provide their tenants with 12 months notice that they won’t be renewing the lease agreement with the tenant, Bowtell said.

The tenant can elect to move out at the end of the agreement without giving notice.

In the last six months, some of the lower rental areas, including International City and Discovery Gardens, have experienced high rental growth. These two developments have registered “between 20 and 25 per cent [in rental growth] per annum compared to the overall average of 17 per cent [in Dubai,]” Plumb said.

According to Nick Maclean, managing director of real estate consultancy CBRE in the Middle East, some of the residential areas that are expected to be affected by the centre include Jumeirah, Downtown Dubai, and Arabian Ranches.

Meanwhile, the setting up of the new centre can result in more buildings and demand from investors in the long-term, according to Plumb. He added that it “will not make a huge difference in the short-term,” expect for more control over rentals, which will benefit tenants. The new centre can also “encourage more people to register leases,” he said.

In order to survive, you needed to develop a competitive edge. To do this, you needed to adapt which required a brutally honest assessment about your own capabilities and the capability of your business to continue to provide the professional services that clients require but within a totally new business context emanating from the starkest of economic realities.

However, it’s not just about introspection, but also about making sense out of the chaos. The market changed rapidly during the recession requiring the rapid development of new solutions to new challenges. I think this is the greatest lesson that we learnt.

Innovation and fresh thinking will always prevail regardless of the circumstances. If the market is hot or cold, innovation has and always will always provide the competitive edge for us and our clients.

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