Gulf News

The race for the sky is not over in Dubai

By Mohanad Alwadiya
Published in Gulf News Freehold

It is the beauty, grandeur and special significance of landmarks and monuments that continue to withstand the ravages of time – characteristics which make them timeless in appeal, and transform them into global icons.

Not to be missed, of course, are the socio-cultural impact and economic benefits of having monuments and landmarks in a place, city or country. After all, their building or restoration already spurs economic activity and, with the end product, can lead to some form of socio-cultural revitalization.

Every nation or great city has some symbolic architectural icon which helps define either the history, vision, cultural values or characteristics of the people that inhabit it… whether it be the Statue of Liberty in New York, The Eiffel Tower in Paris, The Shard in London, The Sydney Opera House, or even St. Basil’s Cathedral in Moscow… they are all symbols, and all of us have grown to accept those structures to be symbolic, in some way, of the cultures that they uniquely represent.

Dubai’s dynamic, ever-changing landscape, a constant in the continuously developing emirate, is a characteristic of the city known the world over. From the opulent halls of the Burj Al Arab and the graceful fronds of the Palm Jumeirah, to the tallest skyscraper that is Burj Khalifa, the architectural and engineering feats Dubai is famous for seem to have no limits. Areas which were once all desert and sand are now teeming with people, businesses, and bustling with tourists.

Such achievements in the field of architecture and engineering prove how important property development is to real estate, and to the general economy. Emaar Properties, one of the UAE’s most respected property developers, after delivering established communities such as Arabian Ranches, Emirates Living, and Dubai Marina, has played a significant role in establishing the bedrock for supporting the lifestyle that Dubai offers today. But all that was eclipsed when it delivered its flagship development, Downtown Dubai, home to the iconic Burj Khalifa, The Dubai Mall and The Dubai Fountain. Not only did it provide what is now the world’s leading lifestyle destination, but it also reshaped Dubai’s skyline forever, and gave it a profile which is recognized around the world. And that skyline is about to change significantly, once again, with the recent announcement of the construction of a stunning new architectural icon, their latest exciting development.

The icon will simply be known as “The Tower” and its design was chosen by His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, and Prime Minister and Ruler of Dubai, a design which draws inspiration from the lily and evokes the image of a minaret, which is a common feature and distinctive aspect of Islamic culture and architecture.

The location of The Tower is an important reminder of Dubai’s past as it will be constructed on the Dubai Creek, the cradle of Dubai’s history and culture. This astute choice of location will forever mark the origin of Dubai and remind all of the humble beginnings of what has now become a remarkable story of vision and growth, amply demonstrated by the 6 square kilometers of world-class master-planned development that will have The Tower as its centerpiece.

Not only is the site historically significant, but it is also located in close proximity to the Ras Al Khor National Wildlife Sanctuary, protected under the UNESCO Ramsar Convention, and home to over 67 species of water birds.

And, as with all great icons, The Tower has a reason for being, and is envisioned to be of symbolic significance to, not only Dubai and the UAE, but to global visitors hailing from all across the world. Once The Tower is finished and unveiled in time for Expo 2020, taking inspiration from the Eiffel Tower which was built for the 1889 Paris Expo, it is envisioned to become another global landmark surpassing the boundaries time and culture.

As an iconic structure, The Tower will provide a clear and bold symbol of a people’s culture, aspirations and ambitions. It will be representative of a vision of progress that has global relevance and benefit demonstrated through innovation, growth and development.

Ask the agent

Question: I have been in the UAE for a long time, and accumulated a portfolio of 17 apartments and a couple of villas located all over Dubai. Everyone knows that the market is on a slowdown so is there still a way to make any profit during this period?

There are too many investors who are under the illusion that investing in property is almost a “set and forget” proposition, but nothing could be further from the truth. The property industry is incredibly dynamic and requires constant attention as factors influencing its performance as an investment are as broad as they are complex.

Investing in property is no different to investing in any other asset. Its purpose is to create wealth but, in order to do that, it needs to be nurtured, maintained and managed just like any other investment. Ask yourself a question: Would you create a share portfolio without monitoring and managing its health and performance? Of course not, and having a property portfolio is no different.

With a portfolio this large, you need professional help to manage your property investment, particularly during times when yield is harder to generate. It requires careful thinking about what the true earnings potential of the portfolio really is, and what is the most efficient and effective way to go about realizing that potential. You need a good property manager who will ensure that you maximize returns from your property portfolio and enable your long term portfolio strategy to be realized.

Essentially your property manager should be capable of managing your business which just so happens to be a property portfolio. Remember, it’s your investment, and you need to ensure it’s in good hands providing you with the returns you expect with as little hassle as possible.

Choose wisely as once you appoint a property manager, your ultimate return on investment is largely in his hands.

QUESTION: I have a well-maintained 1-bedroom apartment in Queue Point, Liwan. When I purchased it, the selling rate was at AED 550 per sq.ft. Should I continue to rent it out or sell it now?

Properties located in non-prime areas such as Dubailand have been doing very well even in the current market scenario. Even in the recent past, we have witnessed the more affordable properties in the market, including those in Dubailand, doing quite well in terms of significant value growth and ongoing sales activity as there remains a supply gap in the truly “affordable” property segment.

As mid to upmarket property in prime locations have become unaffordable for some homebuyers and investors, people have turned to more reasonably-priced projects like Remraam, Skycourts, Queue Point, etc., which promise capital appreciation even in the current market climate. These developments are still young, and more growth and infrastructure development is still in the offing.

There is no doubt that you would still make some profit if you sold today; however, we expect values to still improve, especially as the infrastructure and landscaping around the development gets completed. I suggest you retain the apartment for at least the next 5 years as you will continue to benefit from superior capital growth and enjoy at least 8 percent net annual rental returns in the meantime.

Question: Am I right in thinking that rental rates are not as affected by the market slowdown as sale prices? I was expecting a big reduction in my rent but our landlord told us it will remain the same.

Yes, you are partly right. The current industry climate has affected sale prices more although rents have also fallen in certain areas which only means the market slowdown has varying effects on different areas and property types. Regarding your rent, what will determine whether the landlord can raise your rent or not is how your rental levels compare with the new and updated index.

You should familiarize yourself with Law 43 which was issued on 22/12/2013 and replaced Decree # 2 of 2011. It introduced certain restrictions with regard to the calculation and implementation of legally allowable rental increases.

Having said that, it does not set out to control the rental value of new contracts and where a property is to be let for the first time or to a new tenant, it is up to the owner and prospective tenant to agree as to how much rent should be charged for the property.

However, for your peace of mind, you can compare your rental rate to the current market rate by using the RERA rental increase calculator online by visiting: http://www.dubailand.gov.ae/English/Pages/Rental-Increase-calculator.aspx

While it has its limitations, it is a useful tool that is also being used by landlords as a reference point for determining rental rates.

Question: I have just received an offer from a bank representative to refinance my property. Is this an opportunity I should avail of or not?

Very easily, I can say the answer is YES, but only if it makes financial sense! In short, you need to make some quick but careful calculations.

There are some very attractive mortgage products in the marketplace with a few mortgage providers offering rates as low as 3.99% or even 3.49% which signals that competition among UAE banks for higher market share of the mortgage market is getting pretty intense.

There are a number of things you need to consider such as, is there an early payment penalty for your current mortgage? It may well be that you will need to pay a hefty fee to exit the existing contract.

While 3.99% is an attractive rate, how long are you guaranteed this attractive rate? Interest rates will eventually rise and this eventuality needs to be understood by mortgagors as the attractive 3.99% interest rate enjoyed today will, in all probability, be replaced with a significantly higher rate in 2 years’ time, requiring increased mortgage payments to cover the interest rate hike. You need to factor this into your financial planning.

Will you need to pay any establishment fees for your new mortgage contract? With the mortgage market becoming so competitive, you should be able to have any fees waived.

Finally, make sure you can pay out your new mortgage contract at a future point in time without any penalty. This is an unnecessary expense that you should not be burdened with.

Additional:

Question: I am coming from overseas and looking to rent a home. I heard about this thing called “district cooling.” What, exactly, does it mean?

District cooling for the provision of chilled water has emerged globally as a way to provide cooling to buildings in a more environmentally sensitive way. It is considered to provide great benefits in the long run and, in addition, helps in saving on the costs of electricity which will be reflected in lower DEWA bills of tenants.

You will find that most of the units which are serviced by chilled water district cooling are offered at slightly lower rental rates. However, you should enquire as to how your cooling charges will be calculated and enquire as to all the charges which are included in the cost. You may even ask existing tenants how much they are paying currently before you commit to a tenancy contract.

With regard to consumption charges, I am assuming you will have a BTU meter installed in your future apartment? If so, you will be billed directly by the cooling services provider based upon what you actually consume in terms of cooling. The more you use, the more you pay.

Having said that, the DEWA savings will be offset somewhat as you may incur an additional utility charge as some owners of units that are equipped with chilled water district cooling will be passed on the slightly higher utility charges that they incur which involves the remuneration of the capital costs of providing the infrastructure that delivers the chilled water to the unit. This charge will, in all likelihood, be calculated as a pro-rata of the actual consumption charges.

Nevertheless, in most cases, developers have managed to offer better value for money while helping protect the environment.

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Freehold – Gulf News
Dated: 30 April, 2016

Ask the agent

ask the agent

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Freehold – Gulf News
Dated: 9 April, 2016

Question: We’re a successful startup company and currently looking for office space with the best value? Should we rent or buy?

Congratulations on your successful venture! AT this stage, however, you would still be looking at keeping costs to a minimum until such time you become fully established in the market.

As you may very well know, the old cliché of “location, location, location” is critical. It’s all about proximity and the convenience and prestige that a well-chosen location can bring to your potential customers, staff and business associates. Currently, you will find great value, very affordable and well-constructed office space in Business Bay, which will cost you anywhere between AED 70 and AED 120 per square foot (higher for fully fitted space), but it will be pointless if the location is a hindrance to conducting your business. You need to choose your preferred location first, and work from there.

Think about purchasing your premises. It’s in your best interest to do a complete analysis to see if this option will work for you. We at Harbor have always advocated that, cash flow permitting, businesses acquire their own premises. If you are a business committed to operating long term in Dubai, it makes sense to own your office space, particularly if it is a well-negotiated purchase. There is no tax advantage in leasing in Dubai and, as long as your office space is appreciating, your balance sheet will look a whole lot better and grow stronger over time.

If you decide to lease your premises, try to get the best deal possible and lock it in for at least 3 to 5 years. Lease rates in Dubai will be on the increase, going forward, so make sure you take advantage of current rates.

Question: I came to the UAE with an objective to join real estate as I have several years of experience overseas under my sleeve. Can you advise me on how I can land myself a realtor’s job in a reputable company?

It is good to know that you plan on joining the local real estate sector with some experience. Nevertheless, each real estate environment is unique so I suggest you join a company that will enable you to fast track your learning.

Look for a full service company so you gain a greater understanding of what the UAE real estate business is all about, beyond the buying and selling of property.

The company you choose should value you as an individual and remunerate you appropriately. But they should also be prepared to invest in you by providing the types of learning experiences that come with formal training (mandatory to become a licensed agent in Dubai), and also in-house training. This may involve being assigned a mentor, be placed on an internal rotation scheme to enable a broader knowledge of the business to be developed or be given special projects that will facilitate your learning by encouraging you to seek answers and solutions yourself to enable you to complete the task at hand. Those companies that invest in hi-potential people, typically are those that succeed.

Finally, surround yourself with people who are passionate about the industry because passion is contagious, and it’s what sets the successful ones apart.

Question: How do I know for sure my property consultant is giving me the right advice?

In any relationship, whether it be personal or professional, trust is key. So if you have a nagging feeling that your property consultant is not representing your interests, have a meeting with him and request a justification and rationale for his recommendations and advice. To ascertain whether his justifications and rationale make sense, you should do some research yourself so you can verify the veracity of his claims and assertions. If you remain doubtful, seek an alternative as there are plenty of property consultants out there hungry for your business.

Getting a new consultant is not always the solution and you may want to rethink your criteria in choosing one so you develop rapport and trust in the long run.

Look for experience and passion – people who really enjoy what they are doing. The best way to find such professionals is to ask around. Seek out friends or peers who have recently conducted a real estate transaction and ask. Seek out the positive stories as well as the negative ones.

Find a consultant or agency that exhibits a breadth and depth of industry knowledge and expertise. When conducting initial meetings, make sure you assess how much the agency or its brokers actually know.

Look for longevity. Those that survived the recent recession must be good!

Look for a strong network of corporate, government and industry contacts. The consultant or agency that has good relationships with key industry stakeholders such as the major developers or authorities such as the Dubai Land Department, RERA, DEWA or Economic Department will be able to operate more efficiently and effectively.

And finally, look for an agency that has received some form of industry or peer recognition as they lend credence to the name and reputation of the realtor in question.

Question: We purchased a villa in Dubai back in 2009. However, instead of continuing to rent it out, my husband and I have decided that we want to go ahead and sell our property soon. How do we find a good seller’s agent?

There is a large number of licensed real estate brokers in Dubai, and the whole of UAE of course. But finding the right agent to sell your property is something you need to pay close attention to because getting the best person to represent you and your property out there is crucial to how quickly you can make a sale without compromising on your agreed-upon expectations.

Factors such as years of experience in the UAE property market, track record of success, an in-depth understanding of market trends, area expertise (especially in the neighborhood where your unit is located), client testimonials, level of commitment, passion, dedication, professionalism and honesty are important, not to mention the fact that he/she should also be a duly licensed RERA-certified real estate broker. Before committing to any realtor, make a list of all the questions you want answered first and see how they respond as doing so will help you gauge whether or not giving him/her your business is the best thing for you and your husband, and your property.

Question of the Week: I have been looking at Dubai (or the UAE) as a possible part-time destination during my retirement. Hence, I would like to purchase a property here, rent it out initially and later use the property myself during my retirement. Do you have any advice?

Including property acquisition as a part of your retirement plan is a good move, but you must choose wisely. The key to choosing your property is determining the right balance between the amount to be invested, the returns you require in the interim period before you retire, and what type of property you want to enjoy during your retirement. The good news here is your tastes are likely to be shared by your tenants in the interim so renting it out should not be a problem.

Quality properties are available starting from AED 700 per square foot; however if you want to purchase in the prime areas of Dubai, either in Downtown Dubai, or somewhere close to the beach, or with a golf course view, you can easily double or triple that amount.

You can expect a minimum net rental return of around 5 percent to 7 percent which, given the cheap financing available at the moment, makes for a solid investment in preparation for outright ownership and retirement. Be careful with fluctuations in exchange rates.

Factors such as location, the developer’s record and reputation, quality, service fees, building management and the existence of a functioning owner’s association will require a reputable local real estate professional to help you minimize any risks with your investment, whether during the procurement stage or managing your investment until you are ready to assume occupancy once you will have retired.

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Dubai`s appeal to Indian investors

By Mohanad Alwadiya
Expert Eye – Gulf News

A lot of Indian investors are expected to flock to the International Property Show which will be held at the Dubai World Trade Centre from April 11-13. Being the top Dubai property investor segment based on nationality, investing more than AED 20 billion in 2015, the Indian expat community has had a longstanding relationship with the emirate (and the rest of the UAE) in terms of business and real estate.

But why is Dubai property so popular with the Indian people? The reasons offered are not really surprising, and essentially summarize why investing in Dubai property has had significant appeal for, not just Indian investors, but for investors from every corner of the world.

Ease and efficiency

Compared to most countries in the world, investing in the real estate sector of Dubai is relatively easy. Enlist a reputable brokerage, select your desired property, negotiate a price, write the necessary checks and the property will be yours. Bureaucracy, which makes investing in other countries in the world such a pain, is virtually non-existent and, as long as you follow procedural requirements, your property transaction will be processed efficiently and without undue delays.

Superior value

When compared to the major Indian cities, or major cities round the world, Dubai offers increasingly better value. A modern infrastructure that is continually being developed, a renewed focus on affordable housing, and world-leading rental yields, the value that is inherent in Dubai property is hard to beat in India, or any other country in the world for that matter.

Tax-free rental yields

Put simply, there are not many real estate markets in the world where an investor can enjoy an average 7% yield without paying any local taxes. So, net of service charges, maintenance costs and property management fees, the rent that you charge your tenants goes straight into your wallet without the taxman taking his share. And with the cost of finance remaining reasonably low, the interest charge on any borrowings you may have will be easily covered by the rent that is being yielded by your property leaving more free cash flow to pay down your principal.

Absence of capital gains tax

In addition, capital gains are not taxed upon disposal of the asset which makes investing in Dubai property a very lucrative addition to any investment portfolio as, when taken with a long-term view, investing in Dubai property will provide handsome returns on investment. So, from a total returns point of view, there are few better real estate investments than Dubai property.

World-class infrastructure and security

Many times, investments that provide such lucrative returns are normally associated with excessive risks or poor infrastructure. This is not the case in Dubai. Dubai’s focus has been on developing a world-leading infrastructure for the benefit of commerce, trade, tourism and habitation. The remarkable progress that has been made in opening Dubai up for business, implementing the physical, digital and logistical infrastructures, legal framework and economic policies in the post-recession period has been pretty impressive.

Strong global brand

Dubai as a real estate and commercial hub has captured the imagination of the world, and there is no better barometer of this that the burgeoning tourism industry. Investments in economic revenue generating sectors such as the entertainment and hospitality sectors have ensured that Dubai is increasingly being included in the bucket lists of travelers from all over the world.

Economic entrepreneurialism

Dubai excels in the area of “economic entrepreneurialism.” Already well-known for conducting globally attended exhibitions, there is no greater example than the upcoming Global Expo which Dubai will be hosting in 2020 – an event that the emirate is preparing for with great care.

Multicultural and cosmopolitan society

Once considered just a pit stop for expats that fulfilled employment contracts of limited duration, more and more people have decided to settle down and call Dubai “home.” This change in outlook has had a dramatic effect on the stability of the property market and the development of a society that, while incredibly diverse, is also less transient and more committed to the development of the emirate as a long-term lifestyle solution.

As one looks around the city, one sees many faces hailing from the four corners of the world, and words, both familiar and unfamiliar, echo in the streets and byways. And while there has always been a vibrant and strong Indian community, other communities representing other nationalities are developing rapidly, making it easier for new expats to make the decision to make Dubai their new home.

History has proven that strong nations were built upon such diversity. Armed with this knowledge and the resources the emirate has been so richly endowed, Dubai continues to forge onward with a vision of better things to come.erektionsmittel rezeptfrei

The task of managing properties

By: Mohanad Alwadiya, CEO, Harbor Real Estate
Published in: Expert Eye, Gulf News
Dated: 16th March, 2016

Many people misunderstand the role of a property manager, thinking that the role does not extend beyond the collection and remittance of rental receipts, and acting as a buffer between the landlord and the tenant. Little do they realize that a good property manager will generate greater returns from their property portfolio and enable their long-term portfolio strategy to be realized.

So what should you look for in selecting a professional to manage your property?

Well, first of all, you need a professional who is experienced in the market. Not just in any market though, in this instance, the Dubai market. Typically, if you find somebody with at least 7 years experience, you will have found somebody who has witnessed and survived the global recession, and that should provide a reasonable indication that they are in the business for the long term, and that they had the skills needed to navigate and survive Dubai’s last property slump. Many didn’t.

A competent property manager will provide a whole host of services for you but the most important is the development of a Property Portfolio Strategy. Your chosen professional must be able to articulate and present his thoughts after conducting a thorough assessment of your personal situation and property portfolio. He must be able to provide you with a credible strategy and activity plan designed to harness the true potential of your property and provide you with the maximum rate of total returns It is essential to have a well-thought out strategy for your property portfolio if you are to maximize your returns.

Not just anybody can formulate a credible and implementable strategy. It requires years of expertise and a fundamental understanding of what makes real estate such a worthwhile and superior investment. A true professional will have a strong knowledge base on topics including industry history, current market factors and trends, risk factors, and the likelihood of relevant future events that will affect the performance of your property investment. This knowledge should span global, regional and local landscapes, and will require a good understanding of economic factors, industry knowledge extending to government policies and regulations, finance and market dynamics.

Forming a strategy is one thing, but being able to bring the strategy to life is quite another. You will require an activity plan which will include details of pricing and marketing, customer relationship management and tenant management and policies for the entire portfolio. Essentially, this area of expertise is related to the “topline” or revenue generation and management of the property.

Equally important is the cost management and maintenance supervision of the property. Many times, I have seen excellent “topline” performance being eroded due to poor operational and maintenance cost controls.

Managing your property portfolio will also require proper performance measurement, communications and review schedules, and status reporting and financial statements. You should always seek examples of these elements as transparency and candid performance appraisals are essential to managing your portfolio correctly by addressing shortfalls to objectives, issues requiring redress, and opportunities for performance improvement, in addition to your peace of mind.

You also need to choose a property manager whom you can work with and who, you believe, has your best interests at heart. Your property manager must be customer-centered and, unfortunately, in this business, this is not always the case.

There is no point entering a business relationship that is lacking in mutual trust and respect. You must have confidence in his ability to manage a business… your business… which just so happens to be a property portfolio. As with all investments, but especially investments in property, there will be good times and challenging times. There is no such scenario as “set and forget”. It doesn’t exist. If you do not respect the manager you have appointed, the relationship will not survive the more challenging times and you will need to go through the whole process of finding a replacement.

So take your time but invest your time to your benefit. Be sure to ask for referrals and call some existing clients. Seek out success stories. Ask to see examples of client reports so you have an idea of their work’s completeness, continuity and timeliness. Ask your property manager carefully thought out questions to enable you to gauge the depth and breadth of knowledge that he possesses.

Ensure that the organization you are dealing with has the resources to support the manager of your portfolio. In these times of eliminating overheads, individual performance can be inhibited because of a lack of organizational support. You should ask to meet the team.

Finally, remember, it’s your investment, and you need to ensure it’s in good hands providing you with the returns you expect with as little hassle as possible. Once you appoint a property manager, your ultimate return on your investment is largely in his hands.

Choose wisely.

Ask the agent

Question: I have just joined the market as a property investor. Can you please help me in determining an optimal rental rate to attract my first tenant?

There are different ways by which a good rental rate for your property can be determined, the simplest being the sales comparison approach (SCA) which relies on identifying a factor that is homogenous to similar, if not identical, properties. For example, if an apartment similar to the one that you are planning to invest in is attracting a monthly rental rate of AED 7 per sq.ft. per month, then this will indicate the likely cash flow you can expect. This is an extremely simplistic approach that we, as property managers, do not advocate although it’s surprising how many people limit their analysis to this simple method only.

A more comprehensive method is the capital asset pricing model (CAPM). The CAPM comprehends levels of risk and opportunity cost as it applies to your investment. This model identifies your potential total return on investment which is derived from capital appreciation in addition to net rental income, and compares it to other investments that you may be considering. This is a much more comprehensive evaluation tool which enables smarter investment decisions and, therefore, is the one that we use as a standard procedure.

Please ensure you engage an experienced and professional property consultant when considering building your portfolio. You are about to make a big decision, and you should utilize expertise that will help you minimize risk and maximize your returns.

Question: Has the market bottomed out? Is now the best time to buy, or should I wait for prices to fall further?

The property market is an industry full of surprises, and it is always hard to spot the bottom of a market cycle. However, the market has been correcting for over a year now, and we expect it to pick up again sometime this year as the next five years are expected to see strong economic growth in the Dubai. My recommendation, thus, is for you to start your property search immediately as proper due diligence can take time.

Know what you can afford. If you have the cash, I suggest you pay for it outright; however, don’t be afraid to take out a mortgage and make sure you consider the many and varied easy payment plans that are currently on offer as many of these plans will save you considerable amounts of money.

Think carefully about location, surrounding infrastructure, construction quality, and developer reputation as well building amenities. Properties which are close to the beach, with a sea view, a golf course view or are part of an iconic development, such as Downtown Dubai, usually provide good returns. If you have close access to the Dubai Metro, even better.

You also need to consider the effectiveness of the owners association, service charges and the quality of maintenance services as these will have an effect on the long-term value of your investment.

Finally, be purposeful, persistent, patient and pragmatic, and you are well on the way to making a very sound business decision.

Question: Is there a state of oversupply in Dubai real estate? How does one know for sure?

Calculating optimal supply levels, particularly when emerging from a recessionary period when lots of project s were cancelled or delayed, is particularly challenging. It depends on an accurate estimation of construction timelines which are invariably fluid, and the demand for real estate assets which will emanate from population growth which, in Dubai’s case, will be largely driven by overall economic growth going forward. In addition, it needs to comprehend a lag effect from the time that conditions conducive to development are identified by developers and when properties are finally released onto the market.

Given that the economy of the emirate of Dubai is expected to grow at an estimated 5+ percent annually for the remainder of the decade, and initiatives such as the 2020 World Expo are expected to generate an additional 270,000 jobs, the demand for housing and commercial facilities is expected to grow significantly, going forward. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4 million people by 2020, a 7 percent annual increase from today’s population of 2.25 million.

Question: Can you please share some details on how rental increases are determined in Dubai?

Initially, your landlord needs to give you notice of at least ninety (90) days prior to the expiration of your current contract if he wishes to increase your rent.

You should familiarize yourself with Law No. 43 which was issued on 22 December 2013, and which replaced Decree No. 2 of 2011. It introduced the following restrictions (summarized) to take immediate effect with regard to the calculation and implementation of legally allowable rental increases:

There should not be any rent increase if the rent for the real estate unit is no more than 10% below the average rent that a similar property commands within a neighborhood
The annual rent increases, as specified by the decree, can range from 5% up 20% according to how much the current rent is less than the market average
The market average rates are to be determined by the RERA rental index (via the RERA Rent Calculator)

The implementation of Law No. 43 is necessary to safeguard consumer interest, the overall industry and the economy at large, from rampant and unjustifiable rental increases on existing rental contracts. It does not set out to control the rental value of new contracts and, where a property is to be let for the first time, or to a new tenant, it is up to the owner and prospective tenant to agree as to how much rent should be charged for the property.

Question: What do the terms “BUA”, “GFA” and “NFA” mean? I have heard some realtors use these terms and, as an investor, I am left in the dark.

Like any industry jargon, there are quite a few confusing acronyms used in real estate but those that you have highlighted are very important as they relate to the actual dimensions of the property you are buying or leasing. For this reason alone, it is imperative that you understand them and their significance.

The built-up area (BUA) is the total area being developed or constructed. It is the gross floor area plus parking plus any service area associated with the subject building or project.

Meanwhile, the gross floor area (GFA) is the total floor area of a building including any underground saleable or leasable area (such as basement shops) but excluding parking and underground technical areas. Any building used as some form of supporting service plant should be excluded from the GFA.

Finally, the net floor area (NFA) is the GFA as described above, minus the façade of the building (measured from the center line of glass), plant areas, service risers, building structural core, fire stairs, lifts and lift lobbies, common corridors and common toilets.

The individual measurements are used for separate reasons ranging from purchasing a building, calculating potential revenues to be derived from selling or leasing a building to estimating cleaning costs.

The value of a property manager

So what should you look for in selecting a professional to manage your property?

Well, first of all, you need a professional who is experienced in the market. Not just in any market though, in this instance, the Dubai market. Typically, if you find somebody with at least 7 years of experience, you will have found somebody who has witnessed and survived the global recession, and that should provide a reasonable indication that they are in the business for the long term, and that they had the skills needed to navigate and survive Dubai’s last property slump. Many didn’t.

Choose wisely.

Ask the agent

Question: Which would be a better investment, buying a townhouse or an apartment?

This is a common dilemma faced by investors in the residential market. In the UAE where there is a great deal of variation in the properties on offer, making a choice becomes all the more difficult for those who are new to property investment.

Just remember that the market rarely moves uniformly. There is always a difference in the investment returns to be expected from different asset types, in different areas, at different stages of completion, over different periods of time, being completed by different developers.

So in today’s market, knowing what we know about Dubai’s economy going forward, I usually recommend to my clients to invest in affordable apartments or construct a portfolio of affordable apartments and townhouses, and even villas, as the case may be.

But do take note of the keyword here which is “affordable.”

Projects in Dubailand like Queue Point in Liwan and Skycourts are filling the affordable housing void and, if you wish to diversify asset types, I suggest you consider Shamal Terraces in JVC as this recently launched project offers very high quality but reasonably priced and extremely spacious modern townhouses.

Properties in the above communities offer good quality affordable solutions with little compromise and have the potential to provide excellent rental and capital appreciation returns as affordable housing will continue to be in high demand going forward due to the demand for such options among the middle and lower middle income segments in Dubai.

Question: I am interested in working for a real estate broker as I have extensive property experience in North America, but I don’t know which company to join. Can you please advise me on how I can find the best company to work for?

It appears that you are confident in your industry experience, and feel you can be a real asset to the company you will join. However, since the UAE market is also unique while sharing some general characteristics with global real estate hubs, I suggest you join a company that will enable you to fast track your learning and mastery of the UAE property market. Make no mistake, you still have a lot to learn; but having a good solid foundation of real estate principles should help you progress with greater speed.

Try to go for a full service company so that you can gain a greater understanding of what the local real estate business is all about, who the key players are, and the procedures you need to be familiar with.

The company you choose should value you as an individual and remunerate you appropriately. But they should also be prepared to invest in you by providing the types of learning experiences that come with formal training (mandatory to become a licensed agent in Dubai) and also in-house training. This may involve being assigned to a mentor, being placed on an internal rotation scheme to enable a broader knowledge of the business to be developed, or being given special projects that will facilitate your learning by encouraging you to seek answers and solutions yourself to enable you to complete the task at hand. Those companies that invest in high potential people are the ones that typically succeed.

Finally, it is very difficult to be passionate about your chosen profession if it is not part of the culture of the company that you work in. Try to surround yourself with people who are passionate about the industry because passion is contagious and it is what sets champions apart.

Question: I want to give my tenant one-year notice to vacate the flat. Is there a format and any other formalities? I sent him a notice through a courier company but he said it is not valid. Do I have to give it through the court?

You need a valid reason for requesting the tenant to vacate the premises. Is the tenant in breach of the tenancy agreement? Has the tenant broken the law by utilizing the premises for an unlawful purpose? Do you want to sell the property or occupy it yourself?

If your tenant is in breach of the tenancy agreement or has broken the law in some way, you must serve a 30-day notary public notice to the tenant. The notice must clearly state why the tenant is being given 30 days’ notice to fix the matter, and the details of the matter itself. If the tenant does not respond in accordance to the request, then you can the landlord go to the Rental Dispute Settlement Center and request an eviction order.

If you want to sell the property or use it yourself, you will need to provide 12-months’ notice to the tenant through the notary public stating your intentions. You may then refuse to renew any lease for a period that extends more than 12 months past the date of notification.

The notice should be delivered by courier, and it is important to keep record of the delivery report as evidence of receipt by the tenant as you may need this if the tenant refutes receiving your notice.

Question: Are we headed for another recession?

Even as there is an ongoing market-wide slowdown in real estate activity, my answer is NO, I do not believe that we are going to witness a crash any time soon. However, real estate price correction has been taking place which is not necessarily a bad thing.

The market has cooled for a number of reasons. For starters, the capital inflow that was extremely strong during the initial part of the recovery has started to slow down after reaching peak gains late in 2013. Capital is not an infinite resource, and will ebb and flow in accordance with supply and alternative investment.

Also, a number of structural changes have also started to crimp demand. The implementation of the 4% transfer fee, the implementation of new mortgage laws and new laws regarding rental price increases have also had an effect.

Although some people share a negative outlook on the way things are especially with the slower GDP growth compared to last year, for a country to be considered technically “in recession,” it has to experience two consecutive quarters of negative economic growth reflected in its GDP – which is definitely not the case with the UAE.

And given the history of the Dubai real estate market in the run up to the Global Financial Crisis and the dramatic, now infamous, sudden rise and then sharp decrease in asset values that occurred during the crisis, it is not surprising that some industry stakeholders have become nervous about the current state of affairs. While this point of view is understandable, Dubai 2015 is definitely not in the same position as it was in Dubai 2008.

Additionally, the UAE government, acting with strategic foresight, has Vision 2021, UAE’s long-term economic plan launched in 2010, which prioritizes the diversification of the country’s economy thereby reducing UAE’s dependence on hydrocarbon assets.

Question: I have a mortgage on an apartment that I live in and I happen to have some cash currently. Should I settle my loan or invest the cash elsewhere?

It all depends on what interest rate you are paying on your mortgage, and what return you could expect if you invested elsewhere. If you can achieve a return greater than your mortgage interest rate, then you should invest the cash elsewhere and take advantage of the low mortgage rate you will be getting.

There are some very attractive mortgage products in the marketplace with a few mortgage providers offering rates as low as 3.99% or even 3.49%. If you have a mortgage with such a low interest rate, it would not be too difficult to find an investment that will yield in excess of your mortgage rate.

For example, you may consider investing in an apartment which will yield you a net annual cash flow of 5% and, over a period of 5 years, an annual capital appreciation of anywhere between 5% and 7%. This would be a more lucrative allocation of your cash.

If, however, you are not confident in achieving a return on your cash that exceeds your mortgage rate, then I suggest you pay down your mortgage outright as you will save on interest costs.

Expert Eye

Open houses and getting your home sold

Some easy-breezy steps to make the process a fun affair

Holding an open house can be a great way to get your home sold. Here are four easy-to-remember steps that might help you.

Step 1: Plan and prioritise

You need to identify what improvements are required. Discuss this with your real estate agent and make a realistic plan that fits your budget and time frame. Be business-like in your approach and set aside your emotions.

Identify who the target audience might be so you can prepare accordingly. Your agent can help you determine what type of buyer your area is attracting. To establish an emotional connection between your buyers and the home, develop a perception of value for money and make your home appear ready for immediate occupancy. Jot down problem areas or those that need embellishing.

Once you have finished your list, address the issues quickly.

Step 2: Tackle big-picture projects

General fixes you should consider making are:

Cleaning – Pay special attention to your kitchen and bathrooms; they pose the biggest turn-off to potential buyers if dirty.

De-cluttering and depersonalising – Put away family photos. Clean and organise closets and storage space.

Fixing what’s broken –Make sure all broken windows, loose door handles, leaky faucets and non-functioning light switches are in working order.

Painting – Painting your interior walls in neutral colours is one of the most cost-effective ways to make your home show well. Paint can also work wonders on outdated cabinetry.

Replacing flooring, carpets or floor tiles – Try cleaning and repairing damaged flooring, or replacing it.

Updating light fixtures – They are the jewellery of a home. Buy inexpensive, contemporary fixtures, or revamp the old ones.

Step 3: Focus on the details

Use these tips to fine-tune each area in your property:

Front yard and entryway – Keep your lawn mowed and well-maintained. Plant colourful flowers. Replace old welcome mats and door knockers. Give the front door a fresh coat of paint.

Living room – Arrange furniture to create a focal point around an entertainment suite or a large window to create a “wow” factor. Disguise old sofas with fashionable coverings.

Kitchen – Remove magnets and photos off the refrigerator and clear off countertops with non-essentials. Add stylish accessories. Use greenery to fill empty corners.

Bedroom – Emphasise luxury and comfort. No extra beds, golf clubs, workspaces or anything that does not belong in a bedroom.

Bathroom – Put new towels, a new shower curtain and fresh, fancy soaps. Dress up the space with candles or a silk flower arrangement.

Backyard – Make it a place where buyers can see themselves spending time. Add furniture and set out a tray with some cool drinks, or put out some coffee and snacks.

Step 4: Put on the finishing touches

Don’t forget these last-minute details:

Set out vases of fresh-cut flowers – They will make your home smell nice and add a splash of colour.

Let in the light – Buyers want a bright, open house, not a dark and dreary cave.

Turn on all the lights and open all the curtains.

Adjust the temperature – Keep the home comfortable, not too cold or too hot.

Safeguard your belongings – Stash valuables and prescription medications in a safe place.

Leave – Go see a movie, visit friends, or have a long lunch. Spend the day out and about and let your perfectly prepped home sell itself.

Expert Eye

Purchasing a home? Plan carefully

Eliminate any surprises by conducting careful planning and due diligence

There is no doubt that the Dubai real estate market presents some fantastic opportunities for both investors and first-time home buyers. For the latter, there is no better time to take advantage of the value that is currently on offer and start to build a solid ﬁnancial future.

However, just because the market is currently strongly in favor of buyers doesn’t mean that careful planning and due diligence should not be adhered to. There is never a market scenario which demands hasty decisions; the markets will always demand and reward timely decisions. This is an important distinction to make as taking shortcuts in preparation and planning, particularly in ﬁnancial planning, is a common shortcoming of investors and home buyers who are keen to take advantage of the varied opportunities.

One area that is often overlooked is the many additional costs “of buying, owning and occupying a home. Many first-time home buyers tend to only focus on the purchase price and mortgage costs and forget that there are other costs to be considered.

Assuming you have con ducted a thorough search and have identified the property that you would like to buy, your negotiated buying price will be subject to a 4% property registration fee at the Dubai Land Department (DLD). You may be taking advantage of some recent payment plans whereby the transfer of ownership and registration fees are deferred until all payments are satisﬁed; regardless, it is a cost that you need to cover eventually. There will also be a charge of .25 % of the value of any mortgage payable at the-time of registration.

Speaking of mortgages, most lenders require property insurance and you would, in all likelihood, wish to insure your belongings. This is in addition to the loan protection insurance that you need to take out as a prerequisite to finalizing your mortgage so that your spouse and children are protected from having to pay down the mortgage if you should pass away prematurely. You may also consider other forms of insurance covering disability and terminal illness.

Every building or community requires maintenance and operational management. So, you need to understand what fees you will pay to those who will provide the services that make your new home a secure place to live. Fees can vary depending on your location or the development you are part of, so ascertain what you will pay before you sign the purchase agreement.

Then there are the costs of actually occupying your home. It starts with paying deposits to set up utility accounts followed by monthly utility bills for electricity, gas and water, as well as Pay TV, telephone and Internet services.

Then there are the moving costs. If you are a single or a young couple, you may be able to handle this yourself. For some families, moving may require renting a truck or hiring a moving company.

Of course, you need to consider the additional new furniture or decorative items you need to buy so that your new home lives up to the vision that inspired you to buy it in the first place.

If you have purchased a new villa, you will want to do some landscaping. This may include the addition or modification of outside entertainment areas such as patios or BBQ areas, design or redesign of plants, trees, shrubs and pathways along with the establishment of a healthy and robust lawn. Play equipment for children may need to be purchased along with additional items such as security systems, fencing or exterior lighting.

Thus, planning a home purchase entails more than just figuring out what your mortgage payments may be. With careful planning, you can eliminate any surprises with your next purchase.