AN AMUSING STORY… IF IT WASN’T SO SERIOUS!

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute

When it comes to amusement, I have always thought that Dubai has a definite competitive advantage in that it is uniquely placed. With its geographic location, infrastructure, stability, cultural diversity and existing reputation as a leisure destination of note, development as the destination of choice by, not only GCC families and youth, but visitors from all over the world who desire amusement, adventure and unique experiences, will play an increasingly important role in building a strong, vibrant and resilient economy and, of course, property industry.

So, it was with excitement, not amusement, which I read about the latest addition to a city already swelling with entertainment and activity alternatives – the IMG Worlds of Adventure. This amusement park took three years to build and cost more than 3.6 billion dirhams. To be labelled “the world’s largest indoor theme park” is no idle boast, with the complex covering over 1.5 million square feet or around 20 times the size of the pitch at Emirates Stadium in London.

And, wait for it… there is more to come…

The next six months should see an even bigger development which, built at a cost approaching 10 billion dirhams, will include such entertainment icons as LEGOLAND and Bollywood, and a giant water park.

The new theme parks will play a key role in ensuring the emirate’s target of 20 million visitors will be visiting the emirate annually from 2021 will be achieved. Very impressive stuff!

But the reason why I love these latest theme parks is not because I enjoy rollercoaster rides … I will leave that for the more adventurous. I am excited at the effect these fantastic initiatives will have on the economy and, more specifically, the property industry that is so close to my heart.

From an economic point of view, this is very serious business indeed!

Aside from the obvious direct benefits of tens of billions of dirhams being invested into the economy, few people realize the enormous economic contribution theme parks make to the overall economy post launch. It is a cliché, but the world is a small place and the war for providing entrepreneurial and employment opportunities is waged on a global battleground and a successful entertainment and amusement industry is just one economic weapon that Dubai can employ to great effect.

And being a global growth industry, participation cannot be ignored.  Consider the following which was sourced from the TEA/AECOM 2015 Theme Index and Museum Index:

In 2015, there were …

…420 million visits to attractions run by the top 10 global theme park groups, up by 7.2 percent.
…236 million visits to the top 25 amusement/theme parks worldwide, up by 5.4 percent.
…146 million visits to the top 20 amusement/theme parks in North America, up by 5.9 percent.
…131 million visits to the top 20 amusement/theme parks in Asia-Pacific, up by 6.9 percent.
…61 million visits to the top 20 amusement/theme parks in Europe, Middle East and Africa, up by 2.8 percent.
… 29 million visits to the top 20 water parks worldwide, up by 3.7 percent.

In a world that is struggling to generate any form of impressive economic growth, the growth within this industry is truly impressive.

Without doubt, the current world leader with regards to amusement parks is the southern US state of Florida. It’s a fact that theme parks are a major reason why people visit this American state. Here are the top theme parks in Florida and the number of annual visitors they attracted in 2014 according to the TEA/AECOM Theme and Museum Index…

… Magic Kingdom – 19.3 million
… Epcot -11.5 million
… Disney’s Animal Kingdom – 10.4 million
… Disney Hollywood Studios – 10.3 million
… Universal Studios – 8.2 million
… Islands of Adventure at Universal Studios – 8.1 million
… SeaWorld – 4.7 million
… Busch Gardens Tampa Bay – 4.1 million

Truly impressive numbers which only highlight that the economic advantages created by having such a robust entertainment industry are staggering. The state estimates tourism brings in a whopping $82 billion in visitor spending while the State Department of Economic Opportunity says that of the approximately 9.1 million workers in Florida, 1.1 million of them hold jobs directly attributed to tourism. That’s better than 1 worker in 10!

Obviously, the job creation potential of this industry, both direct and indirect is staggering… which is why amusement parks are such serious business. The true long-term value of these projects lies in the long-term economic advantages of employing people and creating commercial activities in order to develop a unique capability to entertain the families and youth of the region and beyond.

And job growth fosters population growth which is critical to any property / real estate Industry. It is the undisputed catalyst to industry growth and the population growth generated by the substantial increase in investment and employment opportunities that a successful foray into the entertainment industry would generate would be and have huge and long-lasting benefits for the property / real estate industry downstream.

Ask the Agent

By Mohanad Alwadiya
Published: Gulfnews
Dated: November, 2016

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

Initially, your landlord needs to give you the notice of increase at least 90 days prior to the expiration of your current contract. You should familiarise yourself with Law No. 43 which
introduced the following restrictions (summarised) with regard to 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 neighbourhood
• The annual rent increases can range from 5 up to 20 per cent 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

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.

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

It depends on an accurate estimation of construction timelines which are invariably fluid, and the demand for real estate assets due to Dubai’s growing population that is 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+ per cent annually for the remainder of the decade, and initiatives such as the Expo 2020 are expected to generate an additional 270,000 jobs, the demand for housing and commercial
facilities is expected to grow significantly. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4 million by 2020, a 7 per cent annual increase from today’s population of 2.25 million.

How is the Dubai real estate market? Is now the best time to buy, or should I wait for prices to fall further?

The real estate market is an industry full of surprises. The Dubai market has been correcting for several months and is picking up again, as the next five years
are expected to see a strong economic growth in Dubai. My recommendation is for you to start your property search immediately in the places you like as proper due diligence can take time. If you have the cash, we suggest you pay for it outright; however, don’t be afraid to take out a mortgage with varied easy payment plans that will save you considerable amounts of money.The location, surrounding infrastructure, construction quality and developer reputation as well as building amenities or properties close to an iconic development, such as Downtown Dubai or those with close access to the Dubai Metro or Tram usually provide good returns. Finally, be purposeful, persistent, patient and pragmatic, and you are well on the way to making a very sound business decision.

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?

The simplest way to determine a good rental rate for your property is the sales comparison approach (SCA) which relies on identifying a factor that is homogenous to similar properties. For example, an apartment similar to your planned investment which attracts a monthly rental rate of Dh7 per square foot can indicate the likely cash flow you expect; however, as property managers, we do not advocate this approach.A more comprehensive method is the capital asset pricing model (CAPM) which comprehends levels of risk and opportunity cost as it applies to your investment. It identifies your potential return on investment derived from capital appreciation in addition to net rental income and compares it to other investments that you may be considering. This enables smarter investment decisions and, therefore, is the one that we use as standard procedure.

Question of the Week

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

Like any industry jargon, there are quite a few confusing acronyms used in real estate but those that you have highlighted 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 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 is excluded from the GFA.

Meanwhile, 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.

The net floor area (NFA), on the other hand, is the GFA minus the facade of the building (measured from the centre 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 and calculating potential revenues to be derived from selling or leasing a building to estimating cleaning costs.

Theme Parks, Ahoy!

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute

Well, Dubai has done it again!!

The latest addition to a city already swelling with entertainment and activity alternatives is the IMG Worlds of Adventure. This amusement park took three years to build and cost more than 3.6 billion dirhams. To be labelled “the world’s largest indoor theme park” is no idle boast, with the complex covering over 1.5 million square feet or around 20 times the size of the pitch at Emirates Stadium in London.

And, wait for it… there is more to come…

The next six months should see an even bigger development which, built at a cost approaching 10 billion dirhams, will include such entertainment icons as LEGOLAND and Bollywood, and a giant water park.

Dubai has always considered tourism to be a key, increasingly successful and lucrative pillar to the economy, but -the latest additions to its suite of attractions are taking the emirates’ capability to satisfy the appetite of those who pursue world-class entertainment and amusement to a whole new level.

The new theme parks will play a key role in ensuring the emirates’ target of 20 million visitors will be visiting the emirate annually from 2021 will be achieved. Very impressive stuff!

But the reason why I love these latest theme parks is not because I enjoy rollercoaster rides… I will leave that to the more adventurous. I am excited at the effect these fantastic initiatives will have on the economy and, more specifically, the property industry that is so close to my heart.

From an economic point of view, this is very serious business indeed!

Aside from the obvious direct benefits of tens of billions of dirhams being invested into the economy, few people realize the enormous economic contribution theme parks make to the overall economy post launch. It is a cliché, but the world is a small place and the war for providing entrepreneurial and employment opportunities is waged on a global battleground, and a successful entertainment and amusement industry is just one economic weapon that Dubai can employ to great effect.

And being a global growth industry, participation cannot be ignored. Consider the following figures sourced from the TEA/AECOM 2015 Theme Index and Museum Index:

In 2015, there were…

… 420 million visits to attractions run by the Top 10 global theme park groups, up by 7.2 percent.
… 236 million visits to the Top 25 amusement/theme parks worldwide, up by 5.4 percent.
… 146 million visits to the Top 20 amusement/theme parks in North America, up by 5.9 percent.
… 131 million visits to the Top 20 amusement/theme parks in Asia-Pacific, up by 6.9 percent.
… 61 million visits to the Top 20 amusement/theme parks in Europe, Middle East and Africa, up by 2.8 percent.
… 29 million visits to the Top 20 water parks worldwide, up by 3.7 percent.

In a world that is struggling to generate any form of impressive economic growth, the growth within this industry is truly commendable.

Without a doubt, the current world leader with regard to amusement parks is the southern US state of Florida. It’s a fact that theme parks are a major reason why people visit this American state. Here are the top theme parks in Florida and the number of annual visitors they attracted in 2014 according to the TEA/AECOM Theme and Museum Index:

… Magic Kingdom – 19.3 million
… Epcot -11.5 million
… Disney’s Animal Kingdom – 10.4 million
… Disney Hollywood Studios – 10.3 million
… Universal Studios – 8.2 million
… Islands of Adventure at Universal Studios – 8.1 million
… SeaWorld – 4.7 million
… Busch Gardens Tampa Bay – 4.1 million

Truly impressive numbers which only highlight just how the economic advantages that are created by having such a robust entertainment industry is staggering. The state estimates tourism brings in a whopping $82 billion in visitor spending while the State Department of Economic Opportunity says that of the approximately 9.1 million workers in Florida, 1.1 million of them hold jobs directly attributed to tourism. That’s better than 1 worker in 10!

Obviously, the job creation potential of this industry, both direct and indirect, is staggering… which is why I love amusement parks.

Most commentators would relate to the increased building activity that such projects would create; however, the true long-term value of these projects lies in the long-term economic advantages of employing people and creating commercial activities in order to develop a unique capability to entertain the families and youth of the region and beyond.

The local market offers significant opportunity. The GCC, with a total population of just over 40 million people, has one of the youngest populations in the world. Approximately 50 percent of the population in the Arabian Peninsula is below 25 years of age. What a wonderful opportunity this represents for Dubai! The possibility exists for the construction of the only mega family entertainment destination in over 2,500,000 square kilometres of territory. From an economic point of view, the provision of memorable entertainment experiences for the youth and families of the region will have a multiplier effect on the economy as a whole, including the real estate industry.

Why are Mortgages Key to Growth?

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute (DREI)

I read a very pleasing article over my morning coffee.

The article revealed that mortgage transactions, including refinancing, have represented approximately 50 per cent of all apartment sales September last year to date with some months achieving over 60 per cent. This is in stark contrast to what has historically been the case in Dubai, as mortgages rarely represented more than 30 per cent to 35 per cent of property sales for most of the prior decade.

This is great news for several reasons.

First, while this trend highlights the confidence of lenders in the marketplace it also highlights the increasing confidence of consumers, mostly owner occupiers, in the market to the extent that they are prepared to take on the risks associated with committing to a mortgage for the sake of purchasing some property.

This is very important to the development of long term sustainable growth for the industry as the bedrock of any property industry is its owner occupiers.  They represent the core of the industry as it is they who view property as an investment in life, not just a way to make a quick buck. And yet, historically, they have attracted focus in a market still undergoing the maturation process which is falling short and not proportionate to their importance.

Owner-occupiers see real estate in a different light. For them, it’s about creating a lifestyle. It’s about creating a home which will provide an environment that is safe and secure within which the individual, couple or family can grow and develop in all aspects whether physical, emotional, social and, of course, financial. In this respect, they have a lot more at stake than those investors with financial interests only.

Typically, they form the core of society, not overly wealthy, who are concerned with providing the family with a future. For some, the purchase of the first family home is the first step towards creating a legacy which hopefully, for the more romantically minded, will turn into a dynasty. These are the dreams which make owning their own home the most important decision they are likely to make. They are in it for the long term; there is a lot at stake, which is why availability of finance through mortgages is critical.

The second reason why this is such good news is because we are witnessing, in real time, the market adapting to legislative changes that were made in early 2014. There is no doubt that the implementation of the mortgage caps earlier in 2014 had affected the demand for many first home buyers who were relying on a mortgage to acquire their dream home.  I remember writing an article at the time of the legislative change and observing the following …

“At Harbor, we see 62% of our clients who were considering buying a property prior to the mortgage caps delay their purchase until they can accumulate the down-payment differential while 38% have settled (or compromised) for a cheaper property to get an initial foothold in the market.”

As predicted, “… the new mortgage caps have certainly produced a definite lag in demand as clients adjust to the new financial realities and many of these clients are planning to participate within the next three years.”

I am pleased to say that these observations have essentially been proven correct. The legislative change made by authorities was implemented to help cool what was then, a rampant market. The desired effect was achieved but buyers didn’t simply disappear, they modified their purchasing behavior, another sign of an increasingly resilient and maturing market.

Finally, a growing number of mortgages are being undertaken for properties that are purchased in the more affordable areas of Dubai, which further demonstrates the systemic shift to affordable housing in the Dubai property market is becoming even further entrenched as a long-term characteristic.

A natural occurrence within any economy that is growing rapidly and is formally recognized as maturing and transitioning from being a “frontier” to “emerging” market as Dubai did back in 2013, is that its middle and lower-middle income segments will expand to support the rapid rise in commercial activities and economic initiatives being instigated by entrepreneurs and corporate or government entities. This expansion is unavoidable if the economy is to grow and providing affordable housing to enable this expansion is a critical element to the future growth of Dubai and the development of the Real Estate industry into a mature model that can efficiently cater for a broad and diverse set of people with different incomes, tastes, preferences and requirements.

And demand is set to grow very rapidly. A case in point… the World Expo is predicted by independent analysts to create over 270,000 jobs. The vast majority of these jobs will not be for people occupying senior executive positions. They will be for people in middle management or lower positions, many with families, who will be seeking affordable accommodation.

The importance of maintaining affordability for the average buyer is critical and the availability of affordable finance in the form of mortgages is vital to enable many to gain access to this lucrative market going forward.

Aspire to be a Property Owner

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate

Among the most fundamental (and practical) dreams people share in common is the dream of owning a home. But why is it that not everyone succeeds in this endeavor? Economics, of course, plays a significant role in the overall scheme of things. So, given the opportunity to purchase a property, or your home, no less, would you not hold on tightly and make sure you own (pun intended) it?

In Dubai, while there has been a correction in rental values, it has essentially lagged behind the correction in property values, and I do not believe that the general rent decline will exceed 10% in most areas. Rents will eventually start to rise from 2017 as preparations for the 2020 Expo start gathering pace.

I have always held a view that owning a property is essential to underpinning the accumulation of wealth and building net worth. Obviously, the accumulation of the property asset itself must be done judiciously and with a high level of diligence and care but, in my experience, the vast majority of people who have taken the step towards property ownership have benefitted significantly.

The essential question to ask is “How do I use my money to increase my wealth instead of the wealth of my landlord?”

Buying your home is a positive step towards establishing your financial security by building your equity or “net worth”. Owning property allows you to change the application of your hard-earned dirhams from covering an expense which offers you no financial return to investing in an asset which does. In a way, it’s a forced form of saving which will reap benefits for you in the future.

Conversely, paying rent actually detracts from your ability to build net worth because, not only are you paying out money for no financial gain, but you are at the mercy of rental inflation as well. This is a problem because you are consistently being asked to pay more while your salary increases are lagging behind, effectively eroding your ability to build wealth. By owning your home, inflation is working in your favor because, in all likelihood, your property is increasing in value and, if kept for a number of years, will enjoy an inflation-driven compounding effect on its value. This allows you to build your individual net worth through the capital appreciation of your property – something which is very important for your financial future.

The fundamentals of buying real estate in Dubai are no different from those elsewhere in the world. As an expat in a new country, you may be even more anxious regarding the decision to buy which is all the more reason to stick to some tried and true principles.

First of all, you need to be very clear as to why you are investing in real estate. Whether it’s to provide the family with a home, generate a steady stream of income or build equity for the future, make sure you are very clear about what your expectations are and quantify them wherever possible. Plan for the long term as the industry is cyclical yet very rewarding if you ride out one or two cycles.

You also need to ensure that you know what you can afford. If you have the cash to pay for the property that you really want, I suggest you pay for it outright; however, don’t be afraid to take out a mortgage and make the purchase as at least your repayments are building equity, not being lost forever on rent.

Then it’s a case of finding the right property. I suggest you contact a reputable real estate brokerage to assist you in doing this, but make sure that you conduct your own research as well. It’s a big decision you are making, and you need to make sure you take the responsibility and are fully aware of what you are doing.

As always, stick to the basics. Think carefully about location, building quality, developer reputation, completion status and quality of infrastructure and building amenities. Properties which are close to the beach (especially with a sea view), a golf course view or part of an iconic development such as Downtown Dubai is a good place to start. If you can have close access to the Dubai Metro, even better. These locations are more likely to provide superior appreciation in capital value as well as be able to ride out cyclical volatility with less distress.

You also need to consider the effectiveness of the owners association, service charges and the quality of maintenance services.  Facility management is becoming increasingly more important to determining the value of buildings, and it will have an effect on the long-term value of your investment.

Finally, think clearly and rationally. If you cannot find a property immediately that will satisfy your requirements and objectives, do not settle for less, regardless of what’s happening in the market.

Meet Dubai’s own Wolf of Real Estate

By:Binesh Panicker
Published: Property Times
Date: 28 August 2016

Mohanad  Alwadiya is a well-known name in the Dubai real estate market, and he wears many hats. Apart from his professional obligations as the CEO of Harbor Real Estate, he also finds time to contribute to the betterment of the market as Senior Advisor & Instructor at the Dubai Real Estate Institute. He is already a raging hit on social media, not an easy task for someone
from real estate.

Tell us about Memaar. How did the concept take off?
Having a primetime property reality TV show in the Middle East has been a long time coming – whether you’re in the UAE, Saudi Arabia, Qatar – practically anywhere in the Middle East, there’s always a new tower, a unique residential project or a new iconic building being launched or unveiled. So MEMAAR simply had to be.

MEMAAR is the brainchild of the Dubai Channels Network (DCN), and we officially went on air for Season 1 in May 2015. We already have a solid audience following comprising millions of viewers from all across the GCC and beyond. When it comes to our guests, we always select real clients from different backgrounds and objectives in order to offer various enriching perspectives.

The show’s objective is to educate, entertain and engage viewers with the real estate sector. I’m overwhelmed with the amount of positive feedback that I receive on a daily basis from viewers from all over the world praising the show and seeking my advice. The show is now broadcasted weekly on Dubai TV every Wednesday at 7pm, Sama Dubai TV every Sunday at 9pm and Dubai One TV (with English subtitles) every Monday at 8pm with multiple repeats on all the 3 channels.

What are the future plans for the show?
After the tremendous success of the first and second seasons, we’re going full-blast on a multimedia level. We have a lot more in store for our ever-growing number of loyal fans.
We are currently shooting for Season 3, with 16 new exciting guests and episodes. The show started broadcasting on Dubai One TV with English subtitles and will continue to run on Dubai TV and Sama Dubai TV. Of course, we want to keep growing and developing, always mindful of the feedback we are getting from our MEMAAR fan base.

You are popularly known as “The Wolf of Real Estate,” which made you a huge hit in social media. Tell us more about your social media presence and its effect.

Thanks to Property Times back in 2014, I got the “Wolf of Real Estate” title given to me which has proven to be a very interesting and strategic form of branding for myself which I have, yes, fully embraced – that is, minus the negative connotation associated with the more famous moniker for Jordan Belfort – “The Wolf of Wall Street.”

However, I believe the moniker emanated from the work of our company, Harbor Real Estate, having been previously referred to as a star that emerged from the last GFC. Beyond having simply survived, it was during the GFC that Harbor Real Estate, in the face of a level of adversity that the industry had never witnessed before, really grew as a real estate enterprise of significant capability and standing in the industry.

In terms of my current social media presence, I do have more than 1,300,000 followers on my public Facebook pages, almost 40,000 followers on my “The Wolf of Real Estate Official” Instagram account, and 515,000 followers on my “Mohanad Alwadiya” official Instagram account. On Twitter, I have a little over 50,000 followers on Snapchat and over 10,000 connections on LinkedIn.
I get all sorts of positive and encouraging comments and messages on different social media platforms, such as those expressing their gratitude for the information and analysis I provide on the TV show, articles I write or social media posts. I also receive a lot of messages from followers asking for my opinion about certain issues or real estate advice. As for the unusual ones and even those which appear negative, I usually just take them with a grain of salt and try to respond positively. In general, I try to answer all the messages I receive as much as I can because I really enjoy the interaction with all my followers, and this allows me to stay in touch with the market and gauge the impact of the various activities I’m involved in.

The response from people via social media has been overwhelming and I am still trying to get used to being referred to as some sort of celebrity in my own right because, frankly, I don’t consider myself a celebrity… just the facilitator of the reality TV show MEMAAR… just doing my job!

What is your ultimate dream?
Well, there’s a lot of things on my mind, and so much that I wish to do! However, the realities imposed by time makes careful prioritization essential.
I’m currently working on a portfolio of development projects and initiatives. Harbor Real Estate continues to expand and is continually developing the capability to provide industry leading service. I call this the “never-ending initiative” as every individual or organization can always improve regardless of past achievements.

From a business growth perspective, there is plenty to be excited about. We have several new projects and unique services that will be launched very soon and we are looking forward to Cityscape to allow us to share these with investors and aspiring homeowners.

Meanwhile, I am also at the final stages of publishing my first bilingual property management book and will be working closely with the Dubai Real Estate Institute on introducing an advanced version of the certification property management course.

There are many other ideas and initiatives that I wish to develop after 2016. I still believe our industry can benefit and better serve our customers by adopting and applying technologies in the areas of product development and communications. The world has become a global marketplace but I still believe that global capital flows in our industry are still hindered somewhat because we do not do a good enough job of putting enough global investors in a position of confidence and certainty. There remains a lot of potential in this space I believe.

Then of course, there’s MEMAAR. As mentioned earlier, we’re all working together and collaborating on how we can keep the show growing and developing, so it only gets better every season.

What is your take on the next few months for Dubai market? There is a general feeling of positivity among agents. What is the reality?
Everyone knows that Dubai real estate has been undergoing correction for quite some time now. We feel that the decline in values associated with that correction has halted or virtually halted in all market segments, or that the market is bottoming out. In Q1 of 2016, we have already witnessed significant growth in investor activity and strong land sales. Both are leading indicators that the market is heading into its next cyclical phase. We at Harbor believe that by the end of 2016, the market will have entered its next phase of growth which is expected to accelerate as we draw ever closer to the Dubai World Expo in 2020.

PROFESSIONALIZING THE REAL ESTATE PRACTICE

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute
Published by: Property Time Magzine

During the years marking the last global economic recession, reports on fraudulent business practices and shady dealings in real estate became quite rampant, and people (investors and end-users) realized that those who fail to practice due diligence have nothing to gain in a relatively new and still-emerging albeit rapidly growing property market.

Now, even as the UAE economy as a whole continues to lag from its earlier predicted level of activity, the real estate industry, in spite of the industry-wide slowdown, continues to earn its share of winners and non-gainers in terms of current industry practice.

Some individuals still manage to pose as agents or real estate representatives, produce fake documents, and get away with the money virtually scot-free. And while the government has put in place strict protocols whether it be in professionalizing industry practices or instituting new policies and regulations to guard the best interests of the market, there are still a few unscrupulous individuals who manage to prey on buyers, even tenants.

The term “business ethics” is not something alien or new to us, but some people with careers outside of the real estate realm may view the term with a heavily critical eye, with some perhaps even joking about the incompatible nature of the words “business” and “ethics.”

But we all know that in real estate, a number of professions emerge including, but not limited to: commercial or residential brokerage, appraisal/valuation, property management, real estate counselling, etc. That being said, for a job to be considered a bona fide profession, it would require some commitment to a certain standard of conduct that the general public expects from the practitioner. This is where the real estate code of ethics comes in.

However, some might say: but anyone can become a realtor, so how does this seemingly “open” industry professionalize current practice and regulate the activities of real estate practitioners? What rules or structures are in place to prevent any form of abuse and/or malpractice in an industry where sometimes morally contradictory relationships or grey areas exist such as in the case of open market listings where one seller lists with various agents, and the big question is where would the realtor’s loyalty be – with the seller or the buyer? Or in the case of valuation assignments where the client may indirectly or even expressly makes known to the appraiser the outcome they are expecting.

Another dilemma confronting realtors is their reliance on commission-based remuneration whereby agents’ dependence on said commission may run counter to the best interests of the client. While a good commission structure would evidently motivate realtors to give their best efforts in order to successfully convert a lead and close a deal, the question of whether or not conditions set are for or against the best interests of their client remains – with yes being the answer in some cases, and at other times not so especially in cases of self-dealing in real estate.

Aside from By-law No. 85 “Regulating the Real Estate Brokers Register in the Emirate of Dubai” which expressly states the legal mandate governing the real estate practice, the Real Estate Regulatory Agency (RERA) and the Dubai Real Estate Institute (DREI) established a mandatory certification program for new and experienced agents who wish to work in a real estate brokerage in Dubai. The DREI also organizes license renewal courses and exams along with a very rich variety of career development programs intended to help elevate the standards of professionalism and effectiveness of brokers in Dubai.

All realtors are, therefore, expected to abide by local laws pertaining to the real estate practice as well as to government regulations that are periodically introduced and, at times, go through a series of revisions or reforms in order to address new issues or problems that crop up every once in a while.

But even in the face of such regulation, real estate firms must also take it upon themselves to continuously educate and empower their agents to make the best decisions in order to maintain individual and corporate integrity, professionalism and, ultimately, success in the real estate business.

Investing in training, whether in-house or otherwise, definitely pays a huge dividend. Extensive and tailor-made training programs should include education on the industry and pertinent rules/regulations (especially on current or new legislation), soft skills and specialized training courses that help employees attain a level of mastery in all the macro and micro aspects of their profession.

The ongoing development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, all reveal a mature and balanced approach to shaping an industry which exhibits sustainable growth over the long term.

Taken altogether, the laws of the land serve as the primary push for realtors to act in a way that upholds and reflects the greater good while constant education through training, workshops, seminars and the like (whether mandatory or voluntary) help real estate practitioners internalize the values that must inherently pervade the system for the industry to thrive and continue to serve as one of the primary sectors supporting the UAE economy.

The Real Estate Regulatory Agency (RERA) and the Dubai Real Estate Institute (DREI) have set a mandatory certification program for new and experienced agents who wish to work in a real estate brokerage in Dubai. The Dubai Real Estate Institute also organizes license renewal courses and exams along with a very rich variety of career development programs designed to help elevate the standards of professionalism and effectiveness of brokers in Dubai.

ASK THE AGENT

By: Mohanad Alwadiya
Published: Gulf News
Dated: 06 August 2016

Question: As a new investor venturing into the UAE property market, how do I know if my property consultant is giving me correct information and the best advice?

If you have the feeling that your property consultant is not representing your best interest, I suggest you have a meeting with him and request a justification and rationale for all of his recommendations and advice. But in order to ascertain whether his justifications and rationale make sense, you should conduct your own research so you are able to verify the veracity of his claims and assertions. If you are still nervous about the quality of his advice, then seek an alternative as there are plenty of property consultants who are hungry for your business.

And whether or not you are a newbie to the real estate industry, you should take upon yourself the responsibility of getting to know the property industry in-depth as you wouldn’t want to risk your wealth or life savings by carelessly venturing into something strange and unfamiliar.

Question: Given that the market is still going through a down cycle, would now be a good time to invest in a REIT? 

Yes, there can definitely be some benefits in investing in a well-managed REIT during cyclical downturns such as the one being experienced at the moment.

As you would be aware REIT is an acronym for “Real Estate Investment Trust” which, as a trust company, accumulates a pool of money through an initial public offering (IPO) and buys, develops, manages and sells real estate assets. REITS allow both small and large investors the ability to invest in real estate without investing large amounts of capital or devoting a lot of time in directly managing a property portfolio.

Investors have the opportunity to buy a unit in a REIT which is actually a portion of a managed pool of real estate. This pool of real estate then generates income through the renting, leasing, selling and financing of property, and distributes it directly to the REIT investors on a regular basis.

A REIT can provide portfolio diversification because of the large amounts of pooled funds available to the REIT management team enables the accumulation and operation of different types of property assets in different locales. This provides the REIT management greater flexibility to minimize the effects of any cyclical downturn by enabling them to focus on opportunities that always exist and emerge from any correctional period to provide superior returns.

Question: It has been my plan to work as a real estate broker in Dubai, but I don’t know which company to join. Any ideas?

Have you ever worked in the industry before? To gain the greatest advantage, I suggest you join a company that will enable you to fast track your learning because, believe me, you have a lot to learn.

Find a full service company so that you gain a greater understanding of what the real estate business is all about, especially here in Dubai, because it sure is not just about buying and selling 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), in-house training as well such as being assigned 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. Those companies that invest in high-potential people are typically the ones that succeed.

Surround yourself with people who are passionate about the industry because passion is contagious and it is what sets champions apart. Best of luck.

Question: In Dubai, what types of training are mandatory for new real estate agents?

The Real Estate Regulatory Agency (RERA) and the Dubai Real Estate Institute (DREI) have set a mandatory certification program for new and experienced agents who wish to work in a real estate brokerage in Dubai. The Dubai Real Estate Institute also organizes license renewal courses and exams along with a very rich variety of career development programs designed to help elevate the standards of professionalism and effectiveness of brokers in Dubai.

Question of the Week:

What sort of documents are required after accepting an offer to buy my property?

The first (and most important) step is to prepare and sign an MOU which contains all the details and timing particulars of the offer. The buyer has to sign the MOU after reviewing its provisions. As with all legal documents, we recommend you have a proficient broker or legal representative draft the MOU for you.

You will also need to sign a “Form F” which is, in essence, a contract between buyer and seller. As part of this step you should ensure that the buyer and / or all the relevant representatives such as a POA holder with original documents) have their respective identification and/or authorizations in order that payments such as the down payment and/or balance amounts, payable by either by manager’s cheque or payment from bank due at transfer, have been satisfactorily arranged.

Step 2 will require the receipt of a “No Objection Certificate” from the developer. This is usually straightforward and a simple procedure.

Step 3 is to pay and final utility bills so that the account is cleared and ready to be taken over by the new owner. If there’s a tenant, you will need to sort out any outstanding rent / payment details.

Step 4 will require you to go to the Dubai Land Department offices or a trustee registration office together with the buyer and all relevant parties, and conduct the final transfer. Transfer of ownership will take place at the DLD with all monies owed by the buyer to you to be presented as part of the transfer procedure.

Although the above procedure appears simple enough, I recommend you engage a professional to handle the transaction process for you. You will be surprised how little issues, many not foreseeable to the inexperienced, can delay the satisfactory settlement of your property sale.

 

 

The impact of Brexit on UAE real estate

Published by Expert Eye
By Mohanad Alwadiya

June 23, 2016 will forever be remembered in history as the day the British, all 52 percent of the 71.8 percent referendum turnout versus the 48 percent who elected to stay, voted to leave the European Union (EU).

However, with the United Kingdom being one of the world’s largest economies, the so-called “Brexit” which is yet to be finalized in the next two years depending on when UK leadership will actually “trigger” Article 50 of the Lisbon Treaty is expected to send ripples around the global business community, not to mention the political ramifications of said move.

The effects of Brexit are as diverse as they are far-reaching, with experts considering how the decision made by the majority of Brits will affect everything from the European geopolitical and socio-economic landscape, the strength and resilience of the European Union in the face of further discontent within its member states, the social and economic ramifications to a newly  “independent” United Kingdom and the inevitable question as to whether the United Kingdom can remain united given the Scottish and  Northern Island  wishes to continue as part of the EU.

In addition, the whole strategic alliance framework of the West has been weakened somewhat as a robust and strongly united European Union was always considered to be a cornerstone to an effective defence to an aggressive Russia and China on both economic and security fronts.

Understandably, the whole world is worried because all the financial and trade mechanisms, agreements, communication channels, policies, protocols and security arrangements that have taken over four decades to build will soon be set to zero for renegotiation.
No wonder the world is nervous and understandably uncertain as to what the future might hold.

And it’s that uncertainty which will have an effect on the UAE property scene. As we all know, investors and potential homeowners alike do not handle uncertainty, especially of this scale, well.

And it’s uncertainty that now lies around the effect of the Brexit on world growth and the possibility of European and UK recessions in the coming year that will make most investors move to less risky assets and safe haven currencies such as the Yen and the US dollar.

Of course, uncertainty regarding world growth has also negatively affected oil prices so many investors will be more reticent to invest in those economies that rely on its revenue. While we all know that Dubai is much less reliant on oil than its neighbouring emirates and countries, it will still be affected by investor nervousness by way of association which is unfortunate yet a reality. Just look at the Dubai Financial Market. It lost 3.3 percent, the biggest decline since January, as Emaar Properties PJSC fell 4.7 percent, mirroring the Brexit effect on many other markets around the world. Hardly rational, in my view.

Investors will be looking closely at the effect on UAE’s tourism. In the first quarter of 2016, Western Europe was the second largest source of tourists to Dubai by region, accounting for 23 per cent, led by the UK’s eight per cent and Germany’s three per cent. With the Euro weakened to $1.10, and with most analysts bearish on its immediate future, it is hard to imagine that level of contribution will continue until the post-Brexit uncertainty dissipates. Now such a strong pillar in the UAE’s burgeoning economy, tourism rates can be affected as nearly every global currency has depreciated versus the AED, making travel to the UAE more expensive for the majority of global travellers while journeying to the UK and Europe for most people has just got a lot cheaper. Hopefully, many will still use the country as a travel hub from and take advantage of what this exciting country has to offer during stopovers.

At the time of writing, the British pound had fallen more than 10% to below $1.34 and still falling as uncertainty continues to cloud everybody’s view as to the future of the UK economy. This is significant as British investors alone injected £1.9 billion into Dubai’s property sector in 2015 purchasing around AED 10 billion worth of UAE property assets, putting them at No.2 with an overall 7 percent of total investments made in the sector in 2015.

Needless to say, with such a currency devaluation and an uncertain outlook, Dubai property has suddenly become a lot more expensive for those wishing to purchase with British pounds, while the London property market has just become a lot more affordable. While a feeding frenzy hasn’t developed as yet, a prolonged weakness in the pound could divert significant levels of investment capital away from a market such as Dubai, especially as British expats, living in the emirate and earning UAE dirhams, take advantage of exchange rate gains to invest back home.

But even in the face of such uncertainty, there is no need to act with undue haste or panic. With or without Brexit, the world of real estate investment has always been riddled with both risks and opportunities. One thing is certain, though, mature and astute investors would know when to grab onto property or let go, making their own calculations and analyses, and seeking further expert advice as events continue to unfold.

brexit_and_dubai_realty

Brexit & Dubai realty

The effects of “Brexit” are as diverse as they are far-reaching, with experts considering how the decision made by the majority of Brits will affect everything – from the European geopolitical and socio-economic landscape, the strength and resilience of the European Union in the face of further discontent among its member states, the social and economic ramifications to a newly  “independent” United Kingdom, and the inevitable question as to whether the United Kingdom can remain united given the Scottish and  Northern Islands’ wish to continue as part of the European Union.

In addition, the whole strategic alliance framework of the West has been weakened somewhat as a robust and strongly united European Union was always considered to be a cornerstone to an effective defense to an aggressive Russia and China on both economic and security fronts.

All this is heady stuff, complicated by the fact that the separation process will be negotiated by a new English Prime Minister, and will probably take up to 2 years! Understandably, the whole world is worried because all the financial and trade mechanisms, agreements, communication channels, policies, protocols and security arrangements that have taken over four decades to build will soon be set to zero for renegotiation.

No wonder the world is nervous and understandably uncertain as to what the future might hold.

And it’s that uncertainty which will have an effect on the Dubai property scene. As we all know, investors and potential homeowners alike do not handle uncertainty well.

And it is this very same uncertainty that now lies around the effect of the Brexit on world growth, and the possibility of European and UK recessions in the coming year that will make most investors move to less risky assets and safe haven currencies such as the Japanese yen and the US dollar.

Of course, uncertainty regarding world growth has also negatively affected oil prices so many investors will be more reticent to invest in those economies that rely on its revenue. While we all know that Dubai is much less reliant on oil than the neighboring UAE emirates and Middle Eastern countries, it will still be affected by investor nervousness by way of association, which is unfortunate yet a reality. Just take a look at the Dubai Financial Market – it lost 3.3 percent, the biggest decline since January, as Emaar Properties PJSC fell by 4.7 percent, mirroring the Brexit effect on many other markets around the world. Hardly rational, in my view.

And investors will be looking closely at the effect of Brexit on the Dubai tourism industry as well. In the first quarter of 2016, Western Europe was the second largest source of tourists to Dubai by region, accounting for 23 per cent, led by the UK’s 8 per cent and Germany’s 3 per cent.

With the Euro weakened to $1.10, and with most analysts bearish on its immediate future, it is hard to imagine that level of contribution will continue until the post-Brexit uncertainty dissipates. Now, such a strong pillar in Dubai’s burgeoning economy, tourism rates can be affected as nearly every global currency has depreciated versus the AED, making travel to the UAE more expensive for the majority of global travelers while journeying to the UK and Europe for most people has just got a lot cheaper. Hopefully, many will still use Dubai as a travel hub and take advantage of what this exciting city has to offer during stopovers.

At the time of writing, the British pound had fallen more than 10 per cent to below $1.34 and is still falling as uncertainty continues to cloud everybody’s view as to the future of the UK economy. This is significant as British investors alone injected £1.9bn into Dubai’s property sector in 2015, purchasing around AED 10 billion worth of UAE property assets and ranking them second with an overall 7 per cent of total investments made in the sector in 2015, increasing from the prior year. Needless to say, with such a currency devaluation and an uncertain outlook, Dubai property has suddenly become a lot more expensive for those wishing to purchase with British pounds.

And yet, the London property market has just become a lot more affordable. Already, there are reports of overseas buyers from all over the world taking advantage of the weaker pound to buy property in the stunned city. While a feeding frenzy hasn’t developed as yet, a prolonged weakness in the pound could divert significant levels of investment capital away from markets such as Dubai, especially as British expats, living in the emirate and earning UAE dirhams, take advantage of exchange rate gains to invest back home.

So, while there are interesting times ahead, there is no need to act impulsively or with any undue haste. The true extent and nature of the ramifications of the Brexit decision are yet to be fully identified, analyzed and quantified. It is still early days, and it will take some time for the fog of uncertainty to clear and for opportunities to emerge. Decision time will come soon enough.