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Preparation is the key

The Cityscape Global Conference provides tremendous knowledge-sharing opportunity to investors

As a proud real estate professional, there is no more exciting time for me than when Cityscape Global opens its doors in Dubai and showcases to the world what a fantastic industry we have. And that time is rapidly approaching – Cityscape Global is just around the corner and this year’s edition will be as exciting and informative as those in years past.

For buyers and investors, there is no better place to gain an appreciation of the myriad opportunities on offer. I always advise my clients that the best way to get the most out of the event is to canvas all the interesting opportunities on display and gradually yet efficiently establish a shortlist of the best opportunities.

Establishing such a list from an exhibition as huge as Cityscape is not easy and requires a disciplined approach. This is where a property asset management professional can assist and it’s a role that keeps me extremely busy with my clients over the entire period that Cityscape is open and for some weeks subsequent to its conclusion.

A lot of the work in ensuring that investors and potential buyers make the most of their Cityscape experience is actually done beforehand in preparing an understanding of what the overall investment environment looks like. This enables efficient and focused assessment of all that is on offer.

It’s also important for investors to understand what they want to invest in and what their investment objectives are. Too many investors formulate the answers to these questions “on the run” during the exhibition. This lack of preparation just leads to confusion and ultimately poor decision-making.

As a general theme this year, I am advising most of my investors to look for value opportunities in the affordable housing segment, particularly in Dubai South, as this segment in this location is likely to be the subject of some very attractive easy payment plans to further enhance affordability and, to some extent, mitigate risk.

This segment has outperformed its more luxurious alternatives for some time now and continues to show potential, even through the recent cyclical correction. And while the value is irrefutable, the risks associated with investing in the afford-able segments of the industry as opposed to the luxury segments are much lower.

But not every Cityscape attendee will have a check book in hand. The Cityscape Global Conference, which is held as a precursor event at the Conrad Hotel on September 10, is a fantastic opportunity to gain a high level of understanding of the factors shaping the industry. This conference always forms part of my preparation for the exhibition and I always recommend that my investor clients avail themselves of this tremendous knowledge sharing opportunity.

The developers who do well out of Cityscape are those who utilize the event as a part of an overall “go to market” strategy. Prior preparation of at least 12 months in will increase the chances of maximizing the returns from participating in the event.

So, for those of us with a passion for the industry, it is going to be an exciting three days. It always seems to end too early!

Affordability Matters Most

Affordability Matters Most

This year’s Cityscape Global Exhibition and Conference is forecast to be the largest yet and comes at a time when Dubai’s Real Estate industry is expected to start entering a cyclical growth phase in the lead up to the World Expo 2020.

The importance of Cityscape Global cannot be overstated. As with many exhibitions, it provides a concentrated and focused forum which allows the industry to showcase its vision and capabilities and demonstrate what shape Dubai will take in the future. But Cityscape is much more than that.

Cityscape Global is an open invitation for all stake-holders to understand, evaluate, participate and prosper in an industry that continues to literally change the shape of Dubai. It is a meeting place of some of the biggest and brightest minds representing all stakeholders in the industry and a confluence of opinions, ideas and opportunities which are shared, debated and developed. It allows stakeholders to gain a macro sense of in-dusty direction and a micro understanding of the various elements that will shape the industry going forward.

For buyers and investors, there is no better place to gain an appreciation of the myriad of opportunities that are on offer, but the sheer scale of the exhibition can become a little overwhelming, especially when you are looking to invest.

As a general theme for this year’s Cityscape, I will be advising most of my investors to look for value opportunities in the affordable housing segment, particularly in the Dubai South areas, as this segment in this location is likely to be the subject of some very attractive easy payment plans to further enhance affordability and, to some extent, mitigate risk.

This segment has outperformed its more luxurious alternatives for some time now and continues to show lots of potential, even though the recent cyclical correction. Affordable properties will continue to be on high demand as Dubai’s population growth gains momentum during a period of expected strong economic growth leading up to the end of the decade. And while the value is irrefutable, the risks associated with investing in the affordable segments of the industry as opposed to the luxury segments are much lower. Demand for affordable accommodation will continue to grow as Dubai’s population swells in the run up to the Expo. As Dubai continues to grow, so does the need for affordable housing.

Yet, although I see great value in investing in the affordable segment, it doesn’t mean some interesting opportunities won’t appear in other segments as well.

So, while you might focus on identifying opportunities in the affordable segment, you need to keep an open mind and be wary of unique opportunities that may be present.

I always advise my clients that the best way to get the most out of the event, is to canvass all the interesting opportunities on display and gradually yet efficiently establish a short list of the best opportunities.

Establishing such a list from an exhibition as huge as Cityscape is not easy and requires a disciplined approach. This is where a property asset management professional can assist…

Why? It’s important to understand what factors are going determine the potential of any investment. For property, these factors include everything from macro level influences such as global economic performance and policies, geopolitical issues, currency rates and oil prices to more regional or local factors such as industry supply I demand levels, consumer confidence, government policy and regulatory framework, industry cycles and liquidity in the marketplace.

So, in reality, a lot of the work in ensuring that investors and potential buyers make the most of their Cityscape experience is actually done beforehand in preparing an understanding of what the overall investment environment looks like. This enables a more efficient and focused assessment of all that is on offer.

But in addition to understanding the invest environment, it’s important for the investor to understand why he or she wants to invest in property and what the investment objectives are. Too many investors formulate the answers to these questions “on the run”, once they are traipsing around the exhibition. This lack of preparation just leads to confusion and ultimately, poor decision making.

Every industry has its shows, whether it’s the myriad of motor shows held around the world, film festivals, fashion events, airshows and the property industry is no different. What many don’t understand is that Dubai’s Cityscape Global has established itself as one of the best Real Estate and Property events globally… and its right on our very own doorstep!

So, for those of us with a passion for the industry, it is going to be an exciting 3 days. It always seems to end too early!

You need a professional property manager

Many people misunderstand the role of the 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 a greater return from their property portfolio and enable a long term portfolio strategy to be realized. So what should you look for in selecting a professional to manage your property(s)?

Well, first of all, you need a professional who is experienced in the market. Not just any market, but the Dubai market. Typically, if you find somebody with at least 10 years of experience, you would find somebody who has survived the global recession, and that should provide a reasonable indication that they are in the business for a long time and that they had the skills to navigate and survive Dubai’s 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 which is designed to harness the true potential of your property and provide you with the maximum rate of total return. 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 policy and regulation, 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 policy 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 for managing your portfolio correctly by addressing shortfalls to objectives, issues requiring addressing and opportunities for performance improvement, in addition to your peace of mind.

You also need to choose a property manager who you can work with and who, you believe, has your best interests at heart. Your property manager must be a 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 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 and so you can have an idea of their 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.

 

Managing your property portfolio will also require proper performance measurement, communications and review schedules, and status reporting and financial statements.

ASK THE AGENT

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

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. 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. 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.” There are many projects scattered all over the country that are filling the affordable housing void. These offer high quality, reasonably priced and extremely spacious homes with the potential to provide excellent returns as affordable housing will continue to be in demand.

 

I want to give my tenant a one-year notice to vacate the flat. Is there a format and any other formalities?

You need a valid reason for requesting the tenant to vacate the premises. Has the tenant breached the tenancy agreement? Has the tenant broken the law by utilising the premises for an unlawful purpose? Do you want to sell the property or occupy it yourself? if the tenant has breached the agreement or broken the law in some way, you must serve a 30-day notary public notice. It must clearly state why the tenant is being given the notice. If the tenant does not respond to the request, you can go to the Rental Dispute Settlement Center and request an eviction order. If you want to sell the property or use it yourself, you need to give a 12-month notice stating your intention through the notary public. The notice should be delivered by courier. Keep a record of the delivery report as evidence of receipt by the tenant if he refutes receiving your notice.

 

I am interested in working for a real estate broker as I have experience in the US. Can you please advise.

Since the UAE market is 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. Go for a full service company to 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 be prepared to invest in you by providing you with the types of learning experiences that come with formal training (mandatory to become a licenced agent in Dubai) and 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, or being given special projects that will facilitate learning. Firms that invest in high-potential people typically succeed. Surround yourself with people who are passionate about the industry.

 

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 per cent 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.

 

Question of the Week

I have 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 market, with a few mortgage providers offering rates for as low as 3.99 per cent or even 3.49 per cent. 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 provide you with a net annual cash flow of 5 per cent, and over a period of five years, an annual capital appreciation of anywhere between 5 per cent and 7 per cent. This would be a more lucrative allocation of your cash. If, however, you are not confident about achieving a return on your cash that exceeds your mortgage rate, then I suggest you pay down your mortgage outright as you will definitely be able to save on interest costs.

Escrow and how it can protect you

Off-plan investors urged to take other steps to boost self-protection.

Anybody can open an escrow account, but not anybody can open an escrow account for property development in Dubai.

With Cityscape just around the corner, more people will be considering purchasing their first home or investment property, or expanding an existing investment portfolio by making an off-plan purchase.

An important feature of any off-plan purchase is escrow there are not many people who understand the concept of escrow and how this legally binding arrangement can provide protection to investors.

An escrow is a legally recognised financial instrument held by a third party (typically a bank) on behalf of two other parties (typically a buyer and a seller) who have agreed to conduct a particular transaction in accordance with certain conditions. Funds are provided by the buyer and held by the party providing the escrow service (bank) until the latter receives formal advice that certain agreed obligations of the seller have been fulfilled, upon which time, the seller can receive funds in the amount specified in the agreement.

The use of escrow accounts by Dubai developers has been mandated by law to protect buyer prepayments. This limits developers from gaining access to funds until certain construction milestones are completed.

Anybody can open an escrow account, but not anybody can open an escrow account for property development in Dubai. The developer must first be registered as a bona fide developer with the Real Estate Regulatory Agency (RERA) which involves the provision of an expansive array of documents.

RERA requires that the land subject to development should be fully paid and a title deed should be issued in the name of the owner. Where the owner of the land cannot register as a developer, RERA permits the land owner to enter into a contract with an existing registered developer to develop the project on behalf of the land owner. The property development contract, however, must be approved by the senior legal adviser of DLD to be accepted by RERA.

Only when a developer is recognised as a “registered developer” with RERA can they apply for an escrow account. When selling off-plan, the developer must ensure all proceeds of the sale of the units are deposited into the escrow account and are used solely for the construction of the project. Failure to comply with the Escrow Law can lead to hefty fines or criminal charges. Once the developer has submitted all the required documents to RERA and is granted the authority to sell units off-plan, RERA will issue an NOC to allow the developer to open an escrow account with an authorised bank.

The bank which will be providing the escrow service needs to understand all the details of the underlying agreement to ensure that it acts in accordance with the provisions. In this way, the bank can help protect the buyers’ pre-paid funds.

But while the introduction of escrow as a legal requirement for developers has helped safeguard the funds of off-plan investors, there are other steps that investors must take to provide additional self-protection.

Buyers need to make sure they are dealing with – a reputable developer regardless if the developer is registered with RERA. Ask around or seek professional guidance.

Warranties and any quality assurance policies should be discussed in detail. Have the sales and-purchase agreement reviewed by a professional to ensure you have legal recourse should any quality issues arise and make the effort to exercise your right to inspect (snag) your property and report any legitimate issues to the developer for rectification. Remember, once you have taken ownership of the property, the developer is obliged to fix any issues for 12 months following the transfer of ownership.

ASK THE AGENT

I have accumulated a portfolio of apartments and villas in Dubai. Is there still a way to make any profit during this slowdown 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 from investing in any other assets. Its purpose is to create wealth but it needs to be nurtured and managed just like any other investments. With a portfolio this large, you need professional help to manage your investment, particularly during times when yield is harder to generate. You need a good property manager who will ensure that you maximise returns from your property portfolio and enable your long-term strategy to be realised.

 

We’re a new company looking for an office space with the best value. Should we rent or buy?

At this stage, you need to keep costs down until you become fully established in the market. The old cliché “location, location, location” is all about the convenience and prestige it can bring to any business. For instance, great value, affordable and well-constructed office spaces are found in areas like Business Bay, but may not work for your business if the location is a hindrance to your operations. We always advocate businesses acquiring their own premises if they commit to operating long term in Dubai. There is no tax advantage in leasing in the UAE and as long as your office space is appreciating, your balance sheet will grow stronger over time. If you decide to lease your premises, look for the best deal and lock it in for at least three to five years. Lease rates in Dubai will soon increase, going forward, so make sure you take advantage of current rates.

 

How do I know if my property consultant is giving me the correct advice?

In any relationship, trust is key. Do some research to verify the veracity of his claims and assertions. If in doubt, seek alternatives as there are plenty of property consultants out there hungry for your business. Look for experience and passion. Ask friends who recently conducted a real estate transaction and listen to their feedback. Find a consultant that exhibits a breadth and depth of industry knowledge, and expertise. Look for an agency that has been in the industry for a long time and has built good relationships with major developers or authorities such as DLD, RERA, DEWA or DED for they will be able to operate more efficiently. And finally, look for an agency that has received some form of industry or peer recognition as they lend credence to the reputation of the realtor in question.

 

I come from overseas and I am looking to rent a home. I heard about “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 helps save on the costs of electricity. Most units serviced by chilled water district cooling are offered at slightly lower rental rates. However, ask how your cooling charges will be calculated and which are included in the cost. As to consumption charges, I assume you will have a BTU metre installed in your apartment. If so, you will be billed directly by the cooling services provider. The DEWA savings will be offset somewhat as you may incur an additional utility charge as some unit owners equipped with district cooling will be passed on the slightly higher utility charges involving the remuneration of the capital cost of providing the infrastructure.

 

Question of the Week

I am looking at the UAE as a possible destination for retirement. I would like to buy a property here, rent it out initially and later use it myself. Any advice?

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. There are many quality properties available; 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, the amount is double or triple. You can expect a minimum net rental return of around 5 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 a functioning owners association will require a reputable local real estate professional to help minimise risks in your investment, whether during the procurement stage or until you are ready to assume occupancy.

2017 … THE YEAR IS ALMOST HALF OVER

It was an interesting first quarter in Dubai’s property market. While prices generally approximated those of the last quarter of 2016, they actually fell by around 8% from the corresponding quarter a full year prior.

Nevertheless, and maybe not too surprisingly, total transaction value jumped by 45% for a total spend of around AED 77 billion on the back of a 7% increase in transactions. Needless to say, there were some pretty big deals done in the 1st quarter.

The 1st quarter industry performance shouldn’t come as a surprise to many. The market has been approaching its cyclical bottom for some time now and it appears that, barring unforeseen events, the decline in property values experienced last year has just about run its course.

So, what does the rest of the year hold? Well, I wouldn’t count on a rapid and sudden turnaround in property values. We are likely to do a bit of bottom-dwelling for a couple of quarters yet.

The headwinds that beset the property market may have lost some of their velocity, but they are still strong enough to make any sudden upturn in values very unlikely.

Nevertheless, the market is offering the best value for some time and will continue to do so for at least the next couple of quarters … but I wouldn’t wait too long.

Affordability has been key to keeping the market bubbling along, and a slew of affordable properties have been launched over the past 2 years and there will be more launched in 2017. First home buyers have never had it so good in Dubai and affordability, or a lack thereof, as a reason to continue to rent is now more of an excuse to justify either procrastination or excessive conservatism.

The strengthening AED has been a headwind, no doubt, particularly where those investors purchasing with the pound, euro and yen are concerned. However, for those who have purchased recently or plan to do so imminently, the value of your property will be increasing as the US dollar continues to strengthen in 2017.

The US Federal reserve remains committed to normalizing interest rates in 2017 which is good news for investors who are holding assets denominated in or pegged to the value of the US dollar, while the angst associated with Brexit is only just beginning. Although interest rates will be increasing going forward, they will remain at very affordable levels for quite some time, making financing through mortgages still very attractive.

And the economic environment will improve from this time forward. Put simply, Dubai needs people to support an economy that is expected to grow at an estimated annual average of 5% for the remainder of the decade and to deliver initiatives such as the 2020 World Expo. The Expo alone is expected to generate an additional 270,000 jobs and drive demand for housing and commercial facilities that, by and large, don’t currently exist. Much of the city’s planning comprehends the number of people living in the emirate to grow to 3.4million people by 2020, a 7% annual increase from today’s population of 2.25million.

Meanwhile, oil prices continue to bubble around the USD45 to USD50 per barrel mark. Despite this obvious crimp on revenues, the governments Infrastructural spending continues unabated with the total budget outlay of Dh48.7 billion for 2017 being marginally up from Dh48.55 billion allocated to 2016. Looking at the 5-year budget plan of Dh248 billion, the average annual spending of Dh49.6 billion is higher by 6.5 per cent than Dh46.6 billion spent during 2014 to 2016 inclusive. This is significant as it demonstrates an unwavering commitment to economic and societal development with the investments in development initiatives being supported by revenues to be generated a newly introduced VAT in January 2018.

And despite global nervousness and uncertainty emanating from Brexit, terrorist threats, North Korean recalcitrance and virtually everything under the Trump administration, the global traveler is continuing explore the globe. Dubai’s economy continues to be driven by fundamentals such as tourism and trade and a slew of new projects to grow these important revenue generating economic segments.  Dubai welcomed almost 15 million overnight visitors in 2016 representing a 12% increase over 2015 to continue a trend of approximately 10% per annum since 2010. 2017 is expected to see the trend continue.

While it appears that the market may have been overburdened with a glut of new launches raising the prospect of an oversupply, the structural shift towards more affordable housing will not only serve to accommodate the expected rapid population growth associated with the 2020 expo, but also serve as an important factor in the development of the Dubai economy overall. Every emerging economy needs to develop a strong middle class as its expansion is critical to growing a sustainable economy and developing resilience in the face of external financial and economic shocks.

I stated earlier in the year that 2017 will be remembered as a year of the astute investor. Those that can recognize the headwinds and understand that every headwind eventually dies out, will do very well over the coming 7 years by investing in 2017.

 

Alternatives real estate assets

While Real Estate Investment Trusts are common in many Real Estate Markets around the world, they are a relatively new here in the Middle East with the Emirates REIT, being the first, launched in 2010. In November of 2016, Saudi Arabia created its local version of a Real Estate Investment Trust (REIT). The reasoning behind this move was to enable the smaller investors to provide liquidity to the market and support government efforts to resolve a housing shortage and increase the percentage of housing generated by developers to 30 per cent from its current level of 10 per cent. Now, more recently, there has been a second REIT launched in Dubai, the ENBD REIT.

While there are advantages for any industry to have financial structures such as REIT’s to support burgeoning property and construction industries, what are the advantages for the investors who will be providing the capital?

There was a time when the property game was for the wealthy investor and those with only small amounts to invest had to look elsewhere to invest their hard-earned capital. This is no longer the case due to the rise of new investment platforms which enable even the smallest of investors to enjoy the returns of investing in property.

One such platform which is relatively new to the local market is the REIT. REIT is an acronym for Real Estate Investment Trust which, as a trust company that accumulates a pool of money through an initial public offering (IPO), buys, develops, manages and sells real estate assets. The IPO is identical to any other security offering with many of the same rules regarding disclosure and reporting requirements and regulations.

Investors, whether large or small, instead of purchasing stock in a single company, have the opportunity to buy a unit which is actually a portion of a managed pool of real estate. This pool of real estate then generates income through renting, leasing, selling and financing of property and distributes it directly to the REIT holder on a regular basis.

Units held in a REIT can be bought like a stock on a stock exchange. The REIT invests in real estate directly, either by buying, selling or leasing properties or by investing in property mortgages.

There are 3 types of REIT’s.  Equity REITs invest in and own properties and therefore are focused on increasing the value of those properties while also accumulating revenues from their properties’ rents.  Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans while Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.

Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in REITs that are listed on the stock exchange. Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate – shopping malls, for example – or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market.

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. A REIT also allows a greater amount of 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.

Investing in a REIT is no different to investing in any company. Some companies represent lucrative opportunities, while some companies may represent too much risk or poor value.  Investors still need to look at the REITS performance in terms of Nett Asset Value growth and dividend payment history, current portfolio composition and performance, the management team, future plans for the REIT as well as have an understanding of the likely performance of the property market and overall economy in which the REIT participates. Investors, having completed a thorough and in depth assessment of the probability that the REIT will provide desired returns, can participate at the level that is consistent with what they can afford to invest.

Another investment platform which allows smaller investors to participate in the property market is Crowdfunding. A relatively new concept Crowdfunding entails the pooling of funds by a group of individuals to finance initiatives such as real estate investment projects. This is usually done via the internet.

The advantages are obvious. Investors get access to the real estate market with small amounts of money and can pick and can efficiently choose which Real Estate projects they wish to invest in, thereby spreading risk and enabling the possibility of building a portfolio made up of a variety of assets, in a variety of locations being developed by a variety of developers.

For developers, Crowdfunding provides another source of funding for their projects. Using the internet is an efficient way of attracting interest to their projects and the reach that the internet provides magnifies the potential for raising funds more quickly.

However, as with any investment, Crowdfunding is not without its risks. Obviously, investors will be exposed to any gyrations in the market along with all the other investors. In addition, the risk of default from developers can be higher when compared to peer-to-peer and direct real estate investment funding. In addition, unlike investing in a REIT, the absence of a secondary market restricts the ease with which an investor can liquidate his or her position. These risks need to be considered carefully when determining the type of return required and, as with any investment, extensive due diligence by all investors, regardless of whether they be big  and small, is of paramount importance.https://www.eklundmedia.com/puteshestvie-k-simvolam-i-magicheskim/

DATA: THE BEDROCK OF PROGRESS

While great strides have been made in the development and implementation of a legal and regulatory frame in Dubai’s Real Estate industry, there remains one area where the industry seems to be lagging the rest of the world. That area is Data Availability and Transparency.

There are several reasons why Data Availability and Transparency are important to the efficient and effective operation of any industry and why, logically, they can foster development and growth.

1. Build Trust within the Industry – Making more information publicly available will empower all the different stakeholders and participants in the industry to the extent where a bedrock of trust is developed simply because the data underlying assumptions, assertions, opinions and points of view is available, accessible, analysable and can be utilised to build trust between parties.

2. Generate Ideas – The availability and subsequent analysis and modelling of data underpins the generation of new ideas. Create an online forum for your local government where residents are encouraged to participate by providing alternative ideas. Brush up on new ways in which communities interact with their governments online.

3. Risk Assessment – We operate within an industry whereby decisions can involve huge capital outlays and where there may be multi-year lags in returns on billions of dirhams of capital employed. In addition, every day, there are hundreds of decisions made, which are not of the same value. Average people, making life changing decisions on whether to buy, invest in or rent properties, are typically making the biggest decision of their life and, without data from reliable third party sources, the perceived risk and resulting nervousness around a transaction can be debilitating.

4. Increase Community Engagement – Once data is available and properly communicated, the number of people becoming engaged or interested in the industry will multiply significantly. News, data and analyses will drive dialogue among a broader spectrum of the community so that the discussions are not only limited to those who are operating within the industry, but with the broader community as well

5. Develop a Better Understanding of Industry Participants Needs – Effective gathering, organising, analysing and dissemination of data will enable the development of a far greater and deeper understanding of what the various participants and stakeholder’s needs are. Once these needs are identified, ideas and initiatives can be generated to ensure that the industry is providing its constituents the benefits that they desire, on an equitable basis. Empower Citizens When local governments are transparent, levels of trust increase. When the trust level is high, citizens begin to feel empowered to take responsibility. Read here about the open city concept.

6. Measure Performance – There is no doubt that proper performance measurement is dependent upon the availability of good data. The market today is far too cluttered with articles, opinions and predictions that are not based on a sound bedrock of relevant, up to date and analysable data. To be able to accurately measure industry performance and to be able to drill down to a granular level of detail to analyse why the industry is performing as it is, what the industry is being affected by, where the industry is strongest or weakest and who is most positively or negatively affected is critical is assessing the industry overall health.

7. Attract People to the Industry – there is no doubt that, as data availability improves, more people will be attracted to the industry as the need for better and more frequent analysis is required. As this intellectual base develops, the industry will build a repository of knowledge that will only serve to enable the industry to operate more effectively and efficiently over time.

8. Boost the Overall Economy – There is no doubt that a robust, efficient and developing Real Estate and Construction Industry is a boon to any economy. Better data facilitates better planning for government expenditures in infrastructure and technology, better resource management, more effective innovation and, ultimately. Greater contribution of the industry to overall economic development and growth.

9. Foster greater cooperation between Public and Private Sectors – The more effective the communication, cooperation, priority setting and shared planning between the Public and Private Sectors, the better the solutions for the community and economy overall. Excellence can be attained through synchronisation of objectives and objectives can only be formulated after proper data analysis and goal setting. The key to success is a shared understanding of the vision and the role each industry participant has in ensuring its achievement.

10. Educate the World – We all preach about global best practice but how can it be properly applied without the understanding that blooms from proper data analysis. And why not have the vision where similar industries in other countries around the world are looking towards Dubai as the centre of the world’s best practice? It’s possible … but it all starts with having up to date, relevant, accessible and analysable data. It’s difficult to excel without it.

Ask the agent

Should I assign my property to a leasing broker or a property manager?

You enter into a leasing agreement when you wish your real estate agency to locate suitable tenants for your apartments and facilitate the signing of the tenancy agreement, leaving you to assume the responsibility of managing the tenants and all aspects of the property thereafter. A property management agreement includes more. It provides an assessment, strategy and activity plan designed to harness the financial potential of your property. Considerations include history; current market, economic and risk factors; regulations; finance; and market dynamics. An activity plan covers pricing and marketing, customer relationship and tenant management, and policy and cost management. These will be performed under a property management agreement. A good property manager will make your investment work harder for you and the returns you receive will outweigh any fees.

I wish to sell my villa, but the garden needs a little bit of work. Is it worth investing in improving the garden? Am I likely to get my money back?

For your garden to become a selling point, you need to establish a low-maintenance and functional landscape that is highly appealing to the potential buyer. Resist the temptation to clutter the landscape with every species of flora known to man. Plants grow and you need to keep that growth in check as your garden can look unkempt and create a negative impression. Ensure that all landscaping elements must be coordinated carefully. If you don’t know or understand the differing qualities of certain soils, it’s time to call your landscape gardener and have him produce an impressive garden for you. Even if you don’t plan on selling your home for another five or 10 years, now is a good time to lay the foundation for a great landscape design that will win over your future homebuyers.

I am planning to invest in Dubai. As this would be my first investment, can you give any useful tips.
First of all, know why you want to invest in property. You must have a clear understanding of what you are trying to achieve. Then you must set your financial objectives carefully. Success in property investment can only be attained when (and if) those objectives have been realised. Always think long term for your greatest success. Those who have had the greatest success possess the ability to think long term, make rational, well-researched and carefully thought-out decisions with the end objectives in mind and understand that every real estate industry globally will go through cycles of growth and contraction. Make sure you know your stuff by being able to communicate knowledgeably with the experts. Always strive to eliminate risks. Plan your finances, cash flows, capital requirements and debt levels carefully.

With many new projects and off-plan opportunities, I am nervous about the quality of end products. Can we expect an improvement in quality?

During the global financial crisis, many developers realised that properties of poor quality were dealt the harshest of value declines. As a result, many developers did not survive. Having said that, the old caveat of “buyer beware” still applies. Deal with a reputable developer. Ask around or seek professional guidance. Ask what proactive measures are taken to ensure the end product has been built to an acceptable standard. Warranties and any quality assurance policies should be discussed in detail, and have the sales and purchase agreement reviewed by a professional. Engage an expert to inspect (snag) your property and report any legitimate issues to the developer for rectification. Remember, once you have taken ownership of the apartment, the developer is still obliged to fix any issues that may arise during the full 12 months following the transfer of ownership.

Question of the Week

I am buying an off-plan property. Can you explain the principle of escrow.

An escrow can be described as a legally recognised financial instrument held by a third party (typically a bank) on behalf of two other parties (typically a buyer and a seller) who have agreed to conduct a particular transaction in accordance with certain conditions. Funds are provided by the buyer and held by the party (bank) providing the escrow service until it receives the formal advice that certain previously agreed obligations of the seller have been fulfilled upon which time, the seller can receive funds to the amount specified in the agreement between the seller and buyer.

The use of escrow accounts by Dubai developers has now been mandated by law for the purpose of protecting the prepayments made by buyers. This limits developers from gaining access to funds until certain construction milestones are completed, helping ensure developers are not misappropriating funds provided in advance for purposes other than which they are intended.

Anybody can open an escrow account, but not anybody can open one for the purposes of property development in Dubai. The developer must first be registered as a bona fide developer with RERA which involves providing documents including details of its officers and solvency, title deeds proving ownership of the land to be developed, NOC from relevant parties to performance guarantees.

Gulf News Saturday, June 10,2017
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