Ask the Agent

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.

Ask the agent

By Mohanad Alwadiya
Published: Gulf News
Dated: October 2016

What property features should I prioritize in listing my apartment for sale?

If you have a listing agent, or are already working with a realtor, they would know exactly what characteristics of your property should be highlighted in order to make your property stand out from the rest and be highly marketable. But, just FYI, the most important features that will make or break your goal to sell your apartment include the fact that it must be competitively priced or priced just right for the market, its location or proximity to landmarks and important infrastructure such as transportation links and commercial districts, size, building facilities and community amenities, quality and current physical condition, whether or not it is being handled by professional property management, fully paid or financed, etc. Also, make sure you mention any improvements done, e.g. upgrading of original material such as plain ceramic flooring to granite, or changing original fittings purchased locally to Italian-made fittings, and if it has any other special feature such as a nice view, a balcony, closed kitchen, extra storage, being located close to the community center / park, etc.

I want to make some structural changes in my villa. What is the typical procedure I need to follow?

You will need to establish that the amendments that you plan on doing does not threaten the structural integrity or safe habitation status of your villa by you or by future owners should you decide to sell it one day.

Therefore, you should prepare the architectural and MEP drawings for the proposed concept. These would need to be viewed in conjunction with the architectural and MEP “as-built drawings” by a number of different authorities and regulatory bodies to ensure that the proposed designs will be structurally sound and meet all the required building codes and regulations.

You will need to obtain NOCs from your OA, the zoning authorities, the Civil Defense authorities and, in some instances, your project developer. Depending on the extent of your renovations, you may also require NOCs from DEWA regarding electricity supply and water supply.

If renovations are extensive, you may be required to have the work inspected by the Civil Defense department and also the Building Department of Dubai Municipality.

In the majority of cases, your architect or contractor can arrange for all approvals on your behalf and I suggest you engage professionals who can achieve this for you.

What documents do I need to provide so I can arrange for an agency to market and sell my villa?

The first piece of documentation is the provision of proof of identity, usually provided by way of passport identification and/or Emirates ID so we know who we are dealing with.

You should also provide a copy of the original Sales and Purchase Agreement so we can verify with the Dubai Land Department (DLD) that we are dealing with the bona fide current owner of the property, and that there are no third party legal entitlements to the property.

If the property is leased, you should also provide us with all details of the lease agreement including the status of outstanding payments and any information or documentation pertaining to the history with the tenant. You should also provide us with the status of payments of items such as service charges or owners association charges.

We will sit and consult with you as to what your requirements are and prepare for you a letter of engagement which would contain the details of what you require from us as a professional agency and what fees we have mutually agreed upon.

If you are located overseas and you would like us to represent you, we would need you to provide a Power of Attorney which will detail the extent to which you would like our representation in the various facets of marketing and selling your property.

What are the limits landlords must work within when it comes to increasing the rent to a rate they want in Dubai?

Rental increases are usually a main source of contention between tenants and landlords, especially when there is a failure in the communication process. By law, tenants should be informed of any changes in the rent three months prior to contract renewal. But even then, the rate of increase may also be questioned by the tenant. By now, everyone has probably heard of the RERA Rental Increase Calculator which is a handy tool accessible online (via the Dubai Land Department website) for tenants who wish to check if the rent increase being imposed by their landlord is justified, and for landlords who want to make sure that the rent increase they are asking for is within their rights. Rent caps apply to all property types in the different areas of Dubai whether they be commercial, industrial, staff accommodation, or residential units. Using the rent calculator as a reference helps prevent disputes between landlords and tenants, and has given the Dubai rental market a modicum of order in terms of preventing unabated rent increases.

QUESTION OF THE WEEK

With so many attractive off-plan offers today, I am very tempted to buy off-plan property. But how do I know if I am buying property with real potential?

Whether you are buying ready property or one that is off-the-plan, market fundamentals still apply, and always make sure that an off-plan purchase is consistent with your property portfolio strategy.

Location is always critical and can never be disregarded. This simply means considerations regarding how close the project is to commercial, educational and leisure hubs, to medical and health facilities, public infrastructure, popular and established communities, and the manifold views one could enjoy all add up to the desirability of a property’s location, add to that the possibility of being neighbor to some celebrity types – the perceived benefits that a location may bring to a prospective buyer can account for up to 90% of a property’s value.

The asset type is also important. What type of asset will be in demand in the future: affordable apartments? Townhouses? Villas? Be smart about the “product” that you buy. Look for certain property types in locations which you believe will be keenly sought in the future.

You need to do some careful financial analysis which will enable you to determine the value of the discount that you anticipate receiving by buying off-plan. Easy payment plans which can ensure your limit your capital exposure before completion and you need to be conversant with financial concepts such as net present value (NPV) and internal rate of return (IRR) to guide you in your decision-making when assessing your alternatives.

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.

ASK THE AGENT

Question: In spite of the ongoing market slowdown, rents in our building are said to have increased according to new tenants. Our rent contract renewal is due in the last quarter of this year, do you think we will also be hit with a rent increase?

Unabated rent increases have been a common occurrence in the UAE; however, with the intervention of the authorities, tenants now have some added protection.

According to the law, your landlord needs to give you at least 90 days’ notice prior to the expiration of your current contract if he intends to increase your rent.

It will also greatly help you if you familiarize yourself with Law No. 43 issued on 22 December 2013 which replaced Decree No. 2 of 2011. Law No. 43 introduced the following restrictions (summarized) to take immediate effect with regard to the calculation and implementation of legally allowable rental increases:

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

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

Question: I am a landlord still relatively new in the business and I want to give my tenant one year’s notice to vacate an apartment I own. I already sent him a notice through a courier company but he (tenant) said it is not valid. What is the correct procedure?

First of all, for the notice to hold up legally, you must have a valid reason for requesting the tenant to vacate the premises. Has the tenant committed any breach in respect of the tenancy agreement? Has there been any illegal activity in the premises? Do you need the unit for yourself? Do you intend to sell the apartment?

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

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

The notice must be delivered by courier, and it is essential you keep a record of the delivery report as evidence of receipt (by the tenant) in case the tenant refutes receiving your notice in future proceedings.

Question: I have a mortgage on the flat I live in. Recently, I received an unexpected inheritance so I now have a substantial amount of cash. Should I pay off my mortgage or invest my money elsewhere?

Congratulations on your financial windfall! Your decision will depend on what interest rate you are paying on your mortgage, and on the expected returns in the investment you are considering.

If you can achieve a return greater than your mortgage interest rate then you should invest the cash elsewhere and take advantage of your low mortgage rate.

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

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

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

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

It all depends on what interest rate you are paying on your mortgage. And what return you could expect if you invested elsewhere.

If you can achieve a return greater than your mortgage interest rate then you should invest the cash elsewhere and take advantage of your low mortgage rates.

There are some very attractive mortgage products in the marketplace with a few mortgage providers offering rates as low as 2.99%. 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 investment property such as an apartment which will yield you a net annual cash flow of 5% and, over a period of 5 years, an annual capital appreciation of anywhere between 5% and 7%. This would be a more lucrative allocation of your cash.

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

QUESTION: I live in a freehold apartment and have some concerns regarding the service charges I am paying for. We do have an existing owners association, should I direct my queries to them? Is it their responsibility to answer such concerns?

Based on the info you provided, it is assumed that you have a fully operational and registered interim owners association board that currently represents you and all apartment owners in your building.

The first thing you should do is to attend OA meetings, get involved and address your queries directly including details on service charges. The OA itself is composed of unit owners and is mandated to represent all the owners of the jointly-owned property development in question, i.e. your apartment building, and is registered as an official entity with RERA.

An OA’s primary purpose is to manage, operate and maintain common areas such as hallways, lifts, stairwells, recreational areas, building systems – virtually all of the owner-shared elements of the building on behalf of all the other owners within the building. They do this by appointing contractors with the expertise to carry out the required tasks and set a service charge that all owners must pay to cover the cost of the contractor services.

The OA is a not-for-profit business entity which elects a board whose role is to action “motions” carried by the OA in addition to managing contractors, managing budgets and capital provisions, enforcing rules for the common good and organizing items such as insurance. As a member, you can always request and view the financial statements of the association to ensure that the service charges you are paying for are justified and correct.

Ask the agent

Q1) There are many opportunities invest in off-plan properties, but the values in the secondary market have improved signiﬁcantly. Are there still advantages of buying off-plan?

Purchasing a property off-plan can provide you with superior capital gains by the time of completion, providing you are buying at a discount to today’s finished inventory and the market strengthens up to the completion date for the particular property that you are considering. This will depend on an estimation of economic growth, population expansion, the number of competing projects in the pipeline and eventual industry inventory position. Be smart about the “product” that you buy and try to avail yourself of a payment plan. Look for certain property types complete with amenities and facilities in locations you believe will be sought in the future. Deal only with reputable developers and check the status of the escrow account.

Q2) I am planning to invest in Dubai real estate.As this would be my ﬁrst property 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 and what role your property portfolio will play in building your wealth. 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 intelligently and knowledgeably with the experts. Always strive to eliminate risks. Plan your finances, cash flows, capital requirements and debt levels carefully.

Q3) 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, 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.

Q4) While the correction in the Dubai property market is broad, certain segments have undergone a greater correction than others. Are there greater-opportunities in some segments in terms of long-term ROI?

Definitely! We are encouraging everyone to invest in the lower priced, higher value, affordable segment of the market as there are some great opportunities. There are many high-performing, yet affordable developments spread all across Dubai, giving investors a wide range of options to choose from. Apartments in some developments have seen excellent capital growth with some residences growing by 35%-over the past two years, with rental premiums of at least 7% not uncommon. Demand for this type of affordable accommodation continues to grow especially as Dubai’s population swells in the run-up to the Expo. invest in an apartment and retain ownership for at least five years as you will benefit from superior capital growth and enjoy a healthy net annual rental return.

Question of the week

Q5) Recent reports have suggested that the current property correction in dubai has bottomed. Would you agree with this and is it a good time to buy?

It is always difficult to pick peaks and troughs in real estate cycles.
Having said that, there are definitely opportunities available and advantages to be gained from purchasing now as the next few years are expected to see strong economic growth. Start your property search immediately as a property investment requires the same approach regardless of the state of the market. lf you have the cash, pay for it outright, but do consider taking out a mortgage as long as you understand the impact of interest rate rises in the future. Think carefully about location, surrounding infrastructure, construction quality, and developer reputation and building amenities. Properties with attractive views, close to the beach, with golfing facilities, are part of an iconic development and have close access to the Metro generally provide good returns. You also need to consider the effectivity of the owners association, the service charges and the quality of maintenance services as these will affect the long-term value of your investment. Be purposeful, patient and pragmatic and you are well on the way to making a very good investment decision.

Gulf News Freehold – Ask the Agent

I am concerned about the risks involved in purchasing an apartment, particularly with regard to my rights if something should go wrong.

Laws have been introduced to better protect the rights of industry participants. These include measures to standardize and clarify the relationship between parties to a real estate agreement and provide recourse when a party has been disadvantaged because of unethical behaviors or practices. There has been a lot of progress made in other areas as well such as the management of investor finances with the introduction of escrow accounts; owner empowerment with the introduction of strata law and introduction of owners associations; investor recourse when disadvantaged by delays in handing over of projects or changes in specifications of properties; or tenant protection with the introduction of mechanisms to restrict the imposition of ridiculous rent hikes.

I am looking to buy an apartment in Jumeirah Lakes Towers or the Dubai Marina area. Do you think it is a good time to buy? Any recommendations?

lt is definitely a good time to buy right now. The market has corrected well for buyers and there are some fantastic easy payment schemes on offer. One example of an extraordinary payment plan is that which is being offered in Dubai Marina. Some two-bedroom apartments in the area are being offered with prices starting at Dhs 2,150,000. All you need is a 10% deposit and you can pay the balance in pro-rated monthly installments over the ensuing seven years with no profit charges applied to the balance.

Meanwhile, Jumeirah Lakes Towers is also a sought-after destination for residents and tenants because it is known to provide various housing options that offer affordable rates. It likewise has the huge advantage of being closeto the Dubai Metro and Dubai Tram, Dubai media and Internet Cities, the business district and Dubai Marina.

I have a young family and I am considering purchasing our-first home. Can you provide any advice as this is the ﬁrst purchase I am making.

Here are common factors to consider as a first time buyer: 1)The real estate market is cyclical and home values do not always appreciate over time. Very careful planning is required if you plan to move in just three or four years; 2) You are much better off financially if you apply your hard-earned dirhams towards building equity in your own home, but remember that mortgage payments can be subject to fluctuations as interest rates rise, while rent increases are governed by law; 3) Avoid making lifestyle sacrifices by choosing a home and a mortgage that suit your budget; 4) Factor-into your decision your family requirements in the future; 5) The Dubai market today is a buyer’s market. If you have done your planning properly, you should be in a position to make a quick decision.

I am looking at expanding my business by establishing several branches around the city. What should I factor into my planning?

lt is all about the convenience and prestige that a carefully thought-out location can bring to your existing and potential customers, staff and business associates. Location is critical to establishing a competitive advantage. There is no use having a superior product or service if your location is inconvenient for your customers. The same can be said for the staff. Proximity to public transport and parking availability reach new levels of importance when summer reaches its peak and staff will be appreciative if you recognize their needs as well. Taking advantage of a prestigious location can do wonders for your brand image. People naturally gravitate towards successful enterprises and a prestige location can help send the message that your business is successful, strong and superior to the others located in lesser environs. Business associates will also be eager to visit and do business with you.

I am thinking of diversifying my property portfolio by buying some commercial assets. Any thoughts on this would be appreciated.

Things are looking very promising for new business in Dubai. As the emirate seeks to grow economically, readily available office space is one of the important factors that new enterprises will consider. A few points to keep in mind:

Dubai’s economic growth is strong at around 4%, driven by tourism and trade. New projects to expand these revenue-generating economic sectors are a feature of Dubai’s growth outlook
The amount of infrastructural, development and economic initiatives, culminating in the hosting of the expo 2020, is indicative of the government’s commitment to economic progression
Population growth is forecast to be between 5% and 7% going forward and, by some estimates. Is considered to be conservative
Business establishment costs, including the cost of capital, have been at their lowest for years

Office rental returns are staging a recovery. There is a relative shortage of Grade A, large floor-plate, single-owner space favored by large companies. This represents strong investment potential. But, there is still a considerable, albeit shrinking, vacancy rate of around 23% which represents good opportunities for value purchases providing strong cash flows increasing with Dubai’s economic momentum over the longer term.

Gulf News Freehold – Ask the Agent

ls Dubai’s realty market about to enter a new period of oversupply? With new projects being announced and the market now in decline, will this prolong the current market correction?

Calculating optimal supply levels, particularly when emerging from a recessionary period, is particularly challenging. it depends on an accurate estimation of demand for real estate assets which will emanate from population growth which, in Dubai’s case, will be largely driven by overall economic growth. It also needs to comprehend a lag effect from the time that conditions conducive to development are identified by developers and when properties are finally released into the market. Given that the Dubai economy is expected to grow at an estimated 5%+ annually and initiatives such as the Expo 2020 are expected to generate more jobs, the demand for housing and commercial facilities is expected to grow significantly.

l recently arrived in Dubai. Can you give me tips on what l should consider when looking to rent a property?

There are six key considerations when going for your first rental.

Know what you can afford and allow 30% of your gross household income for rent.
Give yourself time to find the best solution that fits your budget. Do not jump at the first possibility and do not settle for less.
Make sure your agent is registered with RERA. You can log on to the Dubai Land Department (DLD) website to check.
Make sure the tenancy agreement is as per the RERA standard template. Check DLD website.
Ensure you document any property defects before you sign the contract. Raise them with your agent before you sign anything.
Ensure your rental contract is registered in RERA’s Ejari system. Insist that your broker completes the registration as it is the first step towards safeguarding you rights as a tenant.

I have owned my home for over seven years and I am looking at how I can save money by upgrading particular aspects of the property.

Here are seven ideas that may help you save a few dirhams:
Use low-flow fixtures to cut water usage by up to 40%.
Buy fluorescent bulbs which last four to l0 times longer than regular light bulbs
Update your dishwasher. Modern units use 42% less water than older models.
Consider a tankless water heater and save on electricity.
Good ceiling fans can reduce air-conditioning costs. They dispel the need to turn on the aircon often.
Apply energy reducing film on windows to reduce internal temperatures.
Consider fitting solar panels.

Our contract states there is payment due at handover and payment as maintenance advance. The developer is asking all payments on “completion date.” ls “completion date” not the same as “handover date?”

“Completion date” and “handover date” are not the same. The building can be deemed complete once the official “Completion Certificate,” which ensures the building passed all inspections has been received. Just because a building has been issued a completion certificate does not mean it is ready for handover and occupancy. Often, there are a number of small items that need to be completed before it can be occupied. l suggest you confirm that your SPA definitely refers to the “handover date” as what triggers the final payment and maintenance advance. If so, you should not make the final payment until the developer is ready to hand over the keys to you and only after you (or a professional) had the chance to inspect the apartment to ensure you are receiving what you paid for.

With the current correction in the market having been underway for some time now, do you think the market has bottomed and represents a good opportunity to buy?

There are definitely opportunities available and advantages to be gained from purchasing now. The market will pick up again as the next five years are expected to see strong economic growth in Dubai, but picking the exact timing is always difficult.

Start your property search immediately as a property investment requires the same approach and set of considerations regardless of the state of the market.

Know what you can afford. If you have the cash , I suggest you pay for it outright; however, do not be afraid to take out a mortgage as long as you plan and understand the impact of interest rate rises in the future.

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

Also consider the effectivity of the owners association, service charges and the quality of maintenance services as these will have an effect on the long-term value of your investment.

Send in your property issue-related questions to be answered by industry experts, mentioning ‘Ask the Agent’ in the subject line, to: properties@gulfnews.com

Gulf News Freehold – Ask the Agent

I bought a studio in 2008 financed by a lending firm. Since it is not furnished yet, my lawyer told me to cancel the SPA but the lending firm did not agree.

Visit RERA ﬁrst to sort out the registration issue in Oqood as this is a prerequisite to any further action. Once the property is registered, meet with the lending company. Explain to them that you would like to terminate the finance agreement due to project delay. They will share with you the status of your liability. You then need to obtain compensation from the developer for the delay. Appoint a lawyer to determine if your contract has the proper compensation clause to support your case. If so, plot a course of action to receive what is rightfully yours under the contract. From the information you have provided, it appears that once the course of action is determined, you need to engage all parties and alert them of your intentions. It is then a case of you and your lawyer taking the necessary legal steps to resolve it.

I have an apartment that I have let through an agent. Despite numerous reminders, the agent has refused to pay me. What actions can I take?

The issue here is that you allowed the checks to be issued under the agent’s name. There is no reason to have allowed this and, unfortunately, the decision to do so has placed you in a vulnerable position.

I am not sure of the details of the contract that you have with your agent, but unless you have a proper property management agreement in place with a licensed property management firm, you should never allow the checks to be issued under the agent’s name.

Even if you have a property management agreement, you should stipulate that all cheques be issued in your favour and the property management firm is authorised to receive, issue receipts and bank the cheques into your account.

I am afraid your only option is to hire a legal consultant and go to court and file a legal case against the agent.

My husband and I bought an unfinished penthouse from a non-Emirati guy. Does he have to register it first so he can sell it?

Whatever happens, the penthouse must be registered first. Nothing can happen to affect the legal transfer of ownership of a property unless it is registered first. With regard to MOUs, they come in different formats with different content to suit the particular transaction at hand and each party’s wishes. If you want to ensure that it is legally binding, l suggest you hire a lawyer to draft it for you. Once the property is registered, you should visit the Dubai Land Department office or any of the trustee transfer offices and conduct the transfer of the property there. It appears to me that you have limited experience in concluding a property transaction such as this. My best advice for you is to hire a professional property consultant to take you through this journey in a professional and smooth manner.

I want to modify and extend my villa. What are the documents required and the procedures to be followed when it comes to making alterations?

You need to establish that the amendments do not threaten the structural integrity or safe habitation of your villa by you or by future owners should you decide to sell it one day. Therefore, you should prepare the architectural and MEP drawings for the proposed concept. These need to be viewed in conjunction with the architectural and MEP “as—built drawings” by different authorities and regulatory bodies to ensure the proposed designs are structurally sound and meet the building codes. You need to obtain NOCs from the owners association, zoning authorities, Civil Defence and even the project developer and DEWA. If the renovation is extensive, you may be required to have the work inspected by the Civil Defence and the Building Department. Your architect or contractor can arrange for all approvals on your behalf. Engage professionals who can achieve this for you.

I know that the market has slowed but is the slowdown being experienced across the board, or do some areas still look promising?

There is no doubt that the affordable segment in Dubai still shows a lot of promise. The properties In this segment will be in high demand as the emirate’s strong population continues to grow on the back of a strong recovery.

Properties located in non-prime areas continue to do very well. With the recovery in real estate going from strength to strength, we have witnessed the more affordable or secondary areas of the market continue to do well.

The demand for this type of affordable accommodation has been growing steadily as Dubai’s population swells in the run-up to the Expo and the demand for affordable housing increases.

Examples of affordable projects that are providing good rental returns and expected capital appreciation are the Skycourts and Queue Point located in Dubailand.

Other affordable residential destinations are the International Media Production Zone, International City and Discovery Gardens. These established communities offer a wide range of housing options for families and singles alike.

There is also the new project Town Square offering “value” apartments to newcomers in the city and families.

Gulf News Freehold – Ask the Agent

With the Dubai property market undergoing a correction, does it make sense to invest or wait until the market is showing signs of picking up?

While the market is cooling a little, there are advantages to be gained from purchasing now. The market will pick up again as the next five years are expected to see strong economic growth, but picking the exact timing is difficult. Start your property search immediately as a property investment requires the same approach regardless of the state of the market. Know what you can afford. If you have the cash, pay for it outright, but don’t be afraid to take a mortgage. Think about location, infrastructure, construction quality, developer reputation and building amenities. Consider the effectivity of the owners association, service charges and quality of maintenance services. Be purposeful, persistent, patient and pragmatic in your approach to make a sound investment decision.

There seems to be a lot of press and activity regarding the Expo 2020. How can I, as a landlord of four apartments, capitalise on any new opportunities?

Seek professional advice on to how to manage your portfolio. Many landlords across Dubai are bound to miss out on the revenue generating opportunities that the Expo will bring because of poor or non-existent planning.

A competent property manager will provide you with the best opportunity to maximise your financial gains. Do not make the mistake of leaving your planning too late. Know the current and likely future market conditions and events, risk factors that may enable or inhibit revenue growth, inflation and cost increases and a complete comprehension of financial modeling and the ever-developing area of industry policy and regulation. Depending on the size and complexity of your portfolio, make a five-year plan which covers pricing, cost management and maintenance schedules and several other considerations.

I have 14 apartments which are becoming too large to manage. I am considering hiring a property manager. What type of fees can I expect to pay?

It will vary by provider. It may be between 3% and 6% of the rental receipts; some will have an administrative fee. Understand what you expect from your property manager as the depth and breadth of their services vary greatly. You can negotiate a fee structure based on your actual requirements. Ask for referrals and make sure you follow up with some existing clients to check their efficiency and professionalism. A competent property manager will provide an assessment, strategy and activity plan designed to harness the financial potential of your property. You should have a rolling five-year activity plan which covers pricing, marketing and tenant management among others. A competent property manager will also provide you with review schedules regular financial reporting and many more.

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.

Now that the market has corrected, there are many good opportunities in completed assets. Given the rising value of finished properties, are there advantages of buying off-plan now?

Purchasing an off-plan property. can provide you with superior capital gains by the time of completion, provided you are buying at a discount to today’s finished inventory and the market is expected to strengthen up to the completion date for the particular property that you are considering. This, of course, will depend on an estimation of economic growth, population expansion, the number of competing projects in the pipeline and the eventual industry inventory position.

Be smart about the product that you buy and try to avail yourself of a payment plan.

Look for certain property types complete with amenities and facilities in locations you believe will be keenly sought in the future. Do not assume that all property types in all locations will improve their values homogeneously. No market works this way. Also check the latest Metro route planning.

Deal with reputable developers only and check the status of the escrow account of the development. Escrow accounts were introduced under Law No. 8 whereby all property developers in Dubai must be registered with RERA and hold an escrow account which protects the funds of the buyers and ensures safety of the purchase.

Gulf News Freehold – Ask The Agent

I own an apartment in Dubai. I got a new tenant and increased its rent but I cannot raise it further according to the rental index. The market seems to have peaked. Should I sell it?

Yes, there is price correction, but we are far removed from experiencing a long-term trend. Looking over the next five years, we expect the market to achieve an average price growth of around 7%. Bear in mind that we are talking averages here and popular areas have a habit of outperforming the average. It really comes down to alternatives. If you have identified an alternative investment to give you a better income stream and capital return than what you expect to receive in five years from your apartment, then the right decision may be to sell. However, if you have not, hold on to the property. You will continue to receive at least a 5-7% net rental return and achieve around 7% per annum capital growth in the future.

Why is it that the rents of not so new apartments in some areas remain high? The rates in these areas did not fall as much when recession struck and when rents increased, their rents also increased fast. How come?

The value of a particular location is usually derived from the levels of pleasure, lifestyle convenience, security, harmony, future economic value or even status that can be derived from the property. Whether it is a spectacular view (sea, lake and others) or proximity to public transport, business districts, entertainment, dining, schools or hospitals, the perceived benefits that a location may bring to a prospective tenant can account for up to 90%, Areas close to the beach and entertainment venues as well as properties located close to/within. Downtown Dubai or the business district will command a location premium. Most potential tenants consider a view as a key factor for their house to be enjoyed.

I think that l am paying excessive service charges. Getting access to information that might prove my suspicions is difficult. Is my OA obliged to provide me with information?

Attending owners association (OA) meetings and requesting details on the service charges would be the logical place to start and they are obliged to address your query. Remember, the purpose of the OA is to manage, operate and maintain the common areas, virtually all of the “owner shared” elements of the building. They do this by appointing contractors with the expertise to carry out the required tasks and set a service charge that all owners must pay to cover the cost of the contractor services. The OA is a “not for profit” business entity in its own right with the powers to operate a bank account, sue (or be sued), purchase, own and dispose of assets and enter legally binding agreements. You can request and view the financial statements of the association to ensure the charges you are paying are justified and correct.

Reports are saying that the market has slowed and prices are correcting. Is it a good time to buy?

Picking the exact timing is difficult. Start your property search immediately as this kind of investment requires the same approach regardless of the state of the market. Know what you can afford. If you have the cash, pay for it outright, but you can always take a mortgage. Think carefully about location, surrounding infrastructure, construction quality, developer reputation and building amenities. If you have close access to the Metro, even better. Also consider the effectivity of the OA, service charges and the quality of maintenance services as these affect the long-term value of your investment. Be purposeful, persistent, patient and pragmatic in your approach and you are well on the way to making a very sound investment decision. However, if you decide to rent, there are also great deals. With robust tenant protection legislation and a rental index to limit your exposure to increases, your rights will be recognised.

The property market seems to swing in favour of buyers and investors. Where do you believe the best investment opportunities are likely to appear?

Definitely in, the affordable segment of the market. We are encouraging clients to invest in this segment as it has great opportunities.

Excellent examples, of high performing yet affordable developments are the Skycourts and Queue Point communities in Dubailand. These have seen excellent capital growth.

Demand for this type of affordable housing will continue to grow and we expect other developments that are located close to the two communities to benefit as well, especially as Dubai’s population swells in the run-up to the Expo and the demand for affordable housing increases.

A smart move would be to invest in an apartment and retain ownership for at least five years as I am confident that you will benefit from superior capital growth and enjoy very healthy net annual rental return in the meantime.

In addition, consider looking at the apartments in Sarah Ajmal and Windsor Residence. They are all expected to perform very well as the demand for affordable properties continues to grow.

Of course, there are the established areas such as Remraam, International City, Discovery Gardens and International Media Production Zone, while the Town Square project is one to watch out for.