Local and Federal Authorities Need to Form Much Closer Ties

The UAE real estate sector must have more co-ordination between regulatory bodies in different emirates and the proposed federal real estate regulatory body to tackle various issues concerning the sector, analysts said.

“What the government needs to do is have real estate regulatory bodies of each emirate to liaise with one central regulatory body and the federal immigration department to oversee real estate issues such as visa regulations,” said Chet Riley, Vice-President, Equities Real Estate Analyst, Nomura International.

“Three years ago, people were trying to encourage buyers through visa offers. When the market got overheated, visa rules were tightened. Today there is a lot of confusion over the rules and regulations in the real estate sector regarding visas.”

He said: “A central regulatory body for the oversight of issues such as immigration is probably required to ensure the consistent application of immigration law and prevent forms of regulatory arbitrage related to real estate.

“There are aspects of regulations that we think should remain at the emirate level, which could include dispute resolutions and arbitration, planning consents and associated municipality issues such as infrastructural requirements.”

Emirates Business reported yesterday that the Ajman Real Estate Regulatory Agency (Arra) had submitted a proposal to federal authorities to overhaul current property visa regulations. Arra wants to remove property values, fixed incomes or compulsory exits as criteria for granting or renewing six-month residency visas. 

Ajman’s regulatory body put in a five-point submission and said it should be possible to renew visas every six months for up to three years without the need to leave the country.

Parvees Gafur, Executive Vice-President – Sales, Gowealthy real estate, said: “Co-ordinated efforts are needed between real estate regulatory bodies in various emirates of the country and a central regulatory body that will work in close connection with the immigration department of the country to tackle visa issues of real estate investors.”

“We would even recommend that the immigration department allocate representative resources to each of the real estate regulatory bodies to provide an integrated service package and assist investors with their visa queries promptly,” said Gafur.

He said: “At an operational level, a decentralised approach with individual real estate bodies within each emirate will be far more efficient and effective to govern real estate regulations as each emirate has different challenges, visions and focus. 

“However, a central authority established to monitor the progress of individual bodies will help in guiding various factions towards overall positioning of the emirate to occupy a strategic place within the global economic platform. 

“Such an entity can facilitate best practices and federal-local interactions that can have a positive influence on shaping the overall identity of the emirate.”

Farina Ahmed, CEO, BSEL Infrastructure, an Ajman developer, said: “Any co-ordinated effort taken to bridge gaps in the real estate sector is a welcome move. I believe there should be co-ordinated efforts among different emirates’ regulatory bodies and one central body.” 

Real estate analysts in the UAE have welcomed Arra’s initiative to submit a proposal to the federal government.

Mohanad Alwadiya, Managing Director, Harbor Real Estate, said: “The Arra initiative is a positive move towards attracting foreign investment and boosting the level of confidence among all the relevant stakeholders in the property industry.”

Iseeb Rehman, Managing Director, Sherwoods Independent Property Consultants, said: “The proposal is a positive move. Any effort taken to resolve real estate issues by real estate regulatory bodies is a step in the right direction.”

“In Ajman the real estate sector has been seeing some swift and timely action. The feedback from clients and developers is that Arra is resolving issues quickly and trying to provide clarity.

“Conditions for residing in the UAE is a federal issue, but they need to consider current market climate versus current income situation. Regulators need to be realistic and at the same time appealing to people looking to come to the UAE. If conditions become too stringent it will be harder for people to comply.”

Riley said: “Arra and Rera [Dubai Real Estate Regulatory Authority] are being relatively proactive in the area of co-ordination, which is a positive step and it is very important to continue dialogues among the six emirates. Under the present circumstances, Arra’s initiative, though in the initial stages, is a step in the right direction. We welcome the initiative to establish visa regulations and think this should be set at a federal level in conjunction with immigration authorities to remove any confusion. Currently, the major challenge faced by the region is one of customer confidence, be it investors, end users or even corporate entities.”

“It would, however, be difficult to have a minimum price level set across the emirates given the disparity of pricing in each area. The key issue that we see is the ability of the applicant to support themselves and their dependants, rather than the value of the property, if they were looking to reside in the country,” said Riley.

“Ajman is a different market from Dubai. Imposing limits across the board will be difficult in all the emirates,” he said.

Gafur said: “The proposal is a first step towards addressing visa issues. If implemented, steps such as these will give further impetus to a larger segment of investors and business entities that have long-term business plans in the region.”

“The minimum criteria for property investment should be looked into very closely and the medium- to long-term impacts of such steps have to be assessed using situational planning and forecasting studies. Investment strata-led visa restrictions, if planned efficiently, could have a positive influence in the market by ensuring the right kind of investments and investors are at play over substantial and optimum time periods.”

The BSEL CEO said: “The six-month visa regulation is not enough for an investor in Ajman. Residency permit should be for three years. With six months’ visa tenure, investors lose faith in the real estate market in Ajman.”

Alwadiya said the property market recovery in the UAE needs to be supported by solid economic drivers and regulations. “The visa issue is one that has placed a lot of pressure on recently retrenched expatriates when trying to find alternative employment or heading home. The Department of Naturalisation and Residency has implemented a law which will grant six-month renewable visa to those who invest in freehold property in the UAE.”

“While this is a positive move to assure potential investors, the six-month period is considered to be too limited a duration to be meaningful to many investors. It is thought the federal law should match the general residency law whereby investors will be eligible for a three-year residency visa provided they visited the emirate at least once every six months. This approach will appear to be far more appealing and enticing for investors,” said Alwadiya.

Gafur said: “Confidence-building measures at the federal and regulatory level is paramount in bringing back faith to the market and spur medium- to long-term investments into the country.”

“Fundamentally, the long-term success of an economy is influenced primarily by the potential of the economy to s
ustain itself on the basis of its inherent resources and the faith of internal and external stakeholders. 

“And this faith is determined by the strength of relevant regulatory systems that shape, manage and control various segments of industry that spur the economy, such as legal systems, banking and financial entities and industry bodies.”

Gafur said with substantially reduced market prices for properties and prevailing investor sentiment as the background, a planned and phased overhaul of visa regulations is critical to the long-term success of the emirate. 

“Visa regulation changes can have immediate and substantial effects on the long-term business and operational sentiment of the investing public and should be approached with extreme care. Ajman has come a long way in stamping its brand of investment potential, especially within the mid-segment of investors from South Asia and the United Kingdom. Unfortunately, this growth has been fraught with teething issues, compounded by the present economic downturn.

“The immediate elements that need to be looked into would be infrastructure – power requirements, for example – and further clarity in regulatory and legal frameworks, especially within the real estate sector,” he said.

UAE Banks in Position to start lending soon Reveals Harbor Report

أآد السيد مهند الوادية المدير الإداري لشرآة هاربور للوساطة العقارية بأن البنوك
الإماراتية في وضع قوي يمكنها خلال الفترة الحالية من استئناف عمليات الإقراضفي
المجال العقاري حسب تقرير هاربور الفصلي الذي سيصدر في نهاية الشهر الحالي،
حيث ذآر السيد مهند رئيس تحرير التقرير بأن البنوك الإماراتية تعاملت مع الأزمة
الإقتصادية العالمية بشكل يعزز رؤوس أموالها من خلال التدابير التي اتخذتها بقيادة
البنك المرآزي، فوصلت قيمة رؤوس أموال البنوك إلى 200 مليار درهما خلال شهر
مايو الماضي.

وقال السيد الوادية “إن أهم هذه التدابير التي طبقتها البنوك هي تقديم أسعار فائدة أعلى
للمدخرين واتخاذ نهج متحفظ على عمليات الإقراض، حيث أن هذه الإجراءات وبلا شك
ستساهم بشكل آبير في تأمين القطاع المصرفي بالإمارات من المخاطر المحتملة وبالتالي يساعد دولة الإمارات على
الإنتعاش من الأزمة الإقتصادية”

ويتطرق تقرير هاربور الفصلي إلى الأسباب التي أدت إلى انخفاض حاد في السيولة في الأسواق إضافة إلى طرحه
لدلائل تفيد بعودتها للتدفق بشكل بطيء، آما يؤآد التقرير على أهمية اتباع قانون معلومات الإئتمان ويسلط الضوء
على حقيقة أن البنوك الإماراتية حاليا مازالت متشددة في اعتمادها لمعاييرإدارة المخاطر لديها .

وذآر مهند الوادية في تقرير هاربور الفصلي بأنه على الرغم من ظهور علامات بدء تدفق السيولة إلى أسواق
العقارات الإماراتية والعالمية إلا أن عدداً آبيراً من المستثمرين العقاريين الحاليين والمستقبليين يشعرون بالإحباط
نتيجة لبطء هذا التدفق. فليس فقط انخفض سعر الفائدة المشترك بين بنوك دولة الإمارات العربية المتحدة
“إيبور”مقارنة بأسعار الذروة التي بلغت 4.78 % في تشرين الثاني / نوفمبر من العام 2008 مقابل 2.46 % فقط
في الربع الثاني من العام الحالي 2009 ، ولكن العديد من البنوك مازالت تحافظ نوعا ما على مستويات القروض
المنخفضة نسبيا مقابل الإيداعات المصرفية.

ويتابع التقرير، بالرغم من وجود قابلية ضئيلة للمخاطرة فإن السيولة ستتدفق في القريب العاجل بالأسواق وأنه يمكن
لوآالة ائتمان منظمة الحد من المخاطر المرتبطة بعمليات القروض ومساعدة الدولة على الإنتعاش.
” ينظر إلى تطبيق قانون معلومات الإئتمان على أنه خطوة إيجابية نحو الشفافية والحد من المخاطر التي تواجهها
البنوك وسيخلق هذا القانون إطاراً من الحقوق والإلتزامات لمقدمي البيانات ومستخدمي المعلومات والأفراد على حد
سواء”. اضاف السيد مهند الوادية

وأوضح بأن هذا القانون له آثار إيجابية بارزة تترتب عليه وخاصة من خلال مبدأ الشفافية الذي سيتيح الفرصة
للمصارف بأن تكون سريعة في اتخاذ قراراتها والتخفيف من حدة المخاطر المالية والتقليل من النظام البيروقراطي
آما أنه يعد خطوة إيجابية نحو نضج واستقرار وآفاءة القطاع المالي، مما سيؤدي مرة أخرى إلى ازدهار قطاع
العقارات في الدولة .

سيكون تقرير هاربور الفصلي متاحاً على شبكة الإنترنت اعتباراً من نهاية شهر تموز/يوليو الحالي ويمكن تحميله
www.harbordubai.com/harborreport : من خلال موقع شرآة هاربور للوساطة العقارية

Ask the experts

Every week, we invite you to have your property questions answered by an expert. This week, Mohanad Alwadiya* tackles the task.

Q.. With banks willing to offer financing for apartments, I’m thinking of buying somewhere like The Residence in Downtown Burj Dubai. Do you think this a good ove? Can I expect a decent appreciation over, say, a five year period?

A.. I would say it’s definitely a good move. The Residence, Downtown Burj Dubai represents fantastic value at this time and with the market approaching the ‘bottom’,
the opportunity to make solid capital gains, particularly with a five-year investment horizon is very strong. In addition, with the Burj Dubai approaching completion, your
capital gain in the short-term will be accelerated. Remember that your future capital gain, regardless of property, will be heavily influenced by the decisions you make today. The fundamentals still apply and considerations such as the view, location, fit and finish, configuration and overall quality will have a big bearing on your ability to command a premium when you decide to resell in the future.

Q.. I’m thinking of buying an apartment in a reasonably priced new development, maybe Discovery Gardens. I’m just wondering if there are any hidden charges should I be aware of?

A.. First of all, you need to consider the charges associated with the transaction itself. If you purchase an apartment through a real estate agent, you will normally need to pay a 2% agency commission at the time of purchase. In addition to this amount, transfer fees of 2% will be payable to the Land Department and registration fees of Dh5,000 will apply. If you are financing your purchase, there are additional charges payable to your finance provider. These will vary between 1% and 1.5% of the total loan amount. Once you have moved into your new Discovery Gardens apartment, you will then need to pay an annual maintenance fee, which is currently about Dh30/ft², and includes your central cooling charges. However, this amount is currently under review and is expected to reduce significantly according to April 2009 press reports. Additionally, a further reduction is expected once the Owners Association is formed in accordance with the new strata title legislation. Alhough they’re not really‘hidden charges’, don’t forget that you will need to budget for property and contents insurance and, unless you want to live in the dark, you will need to account for DEWA (Dubai Electricity and Water Authority) expenses as well.

Q.. I’ve been told prime investment properties such as villas on Palm Jumeirah have suddenly become difficult to buy, as prices have dropped and sellers are withdrawing their properties from the market. Do you think prices have bottomed out there?

A.. By and large, yes. I think prices for villas have reached a bottom on Palm Jumeirah and it is extremely difficult to breach this floor.