Gulf news

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
FREEHOLD

FACTORS THAT IMPACT THE REAL ESTATE SECTOR

By: Mohanad Alwadiya
Published: Gulf News Freehold

With the advent of globalization and the exponential rise of cross border capital flows, the number of factors that affect local economies and the industries that operate within those economies has increased dramatically in both number and complexity. Here are some that we will be considering as we advise our clients in 2017.

Oil. Despite the amount of diversification that has occurred in the Dubai economy and the small proportion of Dubai’s GDP that oil represents, the price of oil still affects liquidity levels, oil dependent economy’s performance and overall investor confidence. There is no doubt that that maintaining oil at or above the $50 / barrel for the duration of 2017 will assist in creating market stability.

Currency rates. With anywhere between 40% and 50% of investment in Dubai property coming from investors who usually deal in currencies that are not pegged to the US dollar, any strengthening of the US dollar makes it more difficult to invest in Dubai for those investors. A recent example is the devaluation of the Russian ruble which resulted in Russian investment declining significantly in Dubai’s property market. The USD is likely to strengthen in 2017 as we see the US Federal Reserve continue to raise interest rates and the effect of Trumpenomics and “America First” protectionist policies begin to take effect.

Political instability. Almost omnipresent for well over a decade, the level of political instability in the world today seems unprecedented. From Middle East conflicts, Chinese actions in the South China sea, North Korean nuclear ambitions, Brexit and even significant dissatisfaction with the US election result and subsequent presidential performance, the world is a very unsettled place which leads to investor nervousness. There are no signs that political instability is going to ease any time soon.

Demand and supply. As always, economic fundamental will always play a role in any industry performance. 2017 will see a continuation of balancing of the demand / supply situation in the market as the recent pivot towards affordable properties makes up a greater proportion of deliveries and the demand generated by the rapidly approaching 2020 Global Expo accelerates.

Legal framework. The legal framework that has been developed for the property industry in Dubai has is both comprehensive and effective in protecting the rights of tenants and investors and holding developers to account. Developments will continue in 2017 further increasing the already high levels of confidence among investors with regards to their legal protection and risk minimization.

Mortgage market/ regulations. Historically, mortgages have represented no more than 30%-35% of property sales in the emirate. This ratio has now climbed to well over 45% during 2016 and, in some months, levels of 60+% were achieved. This is great news for several reasons.

First, this trend highlights both confidence of lenders and consumers, mostly owner occupiers, in the market. The second reason why this is such good news is because we are witnessing, in real time, the market adapting to legislative changes that were made in early 2014. There is no doubt that the implementation of the mortgage caps earlier in 2014 had affected the demand for many first home buyers who were relying on a mortgage to acquire their dream home

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

Confidence levels/ buyer’s sentiment. Confidence levels of investors globally have been shaken by the global events of the past few years. The levels of uncertainty surrounding economic policies, geo-political turmoil and social discontent in many countries around the world has created an environment of indecision amongst investors. Nevertheless, the property industry has weathered this quite well and showed a maturity and flexibility that wasn’t evident earlier in the decade. Sure, prices have declined since 2014, but this has been more because of a much-needed market correction. While global events have had an effect, the market’s resilience has been impressive.

Performance of other investment instruments (stock markets, gold, equities, bonds). There is a global competition for a greater share of the capital pie. Capital will always follow the best risk adjusted returns and movements can be swift and of great magnitude. They can be so dramatic that some governments will restrict capital flows. For example, China recently announced new restrictions on capital flows out of the country. Observations from property industry pundits all around the globe suggest the new restrictions are already putting the brakes on what has been the biggest global real estate accumulation by any nationality in modern times. While Chinese demand will continue to benefit many markets those who had not previously established off-shore assets will find it significantly more difficult to invest beyond Chinese borders until the restrictions are raised.

Infrastructure development / government spending. The ongoing commitment to economic development and the associated infrastructural spending has been well-chronicled. The continuing preparations for the 2020 World Expo will help the local economy achieve around 3.5% GDP growth for the year which is very healthy by global standards.

Taxes and transaction costs (registration and transfer fees, commissions, NOC fees) The costs of transacting in real estate in Dubai compare well globally and no new costs or fees are expected to be introduced in 2017. Somewhat conversely, we expect the slew of offers in the market place designed to increase affordability to continue. Great news for first home buyers and investors.

Annual service charges and overall cost of ownership (utility fees, maintenance, insurance, PM costs) Similarly, the costs of owning and operating property is expected to remain stable and should not affect buyer’s decisions other than normal calculations regarding yields, cashflow and asset protection.

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Commercial property investment

The majority of my clients are comfortable with investing in residential property because most have rented or bought a property for their own use and therefore understand what that experience entails. However, very few have actually had a similar experience with commercial property and, therefore are a little less confident in investing in this potentially lucrative segment of the market.

So, why consider investing in commercial property?

Commercial property can add diversification to a property portfolio. Segments within the Real Estate market rarely move in tandem and a mixture of residential and commercial property can make an overall portfolio more resilient to inevitable market cycles.

All things being equal, commercial properties generally produce an ROI at least double that of residential properties. This is mainly due to lower per sq. ft.capital cost but also reflects the higher levels of risk associated with owning commercial property.

Managing tenants in a commercial property is also more straightforward. You will have a business-to-business relationship with your tenant and many of the emotional issues which can complicate residential leasing arrangements won’t exist. It’s easier to keep interactions professional and focused and relationships are built over time with the opportunity to attract a ‘blue chip’ tenant and are likely to rent your property for a long period of time and less likely to default on rental payments. In many cases, commercial tenants and property owner interests are aligned. The tenant wants an efficient operation which presents a favorable impression to his customers, business associates or peers and, in this way, is more likely to assist the owner maintain or even improve the property.

Establishing a true value of the investment is often easier with commercial property. Reviewing the current owners’ income statement and existing lease details will provide a good indication of the likely future cash-flows and help to establish an accurate valuation. Residential properties are often subject to more emotional pricing or developer inefficiency and cost recovery considerations.

Lease variations abound with commercial properties. The requirements of a tenant operating a high turnover major regional distribution and logistics center for non-perishable goods will be vastly different of those of a tenant who requires refrigerated goods storage to supply local retail outlets in shopping malls. In addition to lease rates and periods, negotiations can include such items as maintenance, implementation of storage and logistical systems, provision of office fit-outs, insurance, lease to buy provisions and options … the list goes on. The variations are countless.
However, there are some possible downsides that the investor should consider.

Let’s use a warehouse as an example. As most commercial leases are of a duration exceeding 2 years, with many being of 5 years duration with options for an additional term of 5 years, it could take some time to find a new tenant for the warehouse. Additionally, your current tenant may vacate due to tough economic conditions. Residential property can be resilient when it comes to economic factors over the long term and finding new tenants is not as difficult.

As the lease for each commercial facility can be negotiated with flexibility only limited by law, owning a portfolio with numerous commercial properties can be time consuming and complicated. You will need professional help if just to handle issues such as maintenance and emergencies. Remember, your clients are in the business to make money and will be relying upon you to address any issues that arise with your property immediately. They, like you, do not want to forgo any revenues or incur any costs because of a problem with the property or premises that you provide.

Purchasing a commercial property of a size that can generate significant cash flow will typically require more capital up front than a residential investment. Also, as the scale or size of the premises can be huge, unexpected repairs or major maintenance items can also be very expensive. This requires careful provisioning for expenses and emergencies when calculating lease rates and free cash-flows for re-investment.

There is a greater array of physical and safety risks associated with commercial properties. Warehouses, for example, are often frequented by trucks, forklifts or other heavy machinery which means damage can be substantial from accidents. Having proper insurance is a must, not only for damage to premises and systems, but also in the event of personal injury or death where you, as the owner, can be held liable. Remember, your investment is actually operating as a commercial venture and can receive high volumes of people traffic.

As usual, greater returns will attract greater risks, however, as part of an overall balanced investment portfolio, there is no doubt that commercial space can be very lucrative indeed.

Published: Gulf News Freehold
Dated: 26-March-2017

Why buy rather than rent this year?

I am predicting that over 70% of the people who are reading this article are concerned about ensuring their financial security by building equity or “net worth”.

I am also predicting that every person reading this article understands that owning property allows will allow them to achieve their financial security goals by building an asset base that will serve them and their families’ well into the future.

For those who don’t act upon that knowledge, the opportunities that will emerge in 2017 will go begging and are bound to be viewed in retrospect with some regret by the clear majority of Real Estate investors because, put simply, only a few will open their eyes to the opportunities that 2017 will offer. History has shown us time and again, the majority will be too late to make the most of the opportunities on offer today. They will wait, pontificate and procrastinate and, later ruminate on how they missed the boat.

If you are living in Dubai now, you are uniquely placed to take advantage of a variety of positive developments.

For a start, the market is offering the best value for some time. A slew of affordable properties that have been launched over the past 2 years and there will be more launched in 2017. This structural shift in the market has been a boon for first home buyers and affordability, or a lack thereof, as a reason to continue to rent is disappearing fast. Whether it’s an affordable studio or a luxury villa, there are great value opportunities in every segment of the market supported by the most affordable payment plans seen in years.

Also, the value of your property will be increasing as the US dollar continues to strengthen in 2017. The US Federal reserve is 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.

And then there are mortgages themselves … although interest rates will be increasing going forward, they will remain at very affordable levels for quite some time. Now is the time to do some financial planning to determine how you can obtain that most desirable of assets, the family home.

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 3.4 million people by 2020, a 7% annual increase from today’s population of 2.25 million.

While the price of oil is a big issue for the region’s economies, with oil representing only about 4% of Dubai’s GDP, the effect of the decline in oil prices is not as drastic as some may think. Infrastructural spending continues unabated with the total budget outlay of Dh 48.7 billion for 2017 being marginally up from Dh 48.55 billion allocated to 2016. Looking at the 5-year budget plan of Dh 248 billion, the average annual spending of Dh49.6 billion is higher by 6.5 per cent than Dh 46.6 billion spent during 2014 to 2016 inclusive. This is significant as it demonstrates an unwavering commitment to economic and societal development.

Dubai’s economy is being driven by fundamentals such as tourism and trade and a slew of new projects to grow these important revenue generating economic segments. Predicted by Mastercard’s Global Destination Cities Index to be the 4th most popular destination in the world by year end, Dubai will have welcomed almost 16 million overnight visitors in the by the close of 2016. This will represent a 12% increase over 2015 and continue a trend of approximately 10% per annum since 2010.

And those visitor number will seem paltry once the 2020 Expo kicks off. And the 277,000 extra jobs that are generated to ensure the estimated 20 million visitors to the Expo see Dubai in its most favorable light cannot be underrated in terms generating significant demand for Real Estate assets. Hosting the World Expo will provide additional impetus for the industry to enjoy continued growth and the predictable surge in demand for accommodation and commercial space of all types is sure to have a significant effect on property values.

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.

2017 will be remembered as a year of the astute investor. When opportunity knocks, be ready to welcome and embrace it.

Published: Gulf News Freehold
Dated: 19-March-2017

REITS… preferred by some investors

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.

So, while there are advantages for the government 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.

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.

The race for the sky is not over in Dubai

By Mohanad Alwadiya
Published in Gulf News Freehold

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

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

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

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

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

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

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

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

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

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

Expert Eye

Purchasing a home? Plan carefully

Eliminate any surprises by conducting careful planning and due diligence

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

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

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

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

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

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

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

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

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

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

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

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.