Ask The Agent

Mohanad Alwadiya

CEO, Harbor Real Estate

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

Your landlord needs to give you a notice of increase at least 90 days prior to contract expiry. You should familiarise yourself with Law No. 43 which introduced the following restrictions (summarized) with regard to legally allowable rental increases: There should not be any rent increase if the rent for the real estate alit is no more than 10 percent below the average rent that a similar property commands within a neighborhood; The annual rent increases can range from 5 up to 20 percent according to how much the current rent s less than the market average, The market average rates are to be determined by the RERA rental index. The implementation of Law No. 43 is necessary to safeguard consumer interest, the overall industry and the economy at large from unjustifiable rental increases on existing rental contracts.

What documents do I need to provide so I can arrange for an agency to market and sell my villa? Give a proof of identity, usually a passport and/or Emirates ID, and a copy of the original sales and purchase agreement to be verified with the Dubai Land Department (DLD). If the property is leased, provide details of the lease agreement including the status of outstanding payments and any information pertaining to the history with the tenant. Also, provide the status of payments of service and owners association charges. The agency will sit and consult with you as to what your requirements are and prepare for you a letter of engagement which will contain the details of what you require from the agency and what fees have been mutually agreed upon. If you are located overseas and like an agency to represent you, you need to provide a power of attorney detailing the extent to which you would like the agency’s representation in the various facets of marketing and selling your property.

What property features should I prioritise when 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 to make it stand out from the rest and be highly marketable. But 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 paced 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, duality and current physical condition, whether or not it is being handled by a professional property management firm, or fully paid or financed. Also, make sure you mention any improvements done, and if it has special features such as a nice view, balcony, closed kitchen or extra storage.

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

Question of the Week

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

Whether you are buying ready or off-plan property, market fundamentals still apply. Make sure that an off-plan purchase is consistent with your property portfolio strategy. Location can never be disregarded. Considerations regarding how close the project is to commercial, educational and leisure hubs, medical and health facilities, public infrastructure, popular and established communities, and the manifold views one can enjoy all add up to the desirability of a property’s location. The asset type is also important. What type of asset will be in demand in the future: affordable apartments, townhouses or 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 can ensure you limit your capital exposure before completion. Also, you need to be conversant with financial concepts such as net present value (NPV) and internal rate of return (IRR) to guide you in the decision-making process when assessing your alternatives.

reality_check

Reality Check

 BY CLAUDINE COLETTI
Forbes Middle East
September 2016 Edition

Mohanad Alwadiya is a man of many talents. As the host of MEMAAR on Dubai TV, he introduces VIPs to their dream homes, and as the CEO of Harbor Real Estate he manages a portfolio worth around $4 billion. Here he talks about why he loves his industry and what the future holds.

What is it about real estate that inspires such passion in you?

I see it as fundamental and critical to the existence and success of everyone and everything—individuals, families, businesses and whole economies. Real estate decisions are some of the biggest we will ever make. They affect our families, our employees, our cus­tomers, our shareholders, our citizens, our success, the way that people view us and even the way we view and express ourselves.

These decisions are quite often the determinants of whether dreams and aspirations are realized. Being in this business means we are able to play an important part in enabling people or organizations to achieve those dreams and aspirations, whatever they may be.

What motivated you to start the show?

MEMAAR was the brainchild of Dubai Channels Network. There was not a single property reality TV show in the Middle East, where structural real estate developments are an everyday occurrence. It has grown a lot since it first aired in May 2015. Our audience com­prises millions of viewers from all across the GCC and beyond. When it comes to our guests, we always try to select real clients from different backgrounds and objectives to offer a different en­riching perspective.

What’s the most expensive property you’ve found? And which has been the most inspiring story?

The most expensive property ever chosen was a luxury villa at Emirates Hills, which sold at AED 48.8 million. I’ve found all the episodes inspiring but if I had to short list one or two it would be when media entrepreneur Ali Mroueh went on a quest for a home to surprise his beloved mother. Or the truly inspiring story of Mr. Mahmoud Al Burai, Managing Director at Dubai Land Department, who entrusted me to help him identify the best income-producing investment asset to secure the future of his daughters.

What are your top pieces of advice for GCC and international investors for 2016/17?

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 within a larger diversified portfolio. The more skillful you are at conceptual­izing, the greater your likelihood of generating successful strategies to grow your wealth.

Set your objectives carefully

Financial objectives. These should be reviewed annually and include elements such as total return, capital appreciation, revenue streams, net results and eventual divestment values, all wrapped up in an optimal time frame.

Think long term for your greatest success

Those who have had the greatest success can think long term, make rational, well researched and carefully thought out decisions with the end objectives in mind, and understand that the real estate in­dustry globally will go through cycles of growth and contraction.

Know your stuff

Investing in property is about recognizing and capitalizing on op­portunities that support your objectives. To do this, you must have some knowledge about the industry. This doesn’t mean you have to be an expert, but you need to be able to communicate intelligently with the experts.

Plan to eliminate risks

Plan your finances, cash flows, capital requirements, debt levels, etc, very carefully. Always plan for the worst and hope for the best.

How is the sector changing?

Real estate markets are feeling the effects of a general decline in glob­al economic growth. The world is still, after some eight years, trying to shake off the effects of the global financial crisis and while some economies have fared reasonably, others are still struggling. The re­sulting effect on consumer and investor confidence is quite negative. Yet the market is still developing. It is not stagnant. It is always a very promising sign when an industry demonstrates the flexibility and resilience to undertake a structural shift when market requirements change or develop.

News that the total value of real estate transactions in Dubai, at AED113 billion in the first half of 2016, represented a decline of around 12% from the first six months of 2015 may have disappointed some, but it did not tell the whole story. This figure was generated by 28,251 transactions, almost 25% higher than the same period last year, which is very good news. It demonstrates a market that is grow­ing in health, because it can provide more affordable solutions to a broader spectrum of investors.

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.

Business ethics in real estate

Upholding business ethics in real estate

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

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

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

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

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

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

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

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

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

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

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

Big_shift_to_affordability

Big shift to affordability – Property Weekly

Mohanad Alwadiya is the CEO of Harbor Real Estate, senior advisor and instructor at the Dubai Real Estate Institute – the official training and certification arm of the Dubai Land Department, and presenter/content producer of Memaar – the first-ever property reality TV program in the Middle East. He is also among the Top 10 best performing brokers in Dubai, and is considered one of the most celebrated and influential industry commentators today.

COMPANY

Tell us about your company.

Harbor Real Estate is an integrated real estate service provider offering holistic real estate services to individual and institutional clients

Harbor represents the new breed of passionate real estate professionals that develop innovative strategies derived from conclusions based on rigorous fact-based analyses tailored to deliver tangible results through the adoption and implementation of global best practices

With decades of experience, the Harbor team is truly exceptional, and has intensified its focus on what has delivered success to Harbor since its inception: absolute client satisfaction

Having built a team that is passionate while pragmatic,, creative while logical, and aggressive while accountable, the strength of Harbor Real Estate lies in its ability to create innovative solutions, and to work in partnership with clients as a trusted advisor and reliable executor of wealth-generating strategies.

Harbor aims to consistently set new industry benchmarks. With ISO 9001:2008 certification for its operational guidelines and processes, Harbor continually strives to set the highest standards of customer service

In 2015, Harbor Real Estate won the title of “Best Property Management Firm” in the UAE, and this was a great testament to our aspirations of being the leading property management firm focused on developing and growing institutional real estate funds. Our current portfolio is worth AED 14.8B.

What’s the best property deal you have had in the past one year?

Obtaining the exclusive property management rights for Emaar Business Park Building Nos. 2 & 4 which I have always considered as among the most iconic corporate addresses in Dubai.

How many new agents has your firm hired in the past year?

Our brokerage division is always growing, and we have hired over 20 new brokers in the last 12 months. We always have room for and actively seek experienced agents and property managers.

INDUSTRY

What is your outlook for the UAE property sector for 2016?

Dubai real estate has been undergoing a correction for some time now. We feel that the decline in values associated with that correction has halted or virtually halted in all market segments. In Q1 of 2016, we have already witnessed significant growth in investor activity and strong land sales. Both are leading indicators that the market is heading into its next cyclical phase. We at Harbor believe that by the end of 2016, the market will have entered its next phase of growth which is expected to accelerate as we draw ever closer to the Dubai World Expo in 2020.

What types of property are selling most in the market under the current circumstances?

The market has definitely shifted towards the affordable segment. We have witnessed a strong increase in demand for affordable properties from both end-users and investors as the value story is compelling. Gross rental yields of between 8% and 10% are still achievable in some areas.

What are some of the challenges unique to this market?

There are a few major challenges which are totally unique to the Dubai market. Real estate markets globally are feeling the effects of a general decline in global economic growth, and the ongoing issues associated with geo-political upheavals which exist on virtually every continent. The world is still, after some 8 years, trying to shake off the effects of the global financial crisis, and while some economies such as the US have fared reasonably, other major economies in Europe and Asia are still struggling with systemic issues. The resulting headlines affect consumer and investor confidence negatively, and we all know that confidence is a key prerequisite for growth in the industry.

What are the biggest mistakes you see buyers making when purchasing in the market that offers them good entry points such as the present Dubai property sector?

Being impatient and diverting from the 5 fundamentals of sound real estate investing.

1: Know why you want to invest in / own a property.

2: Set your objectives carefully as success in property investment or ownership can only be attained when (and if) those objectives of the investor have been realized. It’s as simple as that.

3: Think long term for your greatest success and happiness.

4:  Know your stuff… engage others to help you, but do be prepared to assess their performance.

5: Eliminate risks by planning conservatively.

ADVICE

What would you advise people who want to buy? What would you advise people who want to sell?

For buyers, the affordable segment is still providing very good value.

For sellers… it’s a buyer’s market, so don’t sell unless you have a compelling reason to do so. Selling because of a market correction which is part of a normal cycle is both short-sighted and wasteful.

What is your advice to agents who are struggling to close deals in the current market? What is your success strategy to lock in deals even in difficult times?

  • Be realistic when valuing a property; no false promises just to get the business
  • Hold firm to realistic values
  • Carefully assess the financial impact of every offer and counter-offer as an offer can, at face value, seem unreasonable, but further analysis can dispel any doubts
  • Be innovative in seeking solutions
  • Create competition. Market the property aggressively to generate competing bids

TRAINING

What type of training is mandatory for new agents?

The Real Estate Regulatory Agency and the Dubai Real Estate Institute 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 that will help elevate the standards of professionalism and effectiveness of brokers in Dubai.

Does your firm have a designated trainer, perhaps the broker or another experienced agent who acts as a mentor for new agents?

Harbor has always been big on training and we know it pays a huge dividend. Every one of our agents and property managers receives extensive and tailor-made training. Our rigorous internal training program includes industry, soft skills and specialized training courses that help our employees attain mastery in all the macro and micro aspects of their profession. We offer over 30 training courses every year, and each consultant receives a customized training plan that will help enrich his or her knowledge and skills. All our senior directors, including myself, are involved in this dedication to training, and it is part of our annual KPIs and targets.

 

PERSONAL

What motivated you to pursue a career in real estate? How long have you been in Dubai and why did you choose to open a business here?

I have always been passionate about real estate, and I am thankful that Dubai has allowed me to utilise my entrepreneurial skills to pursue my dream of establishing a world-class organisation to thrive in such a wonderful industry. I am immensely proud of what we at Harbor have created.

I have been blessed to have been in Dubai for over 30 years. I am of a generation that has been extremely fortunate to have witnessed and been part of the amazing growth and development that Dubai is now famous for. Any entrepreneur would be short-sighted not to participate in this economic marvel if he had the chance!

How has the industry changed through the years? Which significant events in the industry have left an indelible impression on you?

The most significant changes have been made in the structural area, and these changes have mostly occurred after the last Global Financial Crisis.

The increasing levels of governance, oversight and scrutiny that the industry has undergone has been instrumental in driving confidence back into the industry.  The ongoing development of the industry’s regulatory framework and implementation of laws and regulations to safeguard both consumer and investor interests, the overall industry and the economy at large from rampant and irresponsible speculative, predatory or unethical practices, reveals a mature and balanced approach to shaping an industry which exhibits sustainable growth over the long term. The “free for all” days of the past are long gone and investor, not speculator, confidence underpins the market performance.

The Global Financial Crisis taught the industry a lot. Looking back, many real estate companies were not structured to deal with the crisis and had operated during a period when selling property in Dubai required little or no effort, and even less business acumen or professionalism. It was a sellers’ market of a magnitude that has rarely been seen before, and is unlikely to be seen again.

The recession achieved what recessions typically do… reveal the flaws and weaknesses of those organizations that had been conducting business with a limited vision or a short-term perspective. While the short-term gains may have been exhilarating, it typically came at the expense of long-term survival.

Harbor survived because we quickly realized that everybody was in the same boat, and we needed to develop a competitive edge. After all, that is what a recession is all about… survival of the fittest. It was tough, and there were many sleepless nights during this period.

Obviously, we needed to adapt to survive. This required a brutally honest assessment of our capabilities as individuals, and the capability of Harbor to continue to provide the services that clients required, but within a totally new business context emanating from what was essentially economic turmoil on a global scale.

We needed to make sense of the chaos, and we determined that the market required new solutions to meet new challenges, and I think this is the greatest lesson that we learnt at Harbor. Innovation relevant to circumstance will always prevail regardless of the circumstances. If the market is hot or cold, innovation will always provide the competitive edge.

ask the agent

Ask the agent

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Freehold – Gulf News
Dated: 9 April, 2016

Question: We’re a successful startup company and currently looking for office space with the best value? Should we rent or buy?

Congratulations on your successful venture! AT this stage, however, you would still be looking at keeping costs to a minimum until such time you become fully established in the market.

As you may very well know, the old cliché of “location, location, location” is critical. It’s all about proximity and the convenience and prestige that a well-chosen location can bring to your potential customers, staff and business associates. Currently, you will find great value, very affordable and well-constructed office space in Business Bay, which will cost you anywhere between AED 70 and AED 120 per square foot (higher for fully fitted space), but it will be pointless if the location is a hindrance to conducting your business. You need to choose your preferred location first, and work from there.

Think about purchasing your premises. It’s in your best interest to do a complete analysis to see if this option will work for you. We at Harbor have always advocated that, cash flow permitting, businesses acquire their own premises. If you are a business committed to operating long term in Dubai, it makes sense to own your office space, particularly if it is a well-negotiated purchase. There is no tax advantage in leasing in Dubai and, as long as your office space is appreciating, your balance sheet will look a whole lot better and grow stronger over time.

If you decide to lease your premises, try to get the best deal possible and lock it in for at least 3 to 5 years. Lease rates in Dubai will be on the increase, going forward, so make sure you take advantage of current rates.

Question: I came to the UAE with an objective to join real estate as I have several years of experience overseas under my sleeve. Can you advise me on how I can land myself a realtor’s job in a reputable company?

It is good to know that you plan on joining the local real estate sector with some experience. Nevertheless, each real estate environment is unique so I suggest you join a company that will enable you to fast track your learning.

Look for a full service company so you gain a greater understanding of what the UAE real estate business is all about, beyond the buying and selling of 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), and also in-house training. This may involve being assigned a mentor, be placed on an internal rotation scheme to enable a broader knowledge of the business to be developed or be given special projects that will facilitate your learning by encouraging you to seek answers and solutions yourself to enable you to complete the task at hand. Those companies that invest in hi-potential people, typically are those that succeed.

Finally, surround yourself with people who are passionate about the industry because passion is contagious, and it’s what sets the successful ones apart.

Question: How do I know for sure my property consultant is giving me the right advice?

In any relationship, whether it be personal or professional, trust is key.  So if you have a nagging feeling that your property consultant is not representing your interests, have a meeting with him and request a justification and rationale for his recommendations and advice. To ascertain whether his justifications and rationale make sense, you should do some research yourself so you can verify the veracity of his claims and assertions. If you remain doubtful, seek an alternative as there are plenty of property consultants out there hungry for your business.

Getting a new consultant is not always the solution and you may want to rethink your criteria in choosing one so you develop rapport and trust in the long run.

Look for experience and passion – people who really enjoy what they are doing. The best way to find such professionals is to ask around. Seek out friends or peers who have recently conducted a real estate transaction and ask. Seek out the positive stories as well as the negative ones.

Find a consultant or agency that exhibits a breadth and depth of industry knowledge and expertise. When conducting initial meetings, make sure you assess how much the agency or its brokers actually know.

Look for longevity. Those that survived the recent recession must be good!

Look for a strong network of corporate, government and industry contacts. The consultant or agency that has good relationships with key industry stakeholders such as the major developers or authorities such as the Dubai Land Department, RERA, DEWA or Economic Department will be able to operate more efficiently and effectively.

And finally, look for an agency that has received some form of industry or peer recognition as they lend credence to the name and reputation of the realtor in question.

Question: We purchased a villa in Dubai back in 2009. However, instead of continuing to rent it out, my husband and I have decided that we want to go ahead and sell our property soon. How do we find a good seller’s agent?

There is a large number of licensed real estate brokers in Dubai, and the whole of UAE of course. But finding the right agent to sell your property is something you need to pay close attention to because getting the best person to represent you and your property out there is crucial to how quickly you can make a sale without compromising on your agreed-upon expectations.

Factors such as years of experience in the UAE property market, track record of success, an in-depth understanding of market trends, area expertise (especially in the neighborhood where your unit is located), client testimonials, level of commitment, passion, dedication, professionalism and honesty are important, not to mention the fact that he/she should also be a duly licensed RERA-certified real estate broker. Before committing to any realtor, make a list of all the questions you want answered first and see how they respond as doing so will help you gauge whether or not giving him/her your business is the best thing for you and your husband, and your property.

Question of the Week: I have been looking at Dubai (or the UAE) as a possible part-time destination during my retirement. Hence, I would like to purchase a property here, rent it out initially and later use the property myself during my retirement. Do you have any advice?

Including property acquisition as a part of your retirement plan is a good move, but you must choose wisely. 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.

Quality properties are available starting from AED 700 per square foot; 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, you can easily double or triple that amount.

You can expect a minimum net rental return of around 5 percent 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 the existence of a functioning owner’s association will require a reputable local real estate professional to help you minimize any risks with your investment, whether during the procurement stage or managing your investment until you are ready to assume occupancy once you will have retired.

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

Can you explain the term capitalization rate?

Capitalisation rate (cap rate) is the rate of return on a real estate property based on the income that the property is expected to generate. It is used to estimate the investor’s potential return on investment. It maybe calculated by dividing the investment’s net operating income (NOI) by the current market value, where NOI is the total revenue derived from renting or leasing the property minus all operating costs. Put simply, the cap rate = NOl current market value. Given that the capital values for Dubai properties have shown greater volatility than the income being derived, the NOI being generated from the property at today’s value needs to be looked into. This allows us to see whether the property’s performance is improving or declining by referring to the cap rate. If the cap rate is declining, this leads us to conclude that selling the property would generate greater income.

Where do you think the best investment opportunities are in the Dubai real estate market?

Definitely in the affordable segment of the market!

We are encouraging clients to invest in this important segment as there are some great opportunities and the demand for affordable housing is likely to continue increasing as Dubai heads towards the Expo 2020. There are many affordable developments that have been sprouting in Dubailand and other parts of the city, especially in the outskirts. They are strategically located, with easy access to major road networks like the Shaikh Mohammed bin Zayed Road, thus residents enjoy fast transit times to most of Dubai’s popular areas. The demand for this type of affordable accommodation will continue to grow. invest in apartments and retain ownership for atleast five years to gain superior capital growth and enjoy healthy net annual rental return in the meantime.

Do you think the property prices will fall further in this current cycle? If so, would now be a good time to sell?

The fact that the property industry is notoriously cyclical is widely known yet viewed differently. Investors with a clear strategy and long-term plan simply accept, foresee and plan for cycles in the industry. They look for longer—term sustainable growth rather than take additional risk by trying to accumulate wealth by taking advantage of shorter-term spikes or dips. Investing in property has a very simple purpose: to create wealth over the long term. However, your portfolio needs to be nurtured, maintained and managed to ensure its wealth-creating potential is achieved as it rides the inevitable cycles that occur in the industry. Adopting a short-term vision and reacting unreasonably to inevitable industry slowdowns will lead to underperformance in the longer term. Consider engaging a good property manager who will ensure that you maximize returns.

I plan to purchase our first family home. What are the factors to consider when getting a mortgage?

There are a number of considerations that you need to factor into your plan of buying a home. One of these is getting a mortgage. Generally speaking, you are much better off financially in applying your hard-earned money towards building equity, but keep in mind that mortgage payments can be subject to fluctuations as interest rates rise. Not all mortgages are the same. Try and have the mortgage establishment fees waived. Depending on the institution, this may save you up to Dh3,000. Also request that you are not penalized for paying the mortgage down faster or in its entirety. By law, the mortgage provider cannot charge you more than 1% of the outstanding amount or a maximum of Dhl0,000, but try to have this stipulation dropped from your contract. Make sure your provider will allow you to utilize the equity you build in your home over time. Some lenders will allow you to use this as security for further borrowing.

Question of the week

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

An escrow can be described as a legally recognized 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 ranging from those which establish the bona fide nature of the developer including details of its officers and solvency, title deeds proving ownership of the land to be developed, NOC from relevant parties to performance guarantees.

TIME TO REVISIT THE PRACTICABILITY OF REITS

Mohanad Alwadiya, MD of Harbor Real Estate & Instructor at the Dubai Real Estate institute, the official training 81 cortication arm of the Dubai Land Department

The UAE property market slowdown aside, it is great to know that the country’s real estate landscape has gone a long way from its humble beginnings. Aside from the landmark development in 2002, when UAE property (specifically in Dubai) was initially offered to be sold on freehold basis to expatriates by the Dubai government, another important milestone and sign of industry maturity, though relatively untapped, was the introduction of real estate investment trusts (REITs) into the country, with the first REIT entity, Arabian Real Estate Investment Trust (Areit) established in 2006.

And as people continue to agonize over the current market state of affairs, l would advise ambitious though financially limited would-be investors to look into the viability of investing in REITs rather than sitting and waiting for chance to buy property they can actually afford. But what differentiates a REIT-owned property from traditional property out for sale in the market? Before moving any further, let us try to understand what REITs are first and foremost, beyond the words that make up the acronym itself a REIT is a trust company which accumulates a pool of money through an initial public offering (/PO) and buys, develops, manages and sells real estate assets. REIT5 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 investor on a regular basis. Investors in REITs can expect returns without having to deal with the headaches of maintaining, managing and marketing their real estate assets. Units held in a REIT can be bought and sold like a stock on a stock exchange so investors also have the option to make a safe exit from the property marketplace whenever they decide to do so. There are three types of REITs: equity REITs, mortgage REITs, and hybrid REITs. 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 the investment and ownership of property mortgages while hybrid REITs combine the investment strategies of equity REITs

And mortgage REITs by investing in both properties and mortgages. A REIT can provide portfolio diversification because of the large amounts of pooled funds available to the REIT management team which, in turn, 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 a superior return. If you are a landlord or building owner,

the advantages of getting into business with a REIT are manifold; because, in effect, property owners become “shareholders” in a single real estate company, landlords can reasonably expect a safer, more secure and regular source of income in the form of rent through an easy, fuss-less, flexible, liquid and maintenance-free investment. For tenants, REIT—owned buildings, whether they are malls, business parks or towers, are usually well maintained and professionally managed, so being part of or being under a REIT establishment is a win-win for both landlords and building tenants.

خبراء عزوا تراجعها إلى إرجاء القرار الاستثماري وعوامل نفسية 12.5 مليار درهم تصرّفات عقارات دبي في أكتوبر الجاري

حقق إجمالي التصرّفات العقارية من بيع ورهن في دبي، خلال أكتوبر الجاري، نحو 12.5 مليار درهم، منها ثمانية مليارات درهم معاملات بيع أراضٍ وشقق وفلل، و4.5 مليارات درهم معاملات رهن.

وكشفت بيانات دائرة الأراضي والأملاك في دبي، وجود انخفاض في قيمة التصرّفات خلال أكتوبر، مقارنة مع سبتمبر السابق، إذ بلغت قيمة التصرفات في سبتمبر نحو 20.4 مليار درهم. وعزا خبراء عقاريون لـ«الإمارات اليوم» تراجع التصرفات العقارية خلال أكتوبر مقابل سبتمبر، إلى عوامل عدة، أبرزها العامل النفسي في السوق، الناجم عن التأثر بالعوامل الجيوسياسية، فضلاً على إرجاء القرار الاستثماري من قبل بعض المشترين للعقارات في دبي، انتهازاً لفرصة تراجع يتوقعونها في السوق.

وتفصيلاً، أظهرت بيانات دائرة الأراضي والأملاك في دبي، أن إجمالي قيمة التصرّفات العقارية من بيع ورهن في دبي، سجل، خلال أكتوبر الماضي، نحو 12.5 مليار درهم، مقارنة بـ20.4 مليار درهم في سبتمبر الذي سبقه.

وأوضحت البيانات أن أكتوبر شهد تراجعاً في إجمالي مبيعات الأراضي والفلل والوحدات السكنية، إذ بلغت ثمانية مليارات درهم مقابل 12.3 مليار درهم تم تحقيقها في سبتمبر، كما انخفضت الرهون في أكتوبر إلى 4.5 مليارات درهم مقابل 8.03 مليارات درهم في سبتمبر.

إلى ذلك، قال المدير الإداري في شركة «هاربور» العقارية، مهند الوادية، إن «هناك عدداً من العوامل أثرت في تصرفات العقارات بدبي التي تراجعت خلال أكتوبر»، لافتاً إلى أنه «يأتي على رأس هذه الأسباب العامل النفسي المتأثر بالعوامل الجيوسياسية في المنطقة، إضافة إلى العوامل الاقتصادية العالمية التي لاتزال تؤثر في القرار الاستثماري العقاري».

وأضاف الوادية أنه «على الرغم من هذه الأسباب، إلا أن الوضع العقاري في دبي على المدى الطويل مبشر لوجود عوامل رئيسة من الممكن أن تؤثر في السوق، منها بدء الاستعداد الفعلي لمعرض (إكسبو 2020)، إذ سيوفر المعرض مزيداً من الزخم لقطاع العقارات».

من جهته، أرجع الرئيس التنفيذي لشركة «إس إيه إس إنترناشيونال للعقارات»، سيف بن يوخه «التباطؤ في مبيعات العقارات بدبي خلال الشهر الجاري، إلى التريث من قبل بعض المستثمرين العقاريين بهدف اقتناص الفرص في السوق، مع توقعاتهم بتراجع أسعار العقارات».

وأشار إلى أن «السيولة موجودة في السوق، لكن القرار الاستثماري هو الغائب، إذ يرجئ الكثيرون عملية الشراء بالتزامن مع وجود عوامل من الممكن أن تؤثر في السوق سلباً من وجهة نظرهم»، متوقعاً أن «ترتفع قيمة التصرفات بدءاً من الشهر المقبل».

بدوره، قال خبير عقاري، رفض ذكر اسمه، إن «هناك سبباً من الممكن أن يكون مؤثراً في الأرقام الخاصة بتصرفات العقارات، هو أن السيولة الموجودة في السوق تمتصها مبيعات المشروعات على الخارطة، التي لا يتم تسجيلها بشكل سريع من قبل دائرة الأراضي والأملاك»، لافتاً إلى أن «هذه المشروعات لا تسجل مباشرة ضمن أرقام التصرفات التي تسجلها الدائرة شهرياً».

وفي السياق ذاته، قال الرئيس التنفيذي لشركة «ستاندرد» المتخصصة في إدارة العقارات، عبدالكريم الملا، إن «الأوضاع في السوق العقارية بدبي حالياً أفضل بكثير من فترة الصيف، حتى ولو كان هناك تراجع في تصرفات شهر من الشهور»، مشيراً إلى أن «النظرة الكلية على القطاع مبشرة».

وأكد الملا أن «دبي تتمتع بمناخ استثماري قوي، خصوصاً في هذه الفترة، يجذب الكثير من الاستثمارات في القطاع العقاري ومن جميع دول العالم»، مبيناً أن «وجود أهم عناصر الاستثمار التي ترتبط بتوافر عامل الأمن والأمان والاستقرار متوافرة في الإمارات، إذ تمتلك البنية الأساسية الملائمة والمتطورة التي تجذب المستثمرين ورؤوس الأموال».