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.

ASK-THE-AGENT-4Nov17

Ask the agent

Gulf News Saturday, November 4, 2017
FREEHOLD
By: Mohanad Alwadiya CEO, Harbor Real Estate

I was advised to hire a property agent to get a better deal. They show what they have and say what others offer are not good. Are they being truthful?

The real estate market, like any sales-oriented industry, is a tough place to operate in since everyone is out to make a sale for themselves. So having observed the behaviour you mentioned, it would benefit you a lot to ensure you are dealing with a reputable agency with qualified professional agents. Since embarking on a real estate investment venture is a major decision you will have to make, it would be worth your while to do a little research, or ask people with some real estate know-how as to which companies have established themselves well in the industry. You may also want to have a look at the Dubai Land Department’s Brokers App, which shows you a ranked list of approved brokers in Dubai and could assist you greatly in picking out the agency that will work with you and for you.

Where can people go and discuss, or lodge a complaint against a property developer?

It is a fact that issues related to property transactions and deals (tenant vs. landlord, buyer vs. developer, buyer vs. broker) cannot be avoided; thus, authorities have come up with platforms where complainants can air their grievances. The Government of Dubai has made a web portal called “eComplain” available on the Dubai Government website.

Through the said portal, customers may lodge a complaint and if the matter involves a specific government department, the complaint is routed to the appropriate government entity for further action and resolution.

But in order to deal with real estate matters directly, any issues or complaints involving property industry stakeholders, in this case, a developer, need to be referred to the Real Estate Regulatory Agency (RERA) if the parties involved have failed to come to an amicable arrangement regarding the issue in question.

Who is responsible for the upkeep of leased premises? Is there no scope for natural wear and tear in lease contracts?

The landlord is responsible for the general maintenance of a leased property unless the parties have agreed otherwise in the contract. The owner is also responsible for taking care of any defects or faults that affect the tenant’s use of the property.

However, sometimes the landlord may also transfer responsibility for maintenance to the tenant as it may happen in the case of some commercial leases (Article 16, Law No. 26 of 2007).

Natural wear and tear is taken into consideration by law (Article 21, Law No. 26 of 2007) though upon the expiry of the lease, it is assumed that the tenant will return the property to the landlord in the condition that the property was in at the beginning of the tenancy.

We are very unhappy with the facilities management services in our building. What recourse do we have when the landlord is unable to offer a solution?

In Article 16 of Law No. 26 of 2007, it states that “Landlord shall, during validity of the tenancy contract, be liable for undertaking maintenance of the property and shall rectify any defects or faults that affect tenant’s intended benefit from the property, unless the two parties agree otherwise.”

The law very clearly states that property upkeep and repair is a responsibility of the landlord. The Rental Dispute Settlement Centre, which is the judiciary arm of the Dubai Land Department (DLD), would be your last recourse in case you have already exerted effort to properly communicate the matter to the landlord and/or the property manager to no avail. It hears complaints and provides solutions in a transparent and efficient manner.

Ensure though that you bring with you the required documents when filing a case.

Question of the Week

Now that protecting the environment and sustainability have become essential considerations across various sectors, are there rules to encourage builders to promote human and environmental health?

The already existing Article 7 of the Dubai Municipality’s Decree No. 66 of 2003 involves the selection of glazing for facades with the objective to minimise solar thermal heat gains. However, the article does not provide for penalties in terms of non-compliance.

A Mandatory Progression programme was introduced in 2008 with an objective to ensure new buildings meet “green” standards.

A more current development, however, is the introduction of the “Al Safat” green building rating system. The rating system applies to all types of buildings including residential, commercial, industrial and others.

The four classifications are platinum, gold, silver and bronze (in descending order), and the system requires new buildings taking permits from September 1, 2016 to meet requirements for bronze certification at a minimum.

Old buildings will have to be retrofitted to meet the minimum requirements.

Meanwhile, buildings that have previously acquired green building certification will need to apply again to be Al Safat certified.

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

The Essential role of property asset managers

The role of the property asset manager is misunderstood by many, with the majority of property investors and other industry participants thinking that the role does not extend beyond the collection and remittance of rental receipts and acting as a buffer between the landlord and the tenant.

Little do they realize that a good property asset manager will generate a greater return from a property portfolio and enable long term portfolio strategic objectives to be realized.

Any investor in property would benefit from a professional property asset manager but it is essential to   know what to look for in selecting a professional to manage their property(s)?

  1. Astute investors understand that you need a professional who is experienced in the market. Not just any market, but the Dubai market. Typically, if you find somebody with at least 10 years’ experience, you will have found somebody who has survived the global recession, and that should provide a reasonable indication that they are in the business for the long term and that they had the skills to navigate and survive Dubai’s property slump. Many didn’t.
  2. Strategic Approach. A competent property asset manager will provide a whole host of services for the investor but the most important is the development of a Property Portfolio Strategy. The professional must be able to articulate and present his thoughts after conducting a thorough assessment of your personal situation and property portfolio. He must be able to provide you with a credible strategy and activity plan which is designed to harness the true potential of your property and provide you with the maximum rate of total return. It is essential to have a well thought out strategy for your property portfolio if you are to maximize your returns.
  3. Knowledge and Understanding. Not just anybody can formulate a credible and implementable strategy. It requires years of expertise and a fundamental understanding of what makes Real Estate such a worthwhile and superior investment. A true professional will have a strong knowledge base on topics including industry history, current market factors and trends, risk factors, and the likelihood of relevant future events that will affect the performance of your property investment. This knowledge should span global, regional and local landscapes and will require a good understanding of economic factors, industry knowledge extending to government policy and regulation, finance and market dynamics.
  4. Planning Expertise and Ability to Implement. Forming a strategy is one thing, but being able to bring the strategy to life is quite another. A true professional will provide an activity plan which will include details of pricing and marketing, customer relationship management and tenant management and policy for the entire portfolio. Essentially, this area of expertise is related to the “topline” or revenue generation and management of the property. Equally important is the cost management and maintenance supervision of the property. Many times, I have seen excellent “topline” performance being eroded due to poor operational and maintenance cost controls.
  5. Organizational Ability and Communication Skills. Managing your property portfolio will also require proper performance measurement, communications and review schedules, and status reporting and financial statements. Investors should always seek examples of these elements as transparency and candid performance appraisals are essential for managing your portfolio correctly by addressing shortfalls to objectives, issues requiring addressing and opportunities for performance improvement, in addition to your peace of mind.
  6. Customer Centricity. It’s important to choose a property manager who you can work with and who, you believe, has your best interests at heart. Your property manager must be customer centered and, unfortunately, in this business, this is not always the case.
  7. There is no point entering a business relationship that is lacking in mutual trust and respect. The investor must have confidence in his ability to manage a business … the investor’s business… which just so happens to be a property portfolio. As with all investments, but especially investments in property, there will be good times and challenging times. There is no such scenario as “set and forget”. It doesn’t exist. If you do not respect the manager you have appointed, the relationship will not survive the challenging times and you will need to go through the whole process of finding a replacement.
  8. A History of success. The investor should be sure to ask for referrals and call some existing clients. It’s important to seek out success stories and ask to see examples of client reports to assess their completeness, continuity and timeliness. The investor must ask the property manager carefully thought out questions to gauge the depth and breadth of knowledge that he possesses.
  9. Finally, it’s essential that the organization the investor is dealing with has the resources to support the manager of the portfolio. In these times of eliminating overheads, individual performance can be inhibited because of a lack of organizational support. The investor should ask to meet the team.

Choose Wisely The investor must ensure that the property asset portfolio is in good hands providing expected returns with as little hassle as possible. But the investor must realize that once a property manager is appointed, the ultimate return on the investment is largely in his hands.