Mohanad Alwadiya

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.

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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.

Meet Dubai’s own Wolf of Real Estate

By:Binesh Panicker
Published: Property Times
Date: 28 August 2016

Mohanad Alwadiya is a well-known name in the Dubai real estate market, and he wears many hats. Apart from his professional obligations as the CEO of Harbor Real Estate, he also finds time to contribute to the betterment of the market as Senior Advisor & Instructor at the Dubai Real Estate Institute. He is already a raging hit on social media, not an easy task for someone
from real estate.

Tell us about Memaar. How did the concept take off?
Having a primetime property reality TV show in the Middle East has been a long time coming – whether you’re in the UAE, Saudi Arabia, Qatar – practically anywhere in the Middle East, there’s always a new tower, a unique residential project or a new iconic building being launched or unveiled. So MEMAAR simply had to be.

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MEMAAR is the brainchild of the Dubai Channels Network (DCN), and we officially went on air for Season 1 in May 2015. We already have a solid audience following comprising millions of viewers from all across the GCC and beyond. When it comes to our guests, we always select real clients from different backgrounds and objectives in order to offer various enriching perspectives.

The show’s objective is to educate, entertain and engage viewers with the real estate sector. I’m overwhelmed with the amount of positive feedback that I receive on a daily basis from viewers from all over the world praising the show and seeking my advice. The show is now broadcasted weekly on Dubai TV every Wednesday at 7pm, Sama Dubai TV every Sunday at 9pm and Dubai One TV (with English subtitles) every Monday at 8pm with multiple repeats on all the 3 channels.

What are the future plans for the show?
After the tremendous success of the first and second seasons, we’re going full-blast on a multimedia level. We have a lot more in store for our ever-growing number of loyal fans.
We are currently shooting for Season 3, with 16 new exciting guests and episodes. The show started broadcasting on Dubai One TV with English subtitles and will continue to run on Dubai TV and Sama Dubai TV. Of course, we want to keep growing and developing, always mindful of the feedback we are getting from our MEMAAR fan base.

You are popularly known as “The Wolf of Real Estate,” which made you a huge hit in social media. Tell us more about your social media presence and its effect.

Thanks to Property Times back in 2014, I got the “Wolf of Real Estate” title given to me which has proven to be a very interesting and strategic form of branding for myself which I have, yes, fully embraced – that is, minus the negative connotation associated with the more famous moniker for Jordan Belfort – “The Wolf of Wall Street.”

However, I believe the moniker emanated from the work of our company, Harbor Real Estate, having been previously referred to as a star that emerged from the last GFC. Beyond having simply survived, it was during the GFC that Harbor Real Estate, in the face of a level of adversity that the industry had never witnessed before, really grew as a real estate enterprise of significant capability and standing in the industry.

In terms of my current social media presence, I do have more than 1,300,000 followers on my public Facebook pages, almost 40,000 followers on my “The Wolf of Real Estate Official” Instagram account, and 515,000 followers on my “Mohanad Alwadiya” official Instagram account. On Twitter, I have a little over 50,000 followers on Snapchat and over 10,000 connections on LinkedIn.
I get all sorts of positive and encouraging comments and messages on different social media platforms, such as those expressing their gratitude for the information and analysis I provide on the TV show, articles I write or social media posts. I also receive a lot of messages from followers asking for my opinion about certain issues or real estate advice. As for the unusual ones and even those which appear negative, I usually just take them with a grain of salt and try to respond positively. In general, I try to answer all the messages I receive as much as I can because I really enjoy the interaction with all my followers, and this allows me to stay in touch with the market and gauge the impact of the various activities I’m involved in.

The response from people via social media has been overwhelming and I am still trying to get used to being referred to as some sort of celebrity in my own right because, frankly, I don’t consider myself a celebrity… just the facilitator of the reality TV show MEMAAR… just doing my job!

What is your ultimate dream?
Well, there’s a lot of things on my mind, and so much that I wish to do! However, the realities imposed by time makes careful prioritization essential.
I’m currently working on a portfolio of development projects and initiatives. Harbor Real Estate continues to expand and is continually developing the capability to provide industry leading service. I call this the “never-ending initiative” as every individual or organization can always improve regardless of past achievements.

From a business growth perspective, there is plenty to be excited about. We have several new projects and unique services that will be launched very soon and we are looking forward to Cityscape to allow us to share these with investors and aspiring homeowners.

Meanwhile, I am also at the final stages of publishing my first bilingual property management book and will be working closely with the Dubai Real Estate Institute on introducing an advanced version of the certification property management course.

There are many other ideas and initiatives that I wish to develop after 2016. I still believe our industry can benefit and better serve our customers by adopting and applying technologies in the areas of product development and communications. The world has become a global marketplace but I still believe that global capital flows in our industry are still hindered somewhat because we do not do a good enough job of putting enough global investors in a position of confidence and certainty. There remains a lot of potential in this space I believe.

Then of course, there’s MEMAAR. As mentioned earlier, we’re all working together and collaborating on how we can keep the show growing and developing, so it only gets better every season.

What is your take on the next few months for Dubai market? There is a general feeling of positivity among agents. What is the reality?
Everyone knows that Dubai real estate has been undergoing correction for quite some time now. We feel that the decline in values associated with that correction has halted or virtually halted in all market segments, or that the market is bottoming out. 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.

PROFESSIONALIZING THE REAL ESTATE PRACTICE

By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute
Published by: Property Time Magzine

During the years marking the last global economic recession, reports on fraudulent business practices and shady dealings in real estate became quite rampant, and people (investors and end-users) realized that those who fail to practice due diligence have nothing to gain in a relatively new and still-emerging albeit rapidly growing property market.

Now, even as the UAE economy as a whole continues to lag from its earlier predicted level of activity, the real estate industry, in spite of the industry-wide slowdown, continues to earn its share of winners and non-gainers in terms of current industry practice.

Some individuals still manage to pose as agents or real estate representatives, produce fake documents, and get away with the money virtually scot-free. And while the government has put in place strict protocols whether it be in professionalizing industry practices or instituting new policies and regulations to guard the best interests of the market, there are still a few unscrupulous individuals who manage to prey on buyers, even tenants.

The term “business ethics” is not something alien or new to us, but some people with careers outside of the real estate realm may view the term with a heavily 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.

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.
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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?

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 impact of Brexit on UAE real estate

Published by Expert Eye
By Mohanad Alwadiya

June 23, 2016 will forever be remembered in history as the day the British, all 52 percent of the 71.8 percent referendum turnout versus the 48 percent who elected to stay, voted to leave the European Union (EU).

However, with the United Kingdom being one of the world’s largest economies, the so-called “Brexit” which is yet to be finalized in the next two years depending on when UK leadership will actually “trigger” Article 50 of the Lisbon Treaty is expected to send ripples around the global business community, not to mention the political ramifications of said move.

The effects of Brexit are as diverse as they are far-reaching, with experts considering how the decision made by the majority of Brits will affect everything from the European geopolitical and socio-economic landscape, the strength and resilience of the European Union in the face of further discontent within its member states, the social and economic ramifications to a newly “independent” United Kingdom and the inevitable question as to whether the United Kingdom can remain united given the Scottish and Northern Island wishes to continue as part of the EU.

In addition, the whole strategic alliance framework of the West has been weakened somewhat as a robust and strongly united European Union was always considered to be a cornerstone to an effective defence to an aggressive Russia and China on both economic and security fronts.

Understandably, the whole world is worried because all the financial and trade mechanisms, agreements, communication channels, policies, protocols and security arrangements that have taken over four decades to build will soon be set to zero for renegotiation.
No wonder the world is nervous and understandably uncertain as to what the future might hold.

And it’s that uncertainty which will have an effect on the UAE property scene. As we all know, investors and potential homeowners alike do not handle uncertainty, especially of this scale, well.

And it’s uncertainty that now lies around the effect of the Brexit on world growth and the possibility of European and UK recessions in the coming year that will make most investors move to less risky assets and safe haven currencies such as the Yen and the US dollar.

Of course, uncertainty regarding world growth has also negatively affected oil prices so many investors will be more reticent to invest in those economies that rely on its revenue. While we all know that Dubai is much less reliant on oil than its neighbouring emirates and countries, it will still be affected by investor nervousness by way of association which is unfortunate yet a reality. Just look at the Dubai Financial Market. It lost 3.3 percent, the biggest decline since January, as Emaar Properties PJSC fell 4.7 percent, mirroring the Brexit effect on many other markets around the world. Hardly rational, in my view.

Investors will be looking closely at the effect on UAE’s tourism. In the first quarter of 2016, Western Europe was the second largest source of tourists to Dubai by region, accounting for 23 per cent, led by the UK’s eight per cent and Germany’s three per cent. With the Euro weakened to $1.10, and with most analysts bearish on its immediate future, it is hard to imagine that level of contribution will continue until the post-Brexit uncertainty dissipates. Now such a strong pillar in the UAE’s burgeoning economy, tourism rates can be affected as nearly every global currency has depreciated versus the AED, making travel to the UAE more expensive for the majority of global travellers while journeying to the UK and Europe for most people has just got a lot cheaper. Hopefully, many will still use the country as a travel hub from and take advantage of what this exciting country has to offer during stopovers.

At the time of writing, the British pound had fallen more than 10% to below $1.34 and still falling as uncertainty continues to cloud everybody’s view as to the future of the UK economy. This is significant as British investors alone injected £1.9 billion into Dubai’s property sector in 2015 purchasing around AED 10 billion worth of UAE property assets, putting them at No.2 with an overall 7 percent of total investments made in the sector in 2015.

Needless to say, with such a currency devaluation and an uncertain outlook, Dubai property has suddenly become a lot more expensive for those wishing to purchase with British pounds, while the London property market has just become a lot more affordable. While a feeding frenzy hasn’t developed as yet, a prolonged weakness in the pound could divert significant levels of investment capital away from a market such as Dubai, especially as British expats, living in the emirate and earning UAE dirhams, take advantage of exchange rate gains to invest back home.

But even in the face of such uncertainty, there is no need to act with undue haste or panic. With or without Brexit, the world of real estate investment has always been riddled with both risks and opportunities. One thing is certain, though, mature and astute investors would know when to grab onto property or let go, making their own calculations and analyses, and seeking further expert advice as events continue to unfold.

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Brexit & Dubai realty

The effects of “Brexit” are as diverse as they are far-reaching, with experts considering how the decision made by the majority of Brits will affect everything – from the European geopolitical and socio-economic landscape, the strength and resilience of the European Union in the face of further discontent among its member states, the social and economic ramifications to a newly “independent” United Kingdom, and the inevitable question as to whether the United Kingdom can remain united given the Scottish and Northern Islands’ wish to continue as part of the European Union.

In addition, the whole strategic alliance framework of the West has been weakened somewhat as a robust and strongly united European Union was always considered to be a cornerstone to an effective defense to an aggressive Russia and China on both economic and security fronts.

All this is heady stuff, complicated by the fact that the separation process will be negotiated by a new English Prime Minister, and will probably take up to 2 years! Understandably, the whole world is worried because all the financial and trade mechanisms, agreements, communication channels, policies, protocols and security arrangements that have taken over four decades to build will soon be set to zero for renegotiation.

No wonder the world is nervous and understandably uncertain as to what the future might hold.

And it’s that uncertainty which will have an effect on the Dubai property scene. As we all know, investors and potential homeowners alike do not handle uncertainty well.

And it is this very same uncertainty that now lies around the effect of the Brexit on world growth, and the possibility of European and UK recessions in the coming year that will make most investors move to less risky assets and safe haven currencies such as the Japanese yen and the US dollar.

Of course, uncertainty regarding world growth has also negatively affected oil prices so many investors will be more reticent to invest in those economies that rely on its revenue. While we all know that Dubai is much less reliant on oil than the neighboring UAE emirates and Middle Eastern countries, it will still be affected by investor nervousness by way of association, which is unfortunate yet a reality. Just take a look at the Dubai Financial Market – it lost 3.3 percent, the biggest decline since January, as Emaar Properties PJSC fell by 4.7 percent, mirroring the Brexit effect on many other markets around the world. Hardly rational, in my view.

And investors will be looking closely at the effect of Brexit on the Dubai tourism industry as well. In the first quarter of 2016, Western Europe was the second largest source of tourists to Dubai by region, accounting for 23 per cent, led by the UK’s 8 per cent and Germany’s 3 per cent.

With the Euro weakened to $1.10, and with most analysts bearish on its immediate future, it is hard to imagine that level of contribution will continue until the post-Brexit uncertainty dissipates. Now, such a strong pillar in Dubai’s burgeoning economy, tourism rates can be affected as nearly every global currency has depreciated versus the AED, making travel to the UAE more expensive for the majority of global travelers while journeying to the UK and Europe for most people has just got a lot cheaper. Hopefully, many will still use Dubai as a travel hub and take advantage of what this exciting city has to offer during stopovers.

At the time of writing, the British pound had fallen more than 10 per cent to below $1.34 and is still falling as uncertainty continues to cloud everybody’s view as to the future of the UK economy. This is significant as British investors alone injected £1.9bn into Dubai’s property sector in 2015, purchasing around AED 10 billion worth of UAE property assets and ranking them second with an overall 7 per cent of total investments made in the sector in 2015, increasing from the prior year. Needless to say, with such a currency devaluation and an uncertain outlook, Dubai property has suddenly become a lot more expensive for those wishing to purchase with British pounds.

And yet, the London property market has just become a lot more affordable. Already, there are reports of overseas buyers from all over the world taking advantage of the weaker pound to buy property in the stunned city. While a feeding frenzy hasn’t developed as yet, a prolonged weakness in the pound could divert significant levels of investment capital away from markets such as Dubai, especially as British expats, living in the emirate and earning UAE dirhams, take advantage of exchange rate gains to invest back home.

So, while there are interesting times ahead, there is no need to act impulsively or with any undue haste. The true extent and nature of the ramifications of the Brexit decision are yet to be fully identified, analyzed and quantified. It is still early days, and it will take some time for the fog of uncertainty to clear and for opportunities to emerge. Decision time will come soon enough.

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.

Stalling will get you nowhere; invest today

STALLING WILL GET YOU NOWHERE ; INVEST TODAY

The opportunities currently available will certainly never come again
By Mohanad Alwadiya
CEO, Harbor Real Estate
Senior Advisor & Instructor, Dubai Real Estate Institute

Stalling will get you nowhere invest today“opportunity knocks only once” is an oft-quoted proverb in life, and it rings even truer when it comes to real estate. Others may argue that other opportunities will present themselves in the future; true, but will they be the exact-same opportunities?

It would, of course, be great if these future opportunities actually materialize; excellent, if they turn out to be better opportunities. But then, what if they don’t – which is usually the case as far as opportunity in real estate is concerned. After all, land is not unlimited and a building or unit, once sold, won’t likely change hands several times in the course when it is perceived to be at its peak value.

Expertise derived from hindsight has no place at the table of successful people, and regret is a fruitless and pointless emotion. Successful people thrive on opportunities, not lost opportunities. If they cannot make one opportunity work to their satisfaction, they move on and find another opportunity. Regret simply diverts energy and focus from the effective pursuit of the next great opportunity.

For those still currently on the fence about real estate investment, resolve to buy TODAY. After all, oil prices aren’t expected to go anywhere soon, the decline of the Russian ruble and the Euro versus the US dollar has effectively made offshore investing appear too expensive for many, there are reports of a growing oversupply and the inevitable interest rate increases on the US dollar, and its AED cousin, will only further hamper overseas investment and overall market liquidity.

While these considerations are valid and worthy harbingers of the dreaded procrastination, we need to put our positive hat on for a while, and consider the following…

Put simply, Dubai needs people to support an economy that is expected to grow at an estimated 5 percent percent-plus annually 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 277,000 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 3.4million people by 2020, a 7 percent annual increase from today’s population of 2.25million.

While the price of oil is a big issue for the region’s economies, with oil representing only about 4 percent of Dubai’s GDP, the effect of the decline in oil prices is not as drastic as some may think. 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. Dubai welcomed 4.1 million overnight visitors in the first three months of 2016, which represented a 5.1 percent increase over the same period last year continuing a growth trend of approximately 10 percent per annum since 2010.

But those visitor numbers will seem paltry once the 2020 Expo kicks off. And the 277,000 extra jobs that will be generated to ensure the estimated 20 million visitors of the Expo see Dubai in its most favorable light cannot be underrated in terms of generating significant demand for real estate assets.

And though the ongoing speculation surrounding the US Federal Reserve’s intention to raise interest rates is making many people nervous, we can be sure that interest rates in the US will eventually rise and the AED will continue to get stronger. To invest in a market that is undergoing a 10 percent to 20 percent correction in a currency that certain to appreciate only makes sense, especially when financing is still cheap and will remain so for quite some time.

While on the topic of certainty, there is no doubt that a stabilized real estate market will provide a much better launch pad for what will be a period of significant economic and commercial activity over the next 5 to 7 years. 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.

Still unconvinced or undecided?

Remember the opportunities that have come with 2015 and 2016 – the period of opportunity for the astute investor – will most certainly never come again. Ask around for expert advice, conduct your own research, make the calculations and decide now, today, so you won’t find yourself scratching your head in disappointment five years hence.

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.”

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