Government initiatives bode well for UAE’s future real estate prospects

Government initiatives bode well for UAE's future real estate prospects

As global economy starts showing signs of a revival, a gradual yet corresponding change can be witnessed in the UAE real estate sector as well. In order to revive and bring back the original glory of the property sector, the authorities in the various emirates of the UAE are working towards achieving this common goal. Many of the recent proactive measures show UAE's resolve to counter challenges effectively.

According to a report from Morgan Stanley, the economy is predicted to see a mild recovery next year and may already have reached the bottom of the downturn. It expects the economy to contract by 2 per cent for the year as the property industry continues to face difficulties and oil production declines. The IMF predicted that growth in the Middle East would halve this year and the UAE economy would contract 0.6 per cent. That is still better than an expected 1.3 per cent contraction in the global economy. Underneath are some of the initiatives that would help UAE property sector to recapture its old position.

Federal Real Estate Regulatory Authority
The UAE Government has established a Federal Real Estate Regulatory Authority in order to co-ordinate regulatory efforts at the local and federal level. While Dubai and Ajman have already set up regulatory bodies to govern the property sectors of their respective emirates, the concern is about foreign property developers, who wholly finance their projects from local banks, without sufficient capital. Therefore, a need to have regulation was felt that would limit the finance being made available to foreign developers, who do not have a stake in the capital of their projects.

Federal Freehold Property Visa
In an unprecedented move, the Interior Minister issued a decree to better regulate the real estate sector by allowing expatriate property owners to obtain multiple entry visas valid for six months. Up until now, the regulations have been different in each emirate in the absence of federal regulation.

According to the ruling, investors have to meet a set of requirements:

Property should be worth at least AED 1 million
It should be ready for the investor to move in
It should be wholly owned by the investor
Investor must have a monthly income no less than AED 10,000 or equivalent in foreign currencies
Investor is required to obtain the title of the property from the registration authority before he could be granted the visa

Amendment to Article No 13
Recently, Dubai Government amended Article No. 13, to provide new provisions for the cancellation of contracts, thereby guaranteeing additional protection for property developers and buyers. According to the amendment, before cancelling any purchase contract, a developer must notify the Land Department if a buyer is in default of a contract for sale. This would boost the confidence of real estate investors and developers and help lift the cloud of uncertainty hanging above the property market.

Metro Effect
With Red Line of Dubai Metro commencing on 09.09.09, its effect has already started taking shape in the property market. Analysts have reported a price appreciation of properties in areas close to metro stations. According to a Dubai-based estate agency, apartments in buildings directly opposite the Dubai Marina station are selling for 6.5 per cent more than units in properties that are further away. Several other agencies said they were receiving more inquiries about units in buildings within walking distance of the stations. The trend indicates a growing number of people craving for properties near metro station. This would further escalate the demand for residential properties and spike the rates in the nearby areas of train depots.

2020 Olympic Bid
Dubai's bid to host the 2020 Olympic Games could further boost the UAE emirate's real estate sector and its economy. In fact, Dubai has a number of sports venues, as well as the infrastructure to host such a major sporting event. In this regard, the government has made a lot of infrastructural overhaul to justify their case. Upcoming metro network, water taxis, feeder line services for Dubai Metro and interstate bus services are some of the major factors to brighten Dubai's prospects to hold the event. History is replete with instances of property prices spiraling upwards in the host city, prior to the run-up to the Olympic Games.

Ajman Real Estate Regulatory Authority
Ajman Government has amended its regulation to create Ajman Real Estate Regulatory Authority (ARRA), aimed to regulate the property and construction sector of the emirate. The decree stipulates finding of a general establishment, affiliated to Ajman Government, named as Ajman Real Estate Regulatory Authority, with an independent corporate existence, which enjoys administrative, financial and legal independence. The agency has made it mandatory for property as well as master developers to register with it. The developers will have to pay fees of AED 100,000 to register while for real estate projects, it is AED 50,000.

ARRA is planning to set up a dispute resolution committee to look into issues relating to the emirate's real estate sector. The new entity will have the support of the Government of Ajman as well as the ministry of justice. The committee will be looking exclusively at real estate conflicts that have arisen due to a party not meeting his contractual obligations.

RAKIA Real Estate Regulatory Agency
Ras Al Khaimah Investment Authority (RAKIA), Ras Al Khaimah-based government body, has recently established RAKIA Real Estate Regulatory Agency (RERA) that will create a new layer of protection for real estate investors in the emirate. The Agency will oversee the implementation of the escrow account law for freehold projects under RAKIA.

The escrow account has been implemented to prevent mishandling of construction funds and ensure that investors' money is spent according to the master plan of the project. Real estate developers may only register with RAKIA RERA when the project's concept design has been approved. RAKIA RERA will also oversee the proper conduct of construction by sending out a team of engineers to inspect projects.

Apart from these, there are several other positive aspects coming into the UAE property sector like relaxation of lending rules and flexible payment plans offered by various developers. These initiatives could go a long way in improving the overall UAE property scenario. So, contrary to all negative speculations regarding UAE's worsening position, we can easily conclude that with the aid of these initiatives it can easily ride through this critical phase.