UAE moots federal real estate regulatory body

UAE moots federal real estate regulatory body

The UAE Government is planning to establish a federal real estate regulatory authority to effectively control property developers, the minister of state for financial affairs, Obaid Humaid Al Tayer has said. Currently, the government does not have a body to supervise the sector, although emirates like Dubai and Ajman have their own real estate regulatory authorities - Real Estate Regulatory Authority (RERA) in Dubai and Ajman Real Estate Regulatory Authority (ARRA) in Ajman. The property industry has in recent years emerged one of the mainstays of the UAE economy and was the principal contributor to the country's GDP in 2007. In its latest release, the Ministry of Economy states that the value of contribution of non-oil sectors (which includes the real estate sector) to the GDP has risen to reach about AED 577.5 billion in 2008, over AED 467.9 billion in 2007, whereas the percentage contribution of such sectors has decreased to about 62.1 per cent in 2008, compared with 64.1 per cent in 2007.

But consequent to the global economic gloom, the growth of the UAE property industry has been hit by a flurry of job losses, cancellation of projects and a steep correction of property prices. Under the present circumstances, the government perceives a need for a federal monitor which would oversee developments in the various emirates. The move comes in the wake of several property developers defaulting on their commitments and is among a slew of recent measures undertaken by the Federal Government to raise the sector to international standards. A Central Bank resolution limits lending for real estate projects to 20 per cent of the deposits that a bank has available for loans.

Despite increased surveillance, the UAE is firm in its resolve to attract more foreign players in the property sector.  While addressing the Federal National Council (FNC), Mr Al Tayer, the Minister of State for Financial Affairs has reiterated that no further restrictions would be levied on foreign investors. "We should protect the real estate sector in these difficult times," he said. "We shouldn't impose any further restrictions at this difficult time on banks or on the movement of capital. We should deal with the circumstances calmly and wisely."

The Federal Government is also planning to issue unified freehold property visas to non-national buyers of property in various emirates. The announcement along with the afore-mentioned plan for a regulatory body, mark a decisive chapter in the country's real estate sector.

It is interesting to note that although the regional markets are still in a downturn, recovery signposts are already discernible. According to a new report on the Middle East North African (MENA) real estate sector by Jones Lang LaSalle, the stabilizing oil prices are a clear indication that the industry is set for expansion by 2010. The market analyst sees a host of opportunities in the present-day UAE property market. The report says: "The current market conditions create significant opportunities for equities only investors and those who still have access to debt finance. Given the current correction in pricing that is now taking place, Dubai offers a range of options for opportunistic investors. While yields are likely to increase (with capital values decreasing ahead of rental values) in the medium term,  the long-term outlook for the emirate remains positive, particularly as supply forecasts decline with more and more projects either cancelled or ‘put on hold.'" The findings are in tandem with the UAE Ministry of Economy's assertions that the national economy's blanket and the government's effective actions have helped certain economic sectors - construction, real estate, financial services and oil - regain balance, following the direct difficulties they have encountered as a result of the international financial crisis.

Factbox

How do you swap properties in the UAE?

Unlike conventional purchases, commodity/ cash swaps/ exchanges are customized contracts that are traded in the ‘over-the-counter' market between private parties. The first recorded interest rate swap occurred between IBM and the World Bank in the US in 1981.

Worldwide, it has been noted that swaps or exchanges gain popularity when demand and supply of commodities are both subject to considerable uncertainty. Permanently swapping homes is one of the best options in which sellers cannot reduce the price drastically. Trading homes by owner will also save sellers on the realtor's commission.