The Chilling battle between Master Developers and Tenants in Dubai

Dubai, one of the most exciting places on the planet is well loved by its expats. Wooed over the years by some of the most spectacular residences and infrastructure on the planet, expats have flocked to Dubai like mice to cheese. While Dubai does appear to be all fun and games, which to a certain extent, it is, there still are a few things that prove to be a gentle reminder that every coin has a second side. 

If there were a single example to expose the difficulties in Dubai, it’d have to be the realty sector. Master developers, responsible for the design and construction of the residential and commercial units in the Emirate have long been at loggerheads with investors and tenants over a host of issues. As investors began to hold back the payment for services rendered, certain developers responded by cutting off access to community areas such as the beach, fitness centres, community parks and other such common areas. Things went on to degenerate right to a flash point and the developers found themselves in a tough spot. On one hand, they were facing the twin effects of a downturn in the economy and the drying up of revenue streams. At the other end, they found their investors to have rented out their properties to tenants. Now, the problem in the case of the latter scenario was rather peculiar.

The tenants claimed that they had paid all their dues to the property owners, who were the original investors for developers. Thus, for any action related to the payment of dues to be taken, the developers would have to contact the owners and stop targeting the tenants. Following the intervention of the regulatory authority, the matter seemed to have resolved in a satisfactory manner. But there was that underlying feeling of discontent running through both the camps.

One of the most significant cost factors for the realty sector is utilities. Particular among these are the district cooling facilities that are a must for surviving in one of the hottest parts of the world. Citing rising input costs related to generation, transmission and distribution, a leading master developer proposed a rate hike in chiller charges. The announcement mentioned that given the rising input costs, the master developer would no longer be in a position to support the subsidized rates that it had been extending to its residents. It also sought references to the rates being charged across other comparable properties when seeking to justify the hike.

Given the fact that an air-conditioned environment is critical to survival in Dubai; some residents decided to do things differently. Faced with a 200% hike in district cooling charges, some villa owners at the luxurious Jumeirah Islands community decided to install split air-conditioning systems at their respective properties. They were pleasantly surprised to see a noticeable drop in the bills and many declared that they would not be reverting to the central cooling systems in the future.

However, the terms and conditions of the contract between owners and the master developers could prove to be the proverbial fly-in-the-ointment. The Real Estate and Regulatory Agency (RERA) has already announced that they are working with the concerned parties to find an amicable solution to this problem. They also stated however, that rising input costs are bound to put pressure and it remains to be seen as to how much of an impact they would end up having.

The one thing that is being overlooked in this battle has been the humble contract. Industry experts have been crying themselves hoarse to get people to pay close attention to the fine-print. Else, the case may so happen that one’s dream villa may prove to be quite expensive as the living costs increase, as has happened in the case of villa owners at the prestigious Jumeirah Islands community.