Dubai Realty segment readies itself for a second coming

The Desert, Leisure Options & Realty are the three most discussed things in Dubai. While the first two are tempting enough, it is the third and the final one that is going to be in focus today. High expat population, the welcoming nature of the locals, a progressive government and high quality infrastructure have all contributed into the transformation of Dubai. Over the years, this sleepy desert village has blossomed into a multi-faceted extravaganza that is unparalleled in the world.

There is one thing that everyone needs and Dubai is no exception to this – it is housing. Whether it is owned or rented, the realty market in Dubai is characterized by constant churn as the demand-supply equation changes. The past couple of years saw one of the worst times for the realty situation in Dubai. Prior to this, the rentals had been skyrocketing, fantastic developments were being announced and completed every other day and people were in a good mood overall. Then the economic crisis happened and the market bottomed out.

The Dubai property segment saw its fortunes being turned upside-down almost overnight. Rentals plummeted and even properties in hitherto prime areas were left waiting for buyers/renters.  This depressed state of affairs saw many a shakedown in the industry. Businesses folded up, tenants started defaulting on payments, and projects fell behind schedule and so on.

But as is the case with every industry, the slowdown too had to pass. Since the beginning of 2012, the realty scene in Dubai has been showing signs of a comeback. Maybe it was not to the levels of yore but definitely to a stage where it is profitable for all the stakeholders that were involved.

Leading from the front are the prime areas or those that have a sound backing in terms of quality construction, right sized accommodation stock, connectivity in terms of infrastructure and social surroundings, etc. The Dubai Metro is facilitating the development of new growth centres that is taking the load of the already saturated, existing locales. The authorities too are pitching in with a clarification on the existing rules, better enforcement, levying of stringent fines and other punitive measures.

All this activity is part of a confidence building exercise where everyone is meant to benefit. So the next time, one is ready to fly into Dubai, remember that things may seem to be a little tough, but they are only going to get better.

Dubai Authorities clamp down on rental housing irregularities

Dubai has had a long tradition of attracting all kinds of people through its doors. For decades, its growth engine has been powered by hordes of bachelors. It was these blue collar workers that flocked to the desert town and transformed it into the bustling megapolis that Dubai is today. Since then, even white collar workers have joined their blue collar counterparts and made Dubai their new home.

But, as Dubai takes its place at the top of the development charts in the Middle East, the authorities have been cracking down on bachelors that break the accommodation rules. They seem to be frowning upon the whole notion of ‘Sharing is Caring’. Now, the authorities have specified that blue collar workers must seek accommodation in labour camps that seem to have been setup exclusively for them. They cannot seek accommodation in the rest of Dubai.

White collar workers on the other hand are permitted to rent and purchase accommodation in Dubai provided they meet certain requirements. Overcrowding, sub-letting and other such practices are strictly prohibited. Families renting out a villa are prevented from renting it further to other families.

Bachelors on the other hand must avoid overcrowding in their rental accommodation. Only one occupant per bedroom is prohibited when an apartment is rented out to bachelors. Thus, only 2 occupants are permitted in a 2 Bedroom apartment. The same cannot be further let out to other bachelors. The Dubai Municipal authorities have clarified that bachelors are white collared employees. They are single and are living without their families or partners.

All these rules and guidelines however are pre-dominantly applicable to bachelors living in leasehold areas. Those living in freehold areas are currently exempt from these proceedings. Thus, they won’t be fined hefty amounts that go up to DH 50000.

So the next time you go hunting for a rental accommodation, make sure you avoid the above pitfalls.

Dubai Home Owners take the fight to the Master Developer Camp

The uber luxurious master community in Dubai, otherwise known as the Jumeirah Beach Residence or JBR has been in the news for almost a year now. Touted as being amongst the finest freehold locales in Dubai, this 1.7 kilometre beachfront community has a healthy mix of residential as well as leisure options. Here, one will find some of the foremost names in the hospitality business pitching up tents, together with other renowned restaurants and retail brands from around the world.

But the owners and tenants in this 36 tower residential community have been battling the developer for some time now. If one may recollect, the master developer had been talking tough since end of the previous year. A lot of tactics were tried out and included sending out demand notices to barring access to community facilities and the beach front areas.

Matters reached a flashpoint towards the start of this year and the Real Estate Regulatory Agency (RERA) had to be called in to work out a truce. But the master developer has once again chosen to put the ‘name and shame’ tactic into practice. It has put out a list of flat numbers and the corresponding arrears in the common areas of the community.

Many owners are not really against the payment of outstanding dues. But they have been voicing concerns over the continued lack of commitment towards the resolution of common grievances. With the formation of the Home Owners Association (HOA) and the quantum of service charges being levied being the prime areas of contention, the controversy simply refuses to blow over.

Property owners who had parked their hard earned savings to own what is even today, a prime piece of the Dubai realty market have been waiting endlessly for the master developer of their community to register the Home Owners Association (HOA). Such a move would permit the elected HOA to exercise their vote on the community budget, review the audited accounts statements for the past five years, liaison with the facility management and take a call on various other outstanding issues facing the community.

Taking the battle to the Dubai Properties Group (DPG) who is the master developer for this fine community, home owners are also questioning the rates being charged for community upkeep and maintenance. Many are of the opinion that the rates are needlessly high and quality work can be done at significantly lower rates, thereby bringing down the total outstanding arrears in return.

Needless to say, this fight between Dubai property owners and master developers is far from over. It remains to be seen, what the outcome shall be.

Rental Hikes threaten Villa Life at The Springs, Dubai

The Dubai residential realty landscape can be broadly divided into two main types of dwellings: apartments and villas. Given the lower outgo of funds for tastefully appointed apartments, these had been in high demand during the tough economic climate that prevailed in the region. On the other hand, a section of the residents preferred to take the luxurious route out.

Families had traditionally flocked to areas along the Emirates road such as Mirdiff, Bur Dubai and other locales situated on the periphery. However, come recession time and a few amongst them began to take advantage of the falling rates to gift themselves an upgrade. Suddenly, the upmarket Springs community began to look very attractive in a sliding rental rate market. As a result, many a family moved into this popular community that is famed for its quality living standards.

Two years down the line, the economic scenario has changed and the balance of power has tilted in favour of the landlords. Given the new rental rules that permit dwelling owners to increase rents by pre-determined levels, a lot many owners are choosing to exercise their rights. As a result, many tenants are now reporting rental hikes in the range of DH20000 and more!

Those caught in this rising rentals scenario are finding themselves in a tough spot. Having become hooked to the improved lifestyle that comes with living in a villa, they are now finding the step down to apartment living a bitter pill to swallow. As a result, many have been found to be entering into closed-door negotiations with their landlords over the quantum of rent hike.

The villa rentals market is governed by a few key aspects. First, the villas at The Springs are still relatively cheaper than other comparative communities elsewhere. Second, even within the Springs communities, the rental rates vary from villa to villa. Chief among the rent influencing factors are:

The Land Lord: The most critical influencing factor in the whole rental negotiation is without doubt, the Landlord. Often, the quantum of the hike can be discussed and revised based on one’s personal equation with their landlord. 

Payment Schedule: When it comes to payment schedules, the lesser the number of instalments, the better are the chances of negotiating a favourable rent on one’s favourite villa. So, it’d be wise to keep those rental cheques to as few as possible.

Amenities & Location: Even amongst the community, villas that are lavishly appointed and are located at certain preferable places tend to garner a higher rental than others. Amenities like swimming pools and villas with a golfing green or lake view tend to be high on popularity and therefore command a higher rental.

All things said and done, it often boils to the individual negotiations that renters have with their landlords. In the end, if the quantum of hike is higher than what one can fork out, tenants have no option but to do a rethink on the renewal of their leases.

Dubai Property Sector Reforms – Investor Protection takes one step closer to reality

Dubai and the rest of the Emirates are known for some of the most spectacular property developments in the region. Renowned the world over, investors have been flocking to this true oasis in the desert for longer than a decade now. While the picture was all too rosy at the beginning, the global economic downturn led to pressure mounting on developers. As funding pipelines dried up, the facade of prosperity began to crack. Reports began flooding in of investors being left high and dry, as master developers pushed back and in some cases, even abandoned construction plans.

As the economy went into crisis mode, the claims of investors having burnt their fingers only began to rise. Developers too were in no hurry to return the funds that had already been collected. They tried every trick in the book to hold on to the investors funds, even as they struggled to deliver the promised apartments and villas. As a result, the property sector in Dubai lost its sheen amongst investors, who began to exit the market in droves. This only served to further worsen the crisis.

The government earlier in the year had cautioned developers against such malpractices. However, given the market sentiment, they have now released the draft of a law that seeks to protect the rights of the investors against unscrupulous developers. Interpreting the sections of the proposed draft reveals that investors would soon be able to seek full refund of their money, should the developer be held guilty of malpractices.

Delayed by agreement:

The cancellation or termination process may be initiated under the circumstances wherein the developer fails to hand over the unit to the investor, either due to incomplete construction or a delay in handover of possession. The cut-off date for possession handover would be the one mentioned in the contract signed at the beginning, between the developer and the investor. This clause grants protection to investors against builders who include delay tactics in the sale agreement itself.

Variance in Build Specification:          
Some builders are known to use substandard materials or materials that are different in specification from those mentioned in the contract between the developer and the investor. At times, they even under-deliver apartments and villas, with the actual space being over one-third less than that mentioned in the contract. Under the draft of the proposed law, investors will now be able to demand a full refund of their money, should such an incident were to occur.

Common Areas, Common Problems:    
Each sale contract signed between a developer and investor includes in addition to the unit being purchased, the specifications of the common area amenities and features that purchasers are entitled to, when they make an investment. Some builders promise the moon. But fail miserably come delivery time. The new law (proposed)  now makes it increasingly difficult for unscrupulous developers to get away with such malpractices.   

Arbitrary Changes:      
Arbitrary changes in the specifications of the units such that they fall foul of the prevailing rules and regulations or are not to standard fall under this category. Developers who indulge in such behaviour would now have to be responsible for the full repayment of investor dues, should they wish to invoke their rights.

Besides the above circumstances for full refunds, the draft law also seeks to protect investors from unnecessary delays by offering them compensation. Such action is liable to be taken under circumstances such as:

Warranty Breach:       
Where-in the developer or the broker has deviated from any terms and conditions mentioned in the contract signed between the former and the investor

           

Misrepresentations:
The terms and conditions mentioned in the contract are misrepresented to the investor with the intention of getting him/her to part with their funds in a fraudulent manner

Out-of-Spec:
If the investor notices that the unit being handed over not as per specifications mentioned in the agreement signed with the Developer. Such discrepancies have to be ratified by an independent, third-party expert

Delays:
Investors are due to be compensated by the developer for all delays in handover that are greater than a month and lesser than a year

This proposed draft, should it be passed as law, would help go a long way in protecting the interests of the investors. It should also serve to strengthen the realty industry through the weeding out of weaker players who seek to undermine efforts. It remains to be seen, if the proposed improvements actually do make the transition to become the investor protection law that it intends to be.

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.