Re-building Real Estate
Championed as a model practice for the region’s real estate market, five experts comment on how the introduction of the Dubai Strata Law will affect the industry
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The Developer
Niall Mc Loughlin, Senior Vice President, Damac Properties
The regulatory and legal framework that now underpins Dubai’s property market is on par with international standards. RERA is to be commended for creating a regulatory environment that will become an example for other countries in the region to follow.
Countries such as Saudi Arabia and Egypt are already making significant progress with regard to implementing regulatory framework to support growth in their respective real estate sectors. There is the potential for Dubai’s Strata Law to be used as a template for neighbouring countries planning to introduce regulations that define multiple-ownership.
Saudi Arabia is taking monumental steps to provide clear legal frameworks to advance growth in the property sector. Damac is also eagerly awaiting the issuance of the mortgage law, which will play an active role in stimulating local and foreign investment in Saudi Arabia’s real estate market.
The Investor
Ahmed Shaikhani, Managing Director, Memon Investments
In the Dubai Land Department and Real Estate Regulatory Authority, we are very much appreciative of the new regulations and they are a positive development for our operations here at MemonInvestments.
They will stop inexperienced real estate companies and set regulations for all experienced companies and institutions operating in Dubai and the UAE.
The practices the authority wants to regulate and implement are correct, in the shape of the municipality codes, escrow accounts, and appointing auditors and consultants for the construction and financial sectors.
RERA is to be commended for creating a regulatory environment that will become an example for other countries”
The market is more secure now; the payments are coming in and no person, organisation or institution can spend the hard-earned money in the wrong way.
If I was an investor in any country, my first question would be ‘how safe is my investment?’ If there was no regulation, I would cancel, but if I know there is regulation and that there are laws for land and laws for buying an apartment then I am interested in buying there.
The regulations are appropriate for the market right now. We see the authority implementing the laws and expect that it will gradually implement all of the necessary and correct regulations covering every aspect of the industry.
The Regulatory Body
Marwan Bin Ghulaita, Chief Executive Officer, Real Estate Regulatory Authority
I would like to see the real estate market being part of the economy. It can’t lead or drive economic performance; it should be part of it to attract professionals to the market.
Dubai is the most transparent market in the region, based on international standards. Three or four years ago, the regulation was not there. Today, speaking as a regulator, if you want to buy a property a developer would be regulated and registered; if you want to gain a broker’s advice the broker is being registered, regulated and educated, enabling all in the sector to be controlled and regulated by us.
?If Dubai remains income and corporate tax free, it is only a question of time that will help improve matters further narrowing the supply and demand”
The best we can do is to tell each and every investor, even if he is sitting at home in the UK or the US, that there is a regulated market here. People did get hurt in Dubai but they will reinvest in Dubai again because this is the right time to invest. This is how we are adding more professionalism to the market.
Let me share with you one fact, firstly, today we are making sure that only professionals up to our standards will come to Dubai. Secondly, the banks will start lending but we will have every lender in Dubai working by the book, not like before.
Today we are saying owners’ association management and the valuing of property will be based on international standards.
The Agent
Phil Sheridan, Group Chief Executive, Fine and Country Estates
Oversupply will continue to stall the prospect of growth in the property market. Those of us who live and work in Dubai, appreciate how welcoming a city it is and consequently, for the city to thrive once again, it needs to attract people; that is business.
To do that, it needs to be affordable and in that respect, Dubai has already become consumer friendly.
Therefore, if Dubai remains incomeand corporate tax free, it is only a question of time, together with a range of initiatives, that will help improve matters, further narrowing the supply and demand gap.
?While the strata regulations are a necessary and important step in the evolution of the market, they alone are unlikely to restore investor confidence”
Such matters include re-instating the threeyear residency visa with property ownership and the maturing of ‘body corporate’ when it comes to property maintenance charges.
Ultimately, the market still needs liquidity which must be delivered in the form of affordable mortgage finance.
This is something the banks are working hard to deliver, evidenced with Tamweel’s recent offering of 4.99%.
I also believe that Dubai International Financial Centre (DIFC) is crucial to Dubai’s financial standing. As many other parts of the world contend with radical change, high taxation and government intervention, so the financial sector could flourish.
In conclusion, demolishing a few buildings may not be the worst idea where the structure is evidently tired. But the supply demand balance will return.
In the end, the picture lies in the hands of us all. If everyone stopped knocking it and realised how lucky they were to live in this wonderful city, the future would be positively assured.
The Lawyer
Philip Corfield-Smith, Associate, Pinsent Masons LLP
We are advising developers and investors on the association establishment process but are aware that a number of regulatory issues have yet to be fully tested.
One such issue arises out of the historical lack of financial transparency provided by the management companies appointed by developers. It remains to be seen how any debts that remain outstanding at the time of establishment will be dealt with and whether the associations will have to assume liability and look to recover such amounts from the incumbent management companies through local courts.
The issue with this approach is that the associations will be tied up in costly and time-consuming litigation and potentially face difficulties in enforcing favourable judgments.
I would like to see the real estate market being part of the economy. It can’t lead or drive economic performance; it should be part of it”
On balance it appears that the benefits of establishment outweigh the concerns and would break the deadlock that currently exists in many developments where, due to the lack of transparency and trust, owners are refusing to pay service charges, leading to the suspension of utility services.
Once the management of the building and funds are in the hands of the associations, it is hoped that the payment of the service charges that are necessary for the upkeep of the buildings would be made in a timely manner and the associations would then be able to use the mechanism contained within the regulations to deal with any defaulters.
While the strata regulations are a necessary and important step in the evolution of the market, they alone are unlikely to restore investor confidence and a number of other issues will need to be addressed to provide the right environment for a recovery.
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STRATA AT A GLANCE
• Law No. 27 of 2007 Concerning Ownership of Jointly-Owned Properties in the Emirate of Dubai
• Ownership of jointly-owned property, including utilities, land, maintenance and safety provisions
• Disposal of units of jointly owned property; covering permission to divide assets between registered owners, right of refusal and division of common areas
• Authorisation and regulation of Owners’ Association groups
• Insurances for jointly owned-properties
• Direction for Association Constitution 2010
• Constitution covering annual charges; assets; codes of conduct; functions and powers of the association; voting and roles of the board, management and owners
• Direction for General Regulation 2010
• Disclosure statements and consumer protection; issues with disclosure statements; recovery of maintenance charges, community rules and the election of a board
• Direction for Jointly-Owned Property Declarations 2010
• Jointly-owned property declarations; long- term leaseholds
• Circular No. 1 of 2010 – Circular with regards to Service Charge for Jointly Owned Property
• The regulatory role of RERA and the payment of service charges
