What to do as a Real Estate investor in present Dubai economic conditions

Once the apple of real estate investor’s eye, Dubai has now become a thorn in the flesh for many of them. Especially for those who jumped the gun by ignoring all instructions and precautionary measures repeatedly thrown at them by Dubai regulatory authorities, as well as many real estate veterans, as they made some investment blunders whilst they were enchanted by the remarkable growth of real estate sector. Putting in Dubai real estate was certainly not a bad investment decision, but being incautious was. Even though the stupendous growth made Dubai look like an out-of-this-world place, in reality it wasn't, which means the rules of economics were as applicable to Dubai market as they are to any other market in the world.

So what’s there for investors, now when the Dubai dream is over …?

Before we continue to answer this question, let’s respond to this one. Is the Dubai dream really over? To tell the truth, all negatives reports and stories coming from the Dubai circles are having a little bit of hyperbole, there’s no denying that Dubai real estate market is dealing with some serious setbacks, but such problems were always expected. Dubai was never going to escape the consequences of global recession, especially when it mostly depends on tourism and finances coming from the west in form of real estate investments, as it is not oil-rich like its neighboring Emirates (e.g. Abu Dhabi).

Investors, who invested in off-plan properties without checking the credibility of the developer or real estate brokers with RERA, are probably the most grief-stricken group, as more and more developers are running out of finance to carry on with construction work, at the same time they are unable or reluctant to pay back. These investors are left with no choice but to file a suit with Dubai real estate court.

For those, who are worried because of sharp decline in prices, the best option is to hang around. Chances are that we will see recuperation as soon as we recover from financial crunch. It's only a matter of people getting out of their saving mode and touring Dubai (after all tourists attractions like burj-ul-arab or shopping malls have not vanished, they are pretty much there). Dubai is also looking towards a bail-out from Abu Dhabi, while Dubai government is also working to keep the damage caused by recent crisis in check, even if it requires the implementation of the new villainous media law.

Skyscrapers – History and future

Architecture is the alphabet of giants; it is the largest set of symbols ever made to meet the eyes of men. A tower stands up like a sort of simplified statue, of much more than heroic size. (Gilbert Keith Chesterton)

Man has always been daunted by exceptionally tall buildings (or structures), that’s the reason that more or less, all Seven Wonders of the World are essentially man-made structures and each of them has to do something with structural significance. Gigantic structures known as skyscraper are looked upon as a symbol of power, prosperity and pride for the city or the emperor. From the first skyscraper (Home Insurance Building, Chicago) to the latest jaw-dropingly tall Burj-Dubai, these building have continued to amaze the spectators and inspire other architects to dream of coming up with an even taller structure. The race continues, and we can’t really predict on how tall will be the ultimate skyscraper.

History:
We don’t know much about the very first construction in the human history or first man-made building for that matter, but we can safely assume (going by the human nature) that from the very first construction, man had this desire to build and posses the biggest or the tallest one. Apart from being a status emblem, skyscrapers also comes handy in the urban cities where land is scarce and the demand of residential and commercial building is high. Even though we find many examples of tall or exceptionally large buildings from the ancient times, it was actually the scarcity of land that prompted the construction of these concrete giants. The construction of skyscrapers kicked in from the Chicago city back in late nineties and the trend was followed by almost all major cities in the world.

Present & Future:
Now days, skyscrapers are looked upon as an average building in well developed cities unless they are exceptionally high or brilliantly designed. Hong Kong is said to have the most skyscrapers in the world, other cities with a considerable number of tall buildings include New York, Tokyo, Chicago, Sao Paulo (Brazil), Manhattan, Shanghai, Toronto, etc. The major break through in skyscraper history came when the old model, which was supported by steel frame, was replaced by frame-tube structure (and many other models) by Fazlur Khan, probably the most influential architect in the history of skyscrapers. Some of the worth mentioning skyscrapers of present and future are Burj Dubai, Sears Tower, Taipei 101, Empire State Building, Shanghai World Financial Center, Jin Mao Tower and Bank of China tower.

Role of recently initiated Dubai Real Estate Court

At last some relief for investors, as Dubai Real Estate court (AKA Dubai property court) in its first and extensively publicized ruling has ruled in favor of the investor, asking the developer (Mizin) to reimburse the payments made to them by the plaintiff. Prior to this decision, many investors were stuck after they've decided to invest in some off-plan properties, where the construction works never begun or were brought to a standstill in preliminary stage. At a time, when the investors were getting alarmed to a greater extent after listening to similar stories coming from everywhere, it was very important for regulatory bodies to restore investor’s trust and tone down the “scam developer’s mafia”. Bear in mind that RERA is also going to introduce a new rating system for developers, these ratings will be based on their projects, financial stability and presence in the market.

Dubai property court has been looked upon as a ray of light by investors; remember Mizin is a subsidiary group of Tatweer that happens to be one of the biggies in Dubai real estate market. If Dubai Real Estate court can continue to serve justice in the same manner (with a little more speediness though), it’ll give a huge boost to investor’s trust.

Role of Real Estate Court:
Despite the continuous words of warnings issued by RERA for investors to be on your guard when dealing with developers or brokers who are not licensed by RERA, or when there’s no Real Estate Trust Account involved, many investors still fell in the trap. Sometimes, because they were too impatient to check into these details and sometimes because these forewarnings never reached them, as a result more and more disgruntled investors were creating a negative buzz about Dubai real estate market.

In its early days, role of Dubai Property Court will most probably be limited to dealing with these displeased investors and developers, as both parties find themselves in hot waters because of ongoing financial crisis. Developers are struck by the lack of finances to carry out constructions, while investors are getting panicked even if there’s a little postponement in the completion date of the project. Also, among these genuinely victimized investors, there are speculators who do not want to make further payments because the prices are not rising to their liking. Therefore, the court has to walk on a fine line, as both developers and investors are equally important for a vibrant real estate market and upsetting any one of them can prove to be counter productive for Dubai market.

Dubai real estate market putting up with recent setbacks

Dubai would have been able to get away with these setbacks, if there was just one or two at a time, but they arrived in such succession, that Dubai real estate market was left in the lurch by the severity of these setbacks. Some of these debacles could have been avoided, while others were almost unavoidable. Let's look at some of these disasters holding up the growth of Dubai real estate market for the time being.

Financial crisis effecting global economies:
Financial crisis hit Dubai in many ways. There was so much construction work going on in Dubai, majority of these development have to be stopped because of serious shortages of finance. So many expatriates who were directly involved as the labors or working in another capacity at these construction projects were discharged from their duties, as a result they were forced to leave as per the Emirate laws. The exit of these workers resulted in further lessening in demand, which was already dwindling. Some other reasons for low demand include the completion of numerous residential and commercial units improving the supply side, abnormally high prices, and investors taking more and more interest in the neighboring emirates like Ajman or Abu Dhabi real estate. Plus, as it happens in recession, people are spending less on leisure activities like shopping or touring the high-profile places like Dubai.

Low Oil Prices:
Although, Dubai do not depend too much on its oil exports but the region surely does, especially its neighbor Abu Dhabi with considerably large reserves of oil. Dubai always anticipated a bailout in case of financial crisis. Now, Abu Dhabi whose economic stability largely depends on crude oil export (the prices of which are going down), is a little reluctant to support Dubai with a large enough financial aid. That is one of the main reasons why Dubai is left high and dry.

Amplification of the crisis by reporters:
Dubai has always been fortunate (and now unfortunate) enough to inspire reporters and journalists to put in a little bit of exaggeration when reporting about Dubai. The whole growth scene was covered like there's nothing stopping Dubai, and now the debacles are projected as the tragic end to Dubai's fairytale. It's funny to see how quickly the number of cranes at Dubai's skyline has been replaced in the news coming from Dubai, by the number of abandoned cars at airport parking.

Still there’s a silver lining in the cloud for serious investors and that is after experiencing abnormal highs and lows, Dubai will eventually become a rather normal real estate market, once the speculations are decelerated and the prices settle on a more realistic levels, it'd be much safer for the serious investors.

UAE real estate regulatory agency (RERA) - Purpose and Functions

Dubai government has been proactive from the day one in dealing with the problems related to real estate market; issues are seriously dealt with before any of them can damage the confidence of investors in Dubai real estate market. Since 1960 Dubai land department has been keeping an eye on all the real estate sales and purchase matters in Dubai. On 31st July 2007 RERA (Real Estate Regulatory Authority) was launched as an agency under the Dubai land department by his highness Sheikh Mohammed Bin Rashid Al-Maktoum, ruler of Dubai.

Although it was launched under Dubai land department, it is more of an autonomous body, with main objectives being monitoring and regulating Dubai real estate market. People tend to mix these two, though the objectives are same, RERA and Dubai land department differs in their priorities, functions and authorities.

Regulatory measures and standardization of the market:
Dubai attracts investors from all four corners of the earth; also there are expatriates coming from all over the world, then there are UAE locals and developers, all adding into the numbers of stakeholders in Dubai real estate market. Keeping in mind the countless developments, purchases, sales, rentals, investments and all sorts of transactions going around in Dubai, a highly efficient and focused regulatory body was needed to look into all of the problems arising from these transactions. RERA works towards managing Dubai real estate market in a way that guarantees the interest for all of the concerned parties.

Protecting investors through legislations and registrations:
RERA is working for the security of investors and transparency for all by registering real estate agents, developers, and brokers, etc with them, till date 823 developers, 1790 brokers and more than 950 projects are registered with RERA. Investors are advised to deal with these registered developers (RERA also manages developers trust accounts) and brokers with complete sense of security.

RERA and Dubai real estate:
Since its launch, RERA has been busy laying out rules and legislation for all sorts of agreements, contracting parties, licensing, compiling standard agreement forms for real estate transactions, keeping a check on all parties involved in Dubai real estate market including buyers, sellers, investors, advertisement agencies, agents, brokers and developers. The official website of RERA (www.rera.gov.ae) is a great source to get all the authentic information regarding Dubai real estate laws (many new laws have been introduced recently), code of ethics, news, list of approved developers, brokers, projects or trustees, research studies and survey reports. You can also sign up and submit your complains with them.

UAE - An insight into one of the most developed economy

Whether we call it a recession or not, one thing is sure, we are going through a severe economic crisis, which will be discussed (once over) in the Economics syllabus and debates, in coming years. In this global economic crisis, where the likes of United Estates or European economies are feeling the heat, United Arab Emirates economy continues to head into positive direction. All the economic indicators and reports are also confirming to the fact that there will be no slowdown in near future. Let's have a look at this thriving economy and the contributing factors.

Oil & Gas reserves:
UAE has almost 10 percent of world’s oil (proven reserves), while the gas reserves amount to 4 percent of global reserves. According to UAE government portal, these reserves can last well over 150 years. Recently when soaring oil prices took a toll on all and sundry, this part of the world remained mostly unscathed. Among the seven estates, Abu Dhabi is the biggest producer, producing more than 80 percent of the total UAE oil and gas production. There’s hardly any chance that oil consumption and demand will go down in future, so the black gold will continue to fuel economic growth of UAE.

Construction & Real Estate:
Dubai has done remarkably well as far as real estate market is concerned. Grand projects like “The Palm”, “Burj ul Arab” or “The World” managed to draw investors from all over the world. Abu Dhabi and other estates are also working in this sector. The demand will be much stronger than the supply even after the completion of ongoing projects. Real estate investors are now much more interested in UAE real estate, after the credit crunch in US market, considering it a safer option than others.

High-Class Tourism Industry:
Biggest shopping mall, tallest building of the world, indoor ski resort, white beaches, deserts, man-made islands, some of the most luxurious hotels in the world, crime free environment, rich cultural heritage, international sports event, to sum up, UAE has got tourists attractions in abundance. Tourism industry contributes significantly in over all GDP of UAE and it will continue to do so in the coming years. Many development projects are in progress; world-class airports, bridges and other infrastructure programs are about to complete.

It’s not that UAE is somehow immune to whatever happens globally, but with ample oil reserves, strong real estate market, foreign investments and an exuberant tourism industry, UAE is better equipped to put up with such situations.

Dubai real estate becoming home to celebrities

Not that Dubai needs some celebrity endorsement to gain popularity; the "city of gold" is a star in itself. When a celebrity purchases some villa, island, or just put his/her name to some building, it's hard to determine who's being promoted? Dubai? The star? or both of them? Dubai has got a celebrity status, that is why celebrities are more than happy to attach their names with the developments going on, some have done it by purchasing a piece of property, others by giving their names to some development, while some are trying their luck in designing hotels or golf courses. Although, the property has got to deliver what it is supposed to deliver (yields on investments, luxurious lifestyle or world class business facilities), still nobody minds paying a little more when they know they will be getting a villa in the neighborhood of David Beckham or Brad Pitt.

Big names from Sports world:
Sheikh Mohammed bin Rashid Al Maktoum presented a whole island (in "The World") to Michael Schumacher at his retirement, probably one of the most expensive publicly known gifts to an individual in recent times. Schumacher involvement doesn’t end there; we have got a whole Michael Schumacher Business Avenue at Business Bay as well. Similarly Boris Becker has a 19-storey building named after him. ACI Real Estate recently launched "Boris Becker tower" in the same district. Talking of tennis celebrities, everybody knows the famous friendly match played between Roger Federer and Andre Agassi at the helipad of Burj Al Arab hotel. Then we have "Tiger Woods Dubai", a golf resort designed by non other than Tiger Woods himself. David Beckham represents the football stars at Dubai, who owns a luxurious Villa at Palm Jumeirah (though for the time being, his in-laws are more likely to occupy it).

Showbiz Biggies:
Dubai government is trying to make Dubai the prime destination for tourists, and what better way to attract people all around the world than bunching up some of the most famous showbiz names in Dubai, one way or another. Brad Pitt, Angelina Jolie, Hillary Swank, Kylie Minogue, Giorgio Armani, Carlos Santana, Shah Rukh; the names are big enough to pull crowds on their own. One of the hottest couple in Hollywood (at least among those, who are still together) Angelina Jolie and Brad Pitt have reportedly bought an island in "the world" Hillay Swank and Shah Rukh Khan are endorsing some property developments (While SRK owns an address in Palm Jumeriah as well). More than 2000 celebrities from all over the world flocked to Dubai for a grand opening ceremony of Hotel Atlantis, where Kylie Minogue and Michael Jackson performed.

With so many celebrities, VIPs and super starts showing up at Dubai, Dubai will soon become an ideal spot for investors, businessmen and tourists alike (oh and paparazzo’s as well).