Dubai: Land Department lifeline to help property buyers

[Marc]

More about "Dubai Disneyland"

Investors facing cash-flow constraints can approach the Dubai Land Department for rescheduling payments for their properties, a senior government official said.

"Our goal is to maintain the contractual relationship between the two involved parties [developer and buyer] and so the most we can do is allow people an extension to arrange money or reschedule their payments," Emad Eldin Farouq, Senior Legal Counsel, told Emirates Business.

"Although there have been some cases of payment default, we have not yet terminated any agreement. We are assessing the relationship between the two parties. The administrative circular, which we had released on November 10, 2008, has managed to so far stop unjustifiable cancellations."

A few developers are offering flexible payment options to investors, with the global credit crisis making it difficult for buyers to pay mortgages on time.

Moreover, payment defaults can lead to attachment of the property by competent authorities, or even allow the developer to move court.

According to Farouq, the decision of any extension or rescheduling is taken on a case-to-case basis and usually a "reasonable" time is granted to buyers for arranging the money. The Land Department is also finalising the regulation aspects of laws already introduced – such as Law No 7 of 2006 concerning land registration, Law No 13 regulating the interim real estate registration and Law No 14 of 2008 on mortgages.

The Land Department has finalised regulations for the implementation of the Strata Law (owners' association and master community declaration and general regulations), which will be released after necessary approval.

Industry players have been urging the release of the regulations to complete the Strata Law in order to bring in transparency and protect buyers and owners.

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Marc

[Marc]

Developers to rework pricing packages

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The year 2009 will be a year of correction in the real estate market, according to a Dubai-based developer.

"This year, we will see restructuring from developers, who will rework their pricing package in a way that will establish reasonable prices in the market," said Taha Mohammed, Chief Executive Officer of property developer Tiger Properties.

"The UAE Government has a very intelligent way of structuring the economy and expatriates will continue to find the UAE market an attractive destination to invest in. Remember, there is a lot of trust left in the markets in the UAE. This year many developers will be involved in organisational re-evaluation," Mohammed told Emirates Business in an interview.

He said new developers in the current UAE market need to first ask themselves if they are in the business for the short or long-term.

—Secondary market prices have dipped around 20 to 40 per cent in Dubai. As a developer, would you lower your prices in the primary market?

—Secondary market prices do not drive the benchmark prices of a developer. We developers will not fight with the secondary market. The secondary market prices definitely impact the psychology of a buyer but developers are not reactive to them. As a master-developer, we will re-evaluate our pricing strategy.

—But the packaging itself that developers today are working on, will it not reduce the benchmark of real estate prices?

—Part of the real estate pricing by Dubai developers, like developers elsewhere, is based on construction costs. When construction costs were high, the real estate prices charged by developers were also high. With construction costs falling – and we expect them to fall further – developers will be able to launch their ventures at more reasonable prices.

—Developers of repute today are still managing to get some home financing for customers of their projects. Do you think they have to pitch strongly for securing the finance?

—I don't think any developer will be able to secure home finance on his projects today, however strongly he pitches. Banks are not going to lend, no matter what the intent of the developer is. The fact of the matter is that central banks need to provide more regulations and guarantees on mortgages and loans so that people who take loans have a larger guarantee on them. Currently in the UAE, the Central Bank is playing it safe for all sectors of the economy and not just one, such as the real estate sector.

—But the real estate sector contributes 33 per cent of the GDP, so why is it not getting enough support from the Central Bank in the market today?

—The Central Bank here is more cautious than other central banks of the world. If you look at the situation in the US and the depression there, the central bank there was not cautious enough to put a hold on the banking and mortgage financing market. Our central bank is playing it more cautiously given the current circumstances.

—What are developers like you doing to attract buyers today?

—I wish there were some kind of a central system that would understand the real estate market and its various segments. The audience for us developers has changed now. Previously, developers relied on retail investors and bulk buyers, but now we are forced to reach out to individual buyers, whether they are middle-income individuals or high-end investors.

—But is there an audience at all?

—You have to understand when people talk about the crisis, they are talking about a time frame of a year or two. The crash that people are talking about will not last for ever. Smart people in the present time will still find opportunities for assets to invest in. In fact, they are the ones who are taking the opportunity now. This is where we need to reach out to the regulatory authorities in Dubai to regulate the real estate sector in such a way as to favour developers as much as buyers or investors.

—Are you happy with Rera's regulations?

—Yes, as a developer we are definitely happy with what Rera is trying to create for Dubai. What Rera has done over the past year is outstanding. However, I don't think we have the right balance yet. Often developers feel they are caught in the middle and we constantly feel pressure from different sides. Developers are always stuck between the master-developer and the customer.

—Is there something further that Rera needs to look into with respect to regulations in the real estate sector?

—There are pressures on every segment of the real estate sector but it is important to understand from where the economy gets its drive. The first priority should be protection of reasonable interests of customers, because consumers or end-users, or even tenants, should legitimately be able to purchase a unit or units that they want to use. Master developers have to be clear from the start about charges and fees to be levied on developers. Some charges, such as district cooling fees, have been thrust onto sub-developers, which we did not anticipate about three or four years back. There are always new changes coming up from master developers all the time and that can be frustrating for sub-developers.

—Currently, do you have a provision in your contracts for visas to real estate buyers?

—Any developer would be silly in the real estate sector to put a clause that contradicts the laws of the country. Anything related to residential visas is a matter of national interest, not a private sector interest. Even if we have a clause in our sales contracts, we mention that it is subject to the law of the emirate.

Recently, there was clarification from the government on this matter that it will not give out residency visas simply because of the purchase of property. We will follow what the government suggests.

—There has been a lot of talk about prices falling in Dubai Waterfront development and that it will take a lot of time for work to begin there.

—These are just rumours. In our opinion, Dubai Waterfront will be an area that will thrive because it is the last beachfront property in Dubai before the Abu Dhabi border. We have no doubt, this development will go forward. In any part of the world, re-designing and restructuring of designs happen, and Dubai Waterfront is not new in that. Currently, the infrastructure has been finished at the Waterfront and it's just a matter of sub-developers putting up their fences and building their projects. We ourselves have made a strategic decision to proceed with one of our projects – Ozean Tower.

—Does Ozean Tower have mortgage finance in place for your customers?

—No, because this particular project came at a time when banks started to shy away from mortgages and loans. As a developer, that is another concern for us, as we find it strange that some banks are offering finance for some of the less qualified developers with less deserving assets.

—So how do you expect to get buyers for Ozean Tower project?

—We already have expressions of interest in Ozean Towers from institutional and individual investors from our existing projects. We have as much of potential buyer interest in Ozean Tower as we have seen in our existing buildings.



PROFILE: Taha Mohammed, CEO of Tiger Properties

Mohammed was the company's Managing Director and was promoted as the CEO in July 2007. His responsibilities include supervision of commercial activities related to realty, including sales, leasing and facility management.

He is also a member of the Tiger Group's Board of Directors, which oversees the operations of Tiger Contracting, Tiger International General Contracting, Tiger Industries, Al Durah Contracting, Al Durah Foundation, Al Waleed Commerce, DubaiLink Tours, Dana Hotel Management, Samaya Hotels & Resorts and the recently-opened Yarmuk University in Syria.

Mohammad has been with the group for 14 years. He has taken on various projects including those in Saudi as well as directing regional business development and operations for business units in the UAE. He holds a bachelor's degree in business administration.

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Marc

[captaincrab]

"The audience for us developers has changed now. Previously, developers relied on retail investors and bulk buyers, but now we are forced to reach out to individual buyers, whether they are middle-income individuals or high-end investors."

This comment is astounding!!! He admits NONE of their buyers were genuine end user purchasers to either occupy or rent.
Talk about a "bubble" in the making. How could they not see it?

[mattnz]

I saw it months ago and stated it on this forum. Its the worlds worst ponzi scheme!! Much much bigger than the madoff scandal.

[Dean@Massiveaction]

It's a bizarre market that's for sure. I know of one building, 1300 units, sold out in 1 hour.

Another high rise was 100% bought by 1 guy. He was just looking to park cash somewhere. Last I heard he didn't even have it rented out, just sitting empty appreciating in value, up until now that is.

[Marc]

Dubai’s Bubble Has Officially Burst

"Dubai Disneyland" - another story from dec 2008

It’s official! Dubai has lost its bubble and investors are scrambling to dump their real estate assets to minimize their losses. The mood is gloom in the emirate as more and more developers are laying off people by the minute.

Reports of panic in the market have surfaced and Bloomberg announced that classified ads were reading like an obituary for the real-estate market in Dubai. The very same market which seemed immune only a few months ago against the global credit crisis.

Some bankers even believe that Dubai’s property prices could fall by 80 percent in 2009, taking it back to 2007 price levels. Signs of trouble have also been recorded on the classy Palm Island development where rich investors complained about the lack of quality in their sand on their artificial beaches. Another issue is the lack of water that circulates the palm fronds of the palm shaped island.

Naturally, this is understanding given the fact these people paid millions for their investments. Another thing that has existing investors livid is the fact that prices have been cut by 40% since September. Imagine you paid full price!

Further to this, shares in the local property firms have lost 80 percent of their value since June this year.

With the slump in oil prices and credit being scarce, not many are positive about the Dubai real estate market right now. There are simply too many dollars in the game to close an eye and hope for the best. What many don’t know is that Dubai owes some $80 billion—148% of GDP to Abu Dhabi and the United Arab Emirates.

Christopher Davidson, a professor of Middle Eastern affairs at Durham University in the UK and author of “Dubai: The Vulnerability of Success” (2008, Columbia University Press) said,

“Dubai is more precarious than it has ever been, if the property industry collapses in Dubai, it will be finished. Dubai’s relative autonomy will come to an abrupt end. The emirate’s push into luxury property developments and tourist attractions was diversification on “paper sand,”

The property bubble in the desert emirate, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, is bursting as scarce credit and slumping oil prices have international investors scurrying to dump assets. That may shatter Dubai’s goal of creating a sustainable economy by building the Persian Gulf hub for finance and tourism, forcing it to depend on oil-rich neighbour Abu Dhabi for financing.

Some reckon that real estate prices will drop a further 20 percent. Even Nakheel PJSC, the Dubai state-owned developer of three palm-shaped islands in the Persian Gulf, said last month that they were scaling back some of their projects worth $30 billion. This includes the widely celebrated 62-story Trump International Hotel & Tower near the Mega Yacht Club on the tree trunk of Palm Jumeirah.

Source...

Cheers

Marc