Real Estate Developments in Abu Dhabi and Dubai
The United Arab Emirates is continuously witnessing positive developments in the real estate market. The market is adapting to the changing terms of the scenario around the choices of the investors willing to invest in the real estate market. Abu Dhabi and Dubai are the ever-growing Emirates in the country with a boost of real estate development announcements over one year. Abu Dhabi recently experienced the launch of the Jubail Island project spanning at the cost of AED 5 Billion and the development of Abu Dhabi’s massive waterfront residential scheme at the Yas Island.
It is pertinent to note that the supply of the residential units has been continued for the first quarter of the year. With the issue of the amendments to the provisions of the Abu Dhabi Law Number 19 of 2005 (“Abu Dhabi Law”) which dealt with real estate property and its amendments in the Emirate of Abu Dhabi. The Abu Dhabi Law was amended concerning Articles 3 and Article 4 under the new unnumbered law on 17 April 2019.
Under article 3.1, the rights of the owner towards the property were limited to the following three (3) categories only:
- Emirati citizens, natural or legal persons
- public holding companies with ownership not exceeding 49 per cent non-nationals
- any person who has been issued a decision by the Abu Dhabi Crown Prince or the President of the Executive Council
Article 3.2 stipulated that the foreign nationals, as well as the legal or natural persons, still have the right to acquire and own all in-kind and original rights in the properties within the areas of investment.
Article 4 was amended concerning the holder of the ‘Musataha’. Musataha is a type of agreement which entitles the holder of the real right in rem towards the construction of the building to make investments, mortgages, sell or purchase a plot of land. This term ranges from a period up to that of fifty (50) years. The Resolution Number 64 of 2010 issued by the Abu Dhabi Executive Council made provisions for the regulations, rules and the term of the Musataha Agreement. The parties to the Musataha Agreement shall exercise the right to dispose of the property, including the right to mortgage. This right can be taken into effect without obtaining the consent of the landlord.
These developments play a major role in upbringing the real estate industry in Abu Dhabi. When a customer approaches a developer, it is of high importance that the preferences and choices of the investors are taken into account when the product is offered. In this case, the flat, unit or property. The industry data is critical when scrutinising the key indicators while at the planning stage.
It is widely believed in the market, that the residential real estate sector for both Dubai as well as Abu Dhabi in a comparison state. To take an example, a foreign investor would prefer to make an investment in Dubai for some apparent reasons, like more knowledge on the real estate regulations and increased gains in the form of profits and interest on the investments. The developers are competing for attracting the investors with competitive value offering and campaigns for maintaining the turnover. Also, the payment structure has been on the lines to the construction progress. The developers are offering a plan in which a specific percentage out of the purchase price is to be paid on completion and sometimes after the end of the project.
October 2018 saw the newly issued rules which were set to make things easier for the landlords to commence eviction of the tenants. These rules will allow the landlords to approach the respective enforcement departments for claiming any of the outstanding rents and the property back in possession. Initiatives like these make an effort to support and create awareness about the suitable environment for investing in the real estate in Abu Dhabi, together with the mechanism for ensuring simplified procedures and amicable resolution of disputes.
With the introduction of the Abu Dhabi Law, which allowed 100% foreign ownership, is intending to boost the confidence amongst the investors and encouraging transparency for longer investment terms. It will enable the foreign nationals to obtain an ownership of freehold titles within the investment zones along with the title deeds. It is to be noted that, previously, the investors were awarded a ninety-nine (99) year lease. This is a fundamental gear change in the market, which is set to enhance and encourage the economic activities in Abu Dhabi. These regulations will also substantially reduce the costs associated with registering the property. Abu Dhabi intends to focus on the foreign investor market in India and that of China, where there is potentially the highest number of investors showing a lot of interest to invest in the real estate in the United Arab Emirates.
The main attraction towards the new Abu Dhabi Law is the initiative of the Abu Dhabi Government, introducing the long-term investor visas along with 100% ownership for the companies belonging to specific industries. This is aimed towards the economic growth and developmental support in Abu Dhabi.
Rightly called as the Abu Dhabi Real Estate Law Number 3 of 2015 concerning the regulation of the Real Estate Sector in the Emirate of Abu Dhabi, provides for the strengthened protective incentives for the off-plan buyers. The off-plan sale is understood as an agreement where the investor is granted the rights in the property under the floor and compound plan. The law appointed the Abu Dhabi Department of Municipal Affairs (“DMA”) as the regulator for real estate who shall be performing similar functions to that of the Real Estate Regulatory Authority (“RERA”) of Dubai. The points to remember are as follows:
- A central and unique or database record for all the projects in the Emirate of Abu Dhabi
- Developers to charge only the administrative fees as approved by the DMA
- Rules to be laid down by the owners’ association
- Sale of off-plan units only on the real right, i.e. right in rem over the property
- Developers to open an escrow account for off-plan sale
- Fine imposed on the developers in the event the project is delayed
Rent cap in Abu Dhabi:
The Department of Municipal Affairs and Transport (DMAT) in Abu Dhabi recently recalled the annual rent cap of 5%, which was abolished in the year 2013.
The real estate market in the Emirate of Dubai has always boomed with the majority of the investors willing to invest in the projects. As it was previously experienced for the rental and sale prices in 2018, the same is expected to decline in 2019. This is largely due to the excess amount of supply volume. However, the industry in the long-term perspective is optimistically positive. Since the prices are on the declining pace; it is making it favourable for the investors to think and invest their money in developing or developed projects. Often, the developers are offering attractive incentives and pries, which has widened the investor pool.
2019 is set to experience a prosperous market avenue in Dubai’s real estate market where the developers are promoting their projects with a payment plan that is suitable for the investors along with their off-plan projects. The disparity in the ratio of demand to supply is also making the developers to create an environment more favourable to the buyers. With the Expo 2020 approaching, the Dubai real property market is set to boost investments by foreign investors by a large parity. Also, with the 10-year investor visa, which was introduced is offering the eligible residents to have a strong sense of permanent residence in the country for investors willing to invest around AED 10 Million.
Digital platforms in the real estate industry:
- Real Estate Self-Transaction (REST) Platform:
Dubai has launched the REST, a digital platform, which is expected to target the ease of managing all the transactions related to real estate or property.
Taqyimee is a smartphone application for valuation services for real estate. It is expected to connect all the evaluators to all the potential and existing investors and owners.
These platforms will increase the transparency in the real estate industry, making it more investor-friendly and providing easy accessibility to the services.
Laws on Rent Cap
The rent cap law in the Emirate of Dubai has issued the Government of Dubai Decree Number 43 of 2013 (the Decree) dealing with the determination of increasing the rents in the real estate industry in Dubai. The Decree imposed an increase in the rent cap to 20%. The rent cap law makes it clear that it applies to all the development areas and the free zones as the Dubai International Financial Center (DIFC). The RERA gives a detailed index on market price where the rental increase prices can be calculated.