Dubai is working on a new rental law that will give separate weightage to commercial real estate such as offices, malls, health and educational property, apart from residential. The law, which is in front of the legislative committee, will replace the current one-size-fits-all rental regulation, top officials said.
That could pave the way for each property asset class to have its own rental index and contractual obligations between negotiating parties. If the law passes, it would signal another major step up for Dubai’s property market in terms of having a more equitable relationship between tenant and landlord. Currently, the Dubai Rental Index, dominated by residential property, is updated annually.
It was just last month that the Land Department announced a “unified lease form” on all rental contracts in the emirate. And if subsequently there are omissions on the part of any one involved in the deal, then penalties come into effect.
“We wanted a new rental law that covers all types of property assets and not just draw on the provisions within a single, unified law,” said Marwan Bin Ghalita, who heads the Real Estate Regulatory Agency, which comes under the Land Department’s aegis.
There will also be changes to another existing regulatory regime currently in place. The laws governing homeowners associations will be “clarified” to bring in more transparency, officials said. With more freehold projects getting greenlighted, the Land Department wants to clearly define the rights of developers and property owners.
The first quarter recorded decent gains for Dubai’s property market — 427 projects were approved involving 213 developers. The total transactions, involving rentals as well, touched Dh77 billion ($21 billion) plus.
“These numbers are promising and go against the negative mentions that were being made about Dubai property market’s prospects,” said Sultan Butti Bin Mejren, Director-General of the Land Department. “It has the makings of being a good year. And it’s not just on the investment side we are seeing gains.
“Our building reclassification programme (which covers all of the older buildings in the city) is 69 percent complete; it has covered 144,000 plots and 314,000 properties.” (According to officials, 80 projects are likely to see completion this year, the bulk of them launched in 2014-15.)
Meanwhile, the Land Department is working on another major regulatory initiative — putting in place a robust foundation for real estate investment trusts (REIT). Currently, there is only the Emirates REIT that is active in the market, which pools together institutional funds into single or multiple properties for yield generation.
“Our focus is to get in more overseas funds involved … and Reits would be a good vehicle through which they can operate,” said Bin Ghalita. “Until now, there was too much emphasis on individual investors, and if the market takes a bit of an uncertainty, they pull out.
“With institutional investors, the strategy is more long term, through the ups and downs of a market cycle. We will need more of these investors.”
(The Land Department has sounded out the DIFC Authority whereby some of the funds operating within its jurisdiction could take local exposures in the realty market.) Emirates REIT started its life by investing exclusively in commercial realty and then, recently, set up a second one to pick up income-generating residential properties in Dubai and Ras Al Khaimah.
“In 2006, the Land Department oversaw 16 laws … over the years we have expanded the regulatory arm,” said Bin Ghalita. “And more of our services are being pushed online. For instance, an overseas investor can have a ready set of data on likely yields depending on the location from our smart map app.
“If they want to pick an estate agent, they can choose between those classified under gold, silver or bronze. Data on how many an agent was involved in and all such relevant details are there. It’s up to the investor to make informed decisions when investing in Dubai. The transparency has already been built in.”
By Manoj Nair
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