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Dubai to classify property developers


Dubai Land Department, the emirate’s land and property registry, is planning to classify the real estate developers based on their performance and delivery track record, in order to boost the sector and help attract investment, a top official said.

Sultan Butti bin Mejren, Director General of the Dubai Land Department, told Gulf Property that his department is working on the plan that will help identify the good developers based on their performance.

“The department is currently working on a strategic project to classify developers. The department’s classification will be only Dubai-based,” he said.

Dubai Government opened the land and property sector to foreign freehold ownership in 2002 that triggered the biggest real estate boom in the country’s history as investment continued to flow in as most developers cashed in on the rising demand for homes.

Dubai’s property market came a long way since then – from a low-regulation to a sound regulatory environment – over the last two decades that saw the market go through the boom-bust cycle in 2006-2009, when developers and brokers had the freedom to carry out business without any restriction as papers and money used to change hands with hefty premium and overnight profits. In this process many people had also lost money while many developers disappeared from the market taking public money.

Dubai Land Department started to strengthen the regulatory environment by adding new sets of regulations to help revive the stalled projects, help the developers who were willing to continue with projects and supported both the developers and buyers to overcome the crisis of 2008-10.

Since then, the Land Department and its regulatory arm – Real Estate Regulatory Agency (RERA) – worked closely to educate the market, trained the brokers and encouraged best practice in the field.

He also hinted that a number of new regulation might be introduced to strengthen the emirate’s property sector’s regulatory environment.

“Real estate legislation is an ongoing process that helps to protect all investors, and Dubai has put in place a set of solid legislative rules that serve this purpose.

“To ensure a more attractive environment, there may be some amendments made to legislation regarding the leases and associations of owners,” he said.

As a result, real estate transaction level reached a record high of Dh267 billion in 2015.

The total value of land transaction declined marginally by 2.99 per cent to Dh259 billion in 2016, down from Dh267 billion recorded in 2015, and 18.8 per cent up from Dh218 billion recorded in 2014, according to Dubai Land Department reports.

The number of real estate transactions also declined 4.9 per cent to 60,595 last year, down from 63,719 recorded in 2015.

“Over 41,776 sales transactions took place, representing a total value of Dh103 billion, while the 15,000 mortgage transactions were equivalent to a value of Dh128 billion”, the report, released in January, said.

The total value of sales transaction fell 20.76 per cent to Dh103 billion in 2016, represents a significant dip in the value of sales, compared to Dh130 billion in 2015, a comparison between DLD’s reports show.

In 2016, land sales and mortgage transactions represented a total value of Dh193 billion across 15,994 transactions. This breaks down to mortgages bringing in over Dh114 billion via 5,145 transactions, while sales secured over Dh55 billion from 9,892 transactions. In terms of value, commercial land (already built on) claimed the lion’s share, representing 30 per cent of the total value secured by transactions in 2016, Dubai Land Department said.

DLD report shows that 55 new developers entered the market as per the Developers Registration, with the launch of 134 new projects worth over Dh100 billion, and the completion of a further 62 projects in 2016.

The data also reveals that in 2016, DLD recorded over 410,000 lease contracts from different groups across Dubai.

DLD issued 695 brokerage licenses over the course of 2016. Of these, 272 brokerage companies were involved in the sale and leasing activities, while 223 brokerage companies were involved in real estate rental activities. The number of brokers has increased to 5,933 over the past year, and that 2,285 brokers’ offices were active in 2016.

However, the real estate market appears to have bounced back strongly this year as the emirate’s Land Department recorded Dh12 billion worth of transactions in the first ten working days of this year – a record.

A surge in oil price and new investment from China and India, is set to boost Dubai’s real estate market that is witnessing a massive inflow of capital, evident in Dh12 billion deals concluded in the first 15 days of 2017.

Dubai Land Department said, it witnessed Dh12 billion deals in the first two weeks of 2017, or Dh6 billion in every five working days – creating a history of transactions in the first few weeks in a year. At this rate, Dubai could record real estate deals worth Dh292 billion this year – if the trend continues. This would be way above the last year’s Dh259 billion property deals recorded in 2016.

In an exclusive interview, Sultan Butti bin Mejren, Director General of the Dubai Land Department, elaborated his thoughts on a number of issues. Excerpts:

 

How is the real estate market in Dubai – in terms of foreign investment attractiveness? Are you happy with the transparency level?

Our real estate market attracted nearly $250 billion worth of investments last year, which demonstrates that foreign investors have a high level of confidence in Dubai, due to its safety, high return on investment and liquidity.

We believe that the legal environment and the existing real estate products and services that are in place ensure high standards that will continue to attract foreign capital.

 

Many people say 2016 was a challenging year, economically. What is your view – from a real estate perspective?

The real estate market in Dubai remains the ideal choice and the safe real estate environment for investors, in addition to providing a guaranteed return.

This is why we have witnessed excellent performance in the market, which was reflected by the overall real estate transactions recorded last year.

 

In terms of the demand-supply situation, how do you see the market shaping up this year?

We see a greater balance between supply and demand. This is a testament to the stability of the market and the sustainability of the real estate sector’s growth from year to year.

 

Do you think the market might suffer from an over-supply and perhaps prices and rents to come under pressure?

Dubai is developing new projects that serve to establish the Emirate as an attractive hub for various investments opportunities such as hotels, resorts and recreational areas, as well as residential and commercial projects.

Dubai is able to create a sustainable demand on an ongoing basis due to government incentive initiatives, including Expo 2020, and significant investments in infrastructure.

 

Will there be new sets of regulations for the real estate sector – to attract more investments?

Real estate legislation is an ongoing process that helps to protect all investors, and Dubai has put in place a set of solid legislative rules that serve this purpose.

To ensure a more attractive environment, there may be some amendments made to legislation regarding the leases and associations of owners.

 

Real Estate Investment Trusts (REITs) are a new phenomenon in the UAE market. They handle investors’ money. What are your plans to encourage investments through REITs and also to ensure that they are under a careful watch?

The department is working on the development of legislation that ensures maturity, continuity and transparency for these funds, to maintain investor confidence.

The Real Estate Investment Management and Promotion Center – DLD’s investment arm – develops many initiatives and programmes to encourage and attract new investments.

 

How important is the Gulf Real Estate Awards to you? How is it going to help improve best practices?

The awards are part of the department's strategy to create a competitive spirit in the real estate market and raise the level of services of participating companies, in addition to improving, recognising and rewarding best practices to encourage companies to adopt them.

 

Are you happy with the responses from the developers and brokers?

We are very pleased with the entries. This is the first edition of the awards and we have received 150 applications, which represents a good turnout, and we hope that more companies will be tempted to participate next year.

 

With Dubai Land Department having adequate data and information on every active players in the market, why doesn’t DLD rank the developers, brokers and reward them – rather than the companies themselves nominating and filling up forms with a lot of claims of achievements. Your own data – which is very comprehensive – could offer a better view and that could perhaps give the right picture of who are the best players?

The department is currently working on a strategic project to classify developers; however, the awards are regional and not restricted to Dubai whereas the department’s classification will be only Dubai-based.

What I would like to confirm is that the awards will use the department’s database to evaluate the companies.

 

Do you plan to name and shame the bad players in the market – or just impose fines?

These awards aim to identify the best companies in the real estate sector.

The classification project will allow us to identify the best organisations across various real estate fields.

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