Is the government doing enough to boost Dubai's real estate sector?

By Jamie Knights

Despite this, slowly, and in certain pockets, the market appears to be stabilising, but real estate experts contend that the government should be doing more to restore the confidence of investors.

Chief Executive Officer of Greenstone Equity Partners, Alex Gemici, says the market will not stabilise unless foreign investors return to the market. "For this to happen, RERA needs to do more to help protect the contractual rights of the purchasers in limbo on uncompleted units," he said. "One way of doing this is by publishing all cancelled projects and forcing developers to perform their contractual obligations. Unless foreign investors feel that their rights are protected in an equitable manner, they will continue to stay away from the market."

Regarding the government's proposed plan, announced in June, to extend visas for developers, Gemici believes it will help, but "not enough".

"The real shot in the arm for the market will be: i) a full visa to a property owner as long as they own a property in the UAE, ii) expansion of free zones, iii) elimination of the 51% local ownership requirement for on-shore businesses, and iv) more transparency and predictability on civil litigation, maybe through the option to use DIFC courts on all real estate related civil litigation at the request of one of the parties as opposed to mutual consent as it is now," he argued.

Gemici also added that on the regulation front, a law restricting the resale of a property contract (flipping) prior to the final delivery of a property would be needed to "avoid another bubble".

Cluttons LLC sales and leasing manager, Mario Volpi agrees that the change of law in regards to visas "is definitely a step forward", adding "any plans to offer incentives to buy properties will always get our vote".

However, he also believes that more needs to be done. "The government can always do more," he said. "Positive messages from them are a help and opening up more credit finance from banks in terms of mortgages and lower interest rates would be one solution.

"The government has been busy trying to kick start the UAE property market for a while now, but to date their efforts have not been as successful as they had hoped. Confidence is slowly returning but the world economy is hampering all attempts at the moment."

Investor protection law earns praise

An issue that experts have been fairly unanimous in their support for has been the Real Estate Investor Protection Law. It is aimed at providing clarity on various issues such as steps that an investor can take in case of project delays and how an investor can cancel the contract if the developer fails to fulfil his contractual obligation.

"The implementation of this law can only be good news for investors and owner occupiers alike," Volpi asserted.

But while these moves, should they come into fruition, are seen as positive - if not necessarily far reaching enough - there is uncertainty over whether the Tanmia initiative, set up in a bid to complete stalled projects, will help.

Gemici believes that it should be local lenders determining the financial viability of a project.

"The market does not need new supply which gets completed due to government support as opposed to real market demand," he added. "When there is sustainable and real demand with waiting lists, the financing from non-government sources will become available."

From the investors point of view, Volpi said the Tanmia initiative was an excellent way of boosting the confidence of buyers of properties that ordinarily may have been delayed or shut down by the government.

"From a market point of view this initiative will further cause price reductions as the oversupply of properties will continue to hamper any recovery in terms of price," he said. "Remember these towers/projects were launched at the height of the market when no one was in recession and Dubai had never heard of a property downturn."

So while moves are being made by Dubai's authorities to restore confidence in the market, it would seem that there is still some way to go.

Both Gemici and Volpi asserted their belief that
oversupply would be an issue, with Gemici adding that he believes less desirable locations would continue to lose value through 2012, up to 25% in some cases.

Volpi contends that the apartment market will remain soft for some time due to the "continual handing over of towers", but that the villa market has reached the bottom in some instances, with even signs of price increases in some areas.

But ultimately, with fluctuations and continual supply, many prospective buyers remain dubious about returning to the scene of the crash, even if they may be at last able to turn and look at the fallout from afar. "I think that investors are uneasy about the future direction of prices, oversupply and regulatory uncertainty," Gemici concluded.