Why was the Real Estate Regulatory Agency established, and what is its role in the Dubai real estate market?
Real estate is an important part of the economy in any country. In Dubai, the real estate sector became part of the economy in 1960, when the Land Department was created to begin regulating and safeguarding private property rights. The idea behind the Land Department was that to have a functioning real estate market, you need a body to ensure that the the private property system is secure, safe, and independent. Until 2000, the Land Department dealt only with Emirati nationals and selected international investors who had been granted permission to own land in Dubai. In 2000, we began to open up the real estate market to foreign investors by creating a designated freehold area for foreign investors, and in 2006 Law No. 7 concerning land registration in the Emirate of Dubai was issued. That law allows foreigners to own properties in certain freehold areas. This provided a lot of Dubai residents with the option of buying their own property and began a shift for many people from a tenant mindset to an ownership mindset. Sheikh Mohammed's vision has always been to make Dubai a hub for business and attract foreign investors. In 2000, the Land Department began establishing a strong system to enhance the services we provide to foreign investors in terms of registering title deeds. Our strategic plan is now to continue enhancing our services. That said, we have already achieved two critical things. First, we have been ranked fourth in the world for land registration systems in terms of speed and value. This year, for speed we were ranked first globally. It takes you only 25 minutes to get your title deed registered in Dubai. In terms of transparency, we are number one in the Middle East. This is an important factor for investors. Creating a real estate environment that is attractive to foreign investors requires legislation that is clear and easy to interpret. So far, we have more than 14 real estate laws in Dubai. We go to great lengths to ensure that any investors who come to Dubai are adequately prepared to participate in the market. We take investors through four stages of preparation: Know, Act, Manage, and Grow. First, Know: Before an investor even comes to Dubai, he can visit our portal to familiarize himself with the Dubai real estate market. The portal provides information on rules and regulations and statistics as well as lists of approved real estate service providers, such as agents and developers. Second, Act: Once an investor decides to go about acquiring real estate in Dubai, they will already know that all real estate service providers in Dubai must be licensed and trained by the government and will have official documentation to show that they are registered and approved. Third, Manage: After you have bought a property in Dubai, and you want after-sales service, you will also be able to contact service providers that have been licensed and approved by the government. Finally, Grow: Once you have begun to make money and want to expand your Dubai real estate portfolio, we will work to keep you up-to-date on changing regulations and new developments.
When you were developing the laws for the freehold land registry system in 2000, where did you look to for examples?
We have a saying in Dubai: “Knowledge is weightless, so go and take it wherever you can." Initially, we looked to Australia, Germany, Singapore, Japan, and Jordan for our inspiration. We took a number of ideas but adapted them to meet our specific circumstances in Dubai. After enhancing the system, we wanted to continue to improve it, so we then looked to Norway, which is first globally for real estate transactions, and New Zealand, which uses electronic real estate transactions. Because of the way we have used best practices, Dubai has the best investment environment in the world.
Who are the main foreign investors coming to the Dubai real estate market?
There is an investment option to suit every foreign investor here in Dubai. Any investor who comes here would be amazed. Some small investors might come to invest $200,000 in a small apartment. Other larger investors might spend $2 million on a villa. There are options for everyone. Our priority is just to encourage long-term investment—investors who want to stay in the market for at least five years. Today, we have more than 235 nationalities in Dubai. We have a huge number of investors from all over the world. The return on investment is one of the highest in the world. At the time of the peak, just before the crisis, you could get a 35% return on investment. That was not sustainable, but now you can get a sustainable return of 8-10% on your property, tax free.
You mentioned the crisis. What about the oversupply that remains in the market following the downturn?
When the economic boom started, it was led by real estate. That was one of the problems with the economy initially, because you can't lead economic growth with real estate. That was in the old days before RERA. RERA was founded in 2007 when we began to realize that the real estate growth was not sustainable and needed to be regulated. Our role was to encourage a sustainable, healthy real estate sector. I think we played a big role in helping to shield Dubai from the worst of the crisis and to facilitate a soft landing. Before the crisis, when we talked about sustainability and long-term investment in the real estate market, no one paid attention. After the crisis, suddenly people realized that proper planning in the market was necessary. In the wake of the crisis, we reassessed the real estate market, and we have stopped any projects that are not useful for Dubai or investors. We've cleared them and restructured them, and this has helped us to cut out a lot of the excess supply that was in the market. Now, from 2010-2011, we've had an increase of 24% on the volume and 20% on the value of real estate transactions in Dubai. This shows that the real long-term investors are still here, but the speculators have left. The strength of our real estate sector now has been the result of our strategic planning post crisis.
Dubai has changed so much in the past seven years. How much do you think it will change seven years from now?
We have a lot of international talent and creativity coming to Dubai. Now that we are giving people the ability to have real ownership in the economy, I think they are more likely to contribute to sustainable long-term growth. I also expect to see more green buildings, cities, and hubs. Our future is in sustainability and creativity. This kind of growth will ensure that the new generation in Dubai can enjoy and contribute to the continued wealth and prosperity of the Emirate.