THE RIGHT EDGE

UAE, Dubai 2013 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Mohammed Khalifa Bin Hamad, Head of Real Estate Relations Management at the Real Estate Regulatory Agency (RERA), on supporting and developing Dubai's growing real estate sector.

How does the department reaffirm the ongoing support of the government toward the real estate sector?

The Land Department is a fundamental part of the government of Dubai, dealing with the ownership of land and property. It was set up as a committee to work in this field in order to facilitate planning and registration for the ownership of property and to safeguard property rights. In recent years, the Land Department has created and enforced a much more comprehensive and transparent regulatory framework. Our achievements have been very important in the evolution of the market and its recent turnaround. Apart from the continuous development of the regulatory framework, we have adapted to constant technological expansion plans within our procedures and processes while providing extensive training and development programs related to the real estate sector. The Land Department's scope is the internal mechanism, while the Real Estate Regulatory Agency (RERA) deals with external issues in relation to developers, owners, and business regulators.

How do you create the right real estate investment environment to attract international investors to Dubai?

Attracting international investors is an integral part of the community's economic development strategy. The Land Department has created an ideal real estate investment environment that draws in millions of investors worldwide due to various factors. Firstly, because our strong legal and regulatory foundation is based upon transparency, it becomes a major supporting factor for sustainable and competitive business. Secondly, Dubai is well renowned for being a tax-free haven, thus, by practicing the same, the real estate sector attracts large potential investors. Furthermore, purchasing property in Dubai is a relatively straightforward process wherein property development companies readily sell property without necessarily appointing an agent. This factor streamlines the buying process, making it swift, easy, and simple for investors. Another factor that draws potential investors to the real estate sector in Dubai is the easy access, readily available information, user-friendly guides, and the emphasis given on customer service. Investors are driven by these factors and insist on easily accessible information when making business decisions, which is why the real estate sector of Dubai is exemplary.

“The ability to achieve competitive advantages depends on the attributes of the resources and capabilities that we possess."

What competitive advantage does Dubai offer in the field of real estate?

The ability to achieve competitive advantages depends on the attributes of the resources and capabilities that we possess. Dubai has built very strong infrastructure, from airports to roads, bridges, and trains. This is in addition to the flexible laws and regulations that have put the Emirate in a unique position, not just on a regional scale but on a global one. However, one of the competitive advantages of Dubai's real estate sector, which often gets overlooked, is that it has managed to mix innovation with affordable labor costs. This combination gives developers the ability to deliver quality products at competitive prices. Furthermore, this country's “relatively liberal economic environment" has evolved to “become one of the strongest economies and fastest growing in the world," according to the World Trade Organization. Lastly, our competitive advantage also lies in the ability to build a highly secure nation with great advancement toward becoming a global financial hub with a variety of finance options widely available and easily accessible. Being the business hub of commercial life in this part of the Arabian Gulf, it has the edge to be the center of the world.

What is your relationship with real estate developers?

We are not only responsible for regulating the real estate sector, but also help in the formulation of the sector's strategies and regulation of the activities of companies that manage residential compounds, as well as the activities of real estate brokers and the owners associations. We also issue rules and regulations that qualify the activities of brokerage, lease contract registration, and certification, as well as issue licenses for real estate development entities. We have a dual relationship with the real estate developers. First of all, we provide assistance to developers in the process of registering property, land, or any specific projects. In order to do this, we have introduced precise mechanisms and user-friendly guidelines to make client transactions easy. Furthermore, we also regulate real estate developers by means of the introduction of an escrow account. Amounts collected from buyers for off-plan properties or project financers are deposited into an escrow account. Its aim is to regulate the functioning of the construction process of units sold off-plan, thus safeguarding the rights of investors. The law, referred also as the Oqood Law, applies to all developers in Dubai, without any exception, who sell properties off-plan in Dubai, and in return they receive payments from the buyers or financers. In addition to the rental aspect, we have launched a very large project called Ejari, which in English means “my lease," and is available on our website. Renewals, cancellations, transfers, and terminations can all be logged. Providing this service on a digital platform enables customers to access it everywhere or on their mobile.

What have been the agency's major developments over the past few years?

On the leasing side, we not only regulate and develop software but also educate people. In our view, we ensure that the professionals working in real estate continue to learn and train in new techniques to advance their business propositions. We have introduced conditions for licensing and certification. Ejari is one of our major developments and it is a system that enables the registration of rental/lease agreements accessible to owners and real estate management companies. The Ejari system provides a full portfolio of services beyond registering the initial lease agreement. Lastly, for our employees to be able to renew their licenses, they must adapt to continuous learning. We also keep them updated on the latest regulations, systems, and other essential information.

How do you see the future of the rental sector in Dubai?

Rentals always involve fixed income, and so if you compare them to the interest received at a bank, or to a sukuk, it is always higher in value. There is currently growth in property prices and leasing amounts. These prices increase annually; it is a perpetual source of income, which is a better financial proposition than simply concluding a deal once and for all. I think the basis for investment should always be the security of fixed income. Before the crisis, Dubai was engaged in developing its infrastructure in the broadest sense, to include airports, roads, a metro system, and hotels; today, the prospects are greatly improved as a result, with a much stronger footing than in the pre-crisis era. In fact, in the event of another crisis, the country would be better prepared than in the 2005-2006 period. Therefore, now is the time to pursue fresh opportunities. From the owner association perspective, we started this business from zero. A title deed had previously only related to an entire building, or else to land, but not to an individual apartment. The Land Department was responsible for introducing precisely such title deeds for apartments. From our side, we have to regulate the real estate sector to reflect the environment of Dubai, and this is why, upon examination of the sector in other countries, we designed an owners association model specific to Dubai. We are providing something new in combining real estate licensing and lease management activities under one roof. Previously, people would ask the property to pay our service charge if it was considered too expensive. Today, we have devised a “service charge index" to be linked to each specific plot and tower in Dubai. It will be ready on our portal for all investors and owners to consult before purchase. To receive RERA approval, a summary of the service charge and the full contract also need to be submitted. The developer/property manager is required to submit International Standards on Auditing (ISA)-compliant audits of the service charge financial statements, which are required to be prepared in accordance with the International Financial Reporting Standards (IFRS). These must be accepted by the owners association. We have also completed another innovative project for owners that will shortly be launched. It involves professional software that manages the owners association of a building, where one exists, which is also a first for Dubai.

© The Business Year - October 2013