Tuesday, July 06, 2010

High maintenance charges for Dubai homes could shun investors

Exorbitant maintenance charges in Dubai could keep away the investors, and make them think twice before purchase, say experts.

The Executive Chairman at PRDnationwide, Gary Bugden, said that service charges need to lessen, as there has been a pressure on prices. The problem is that the returns at the current service charges do not justify the investment.

Developers need to seriously look at how they are designing future projects, as projects with water features in them have high maintenance costs. In fact, the Dubai infrastructure, by itself, is expensive to maintain, he said.

Till date, developers have been in control of the project, and the owners were left at their mercy in calculating the needed maintenance cost for the project.

The General Manager of MAGme Property Solutions, Mazen Falhout, says that property buyers should have been more particular about the add-on costs involved, but, they were too busy speculating rather than factoring the hidden capital investment required over the years.

Before 2008 June, investors were not much bothered about service charges and were only speculating on the growing price. But, now, owners are made responsible for their investments. This led to few owners jeopardizing returns on investments by not adequately accounting for depreciation on electrical, mechanical and plumbing equipment.

If there was no sinking fund, owners will be required to pay the entire bill which could be substantial. Several owners now are faced with fees that cannot be just passed on to tenants, if they wish to remain competitive, Falhout said.

The sinking fund requires a fee to be paid by all unit owners on an approximate wear and tear. It is an obligatory feature to be managed by developers and home owners, wherein associations can take charge. But, with the rents falling by 40 percent last year, it may take some time to come along, said Bugden.

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