Residential, commercial sectors at risk owing to high supply

The greatest risk associated with the residential and commercial real estate markets in Dubai, is the increase in supply predicted during the next three years, which would further contribute to value-seeking attitude among potential tenants, reports Landmark Advisory in their April 2010 Dubai lease guide.

The report states that the lease rates in majority of areas in both residential and commercial markets will drop during the coming months, particularly, for low-quality buildings in less developed and integrated communities.

However, few residential units in major locations with high-quality developments will continue to remain stable, and this is applicable to specific villa developments and select apartment buildings, said Ms. Jesse Downs, Director-Research & Advisory Services at Landmark Advisory.

The lease guide stipulates that office rents that have been gradually declining last year, is mainly because landlords have been more flexible in their negotiations. The commercial market has been witnessing increase in supply in areas such as Business Bay, with about 6mn sq ft of office space due for completion this year. However, majority of spaces in Business Bay are due for handover this year.

The lease rates are likely to decline further in several areas for buildings with multiple owners, Jesse said.

Landmark Advisor has also reported to have noticed increased queries from companies, seeking re-location into Dubai. However, the queries are mostly from companies in other emirates, seeking to expand into Dubai.

Although this is an emerging trend, it is hoped to gather pace in the next few years, with the increase in commercial sale prices, while the leasing rates are bottoming out. Apart from this, better affordability, existing infrastructure, ease in recruitment, and high retention rates will further attract relocation demand in the coming years, Jesse says.

As for residential apartments, high supply has led to fall in rentals in several areas, including well-established locations. Palm Jumeirah and Dubai Marina have witnessed rise in supply, following delivery of new products. This has led to fall in rentals in these areas, and this trend has been observed in both new handover buildings and low-quality buildings.

However, the Landmark Advisory reports that villa lease rates have remained comparatively stable during the period, although few areas such as Victory Heights, Arabian Ranches, and parts of the Lakes experienced low limit declines.

Land Department to seize off-plan properties of defaulting investors

The Dubai Land Department (DLD) may soon begin seizing off-plan properties, whose owners are at default.

The authority has notified investors who are at default, that if they fail to pay their outstanding payments within two weeks, 40 percent of any amount that they have paid so far, will be confiscated, and the properties will be sold at auction.

The amount so obtained, will be handed over to the developers, along with profits received from the auctions. This rule will be made applicable to projects that are at least 80 percent complete.

According to Mohammad Sultan Thani, Assistant Director General at the Dubai Land Department, such a measure is aimed to promote completion of incomplete properties, rather than leading to cancellation of properties.

Several developers were dependent on off-plan mode of sales, during the peak of property sales, wherein, properties were sold before beginning construction, so as to obtain sufficient funds for construction. However, analysts are of the opinion that such models have led to speculative buying and inflated prices.

Several developers, including Al Mazaya Real Estate of Kuwait, with eight projects in Dubai, have issued such cancellation notices to investors.

However, Thani mentioned that the authority is yet to auction out any properties, and believes that there are only few such cases, as people will go ahead in making payments, if the building is almost complete.

Meanwhile, lawyers in Dubai have hit back, claiming that the Land Department does not have the right to do so, as Land Department is not a judicial body, and therefore these judgements cannot be implemented.

Another feather on cap for Burj Khalifa

Burj Khalifa, the world's tallest Building and Dubai's pride has emerged winner of the 'Mixed-use Project Award' during the prestigious Cityscape Awards in the MENA (Middle East North Africa) region.

The awards are being held together with the ongoing Cityscape Abu Dhabi being held at the Abu Dhabi National Exhibition Centre until 21st April 2010, and offering a valuable insight into current and future projects in the region.

The regional and international panel of judges, when commenting on Burj Khalifa and Downtown Dubai, mentioned that being true to the notion of iconic, this development has everything good in a mixed-use development, including pleasant commercial working environment, range of excellent hospitality venues, world-class shopping and beautiful residential integration.

"Burj Khalifa and Downtown Dubai have offered the real estate world with a new point of reference for modern living, and are clearly the worthy winners of this prestigious award," said Chris Speller, Group Director of Cityscape.

The Mubadala Real Estate and Hospitality is the Headline sponsor of Cityscape Abu Dhabi 2010, while Al Qudra Real Estate, Al Maabar, and Aldar Properties are Platinum sponsors, and the Abu Dhabi Department of Municipal Affairs are the associate sponsor for Cityscape Awards for Real Estate in the MENA region.

Burj Khalifa, forms a part of the two-square kilometre iconic development by Emaar, called Downtown Dubai. It was named in the honour of the President of UAE and Ruler of Abu Dhabi, H.H. Shaikh Khalifa bin Zayed Al Nahyan.

The Burj Khalifa, the new urban masterpiece in Dubai and the world's tallest man-made structure, at 828 meters, is encompassed by hotels, biggest shopping mall in the region, entertainment options, commercial and residential developments, all of which constitute Downtown Dubai.

Cityscape Abu Dhabi unveils life-size model of Abu Dhabi's 2030 vision

The Cityscape Abu Dhabi 2010, the international real estate investment and development event, was unveiled yesterday at the Abu Dhabi National Exhibition Centre by H.H. Shaikh Hamed bin Zayed Al Nahyan, Chief of Abu Dhabi Crown Prince's Court, and Chairman of Higher Corporation for Specialized Economic Zones.

The centrepiece of this year's event is a huge scale model of how Abu Dhabi will appear in 2030. The 23 meter by 17 meter display is the biggest single model on show at Cityscape. The model was unveiled on the stand of the Abu Dhabi Urban Planning Council during an opening tour of Cityscape.

The model displays major urban planning initiatives, integrating cultural, economic, environmental and social aspirations of Abu Dhabi in a single format. The model covers areas from the Corniche on Abu Dhabi's main island, to Shahama, Mussafah and Al Falah, and the islands of Saadiyat, Yas, Lulu, Reem and Sowwah.

In fact, it is a visible demonstration of commitment by Abu Dhabi to deliver what has been promised upon three years ago, when the Urban Planning Council was established by an Emiri decree. The model will be a living model which will be constantly updated to reflect the current progress made, and will serve as a great communication platform for all Abu Dhabi's stakeholders, said Falah Al Ahbabi, the UPC General Manager.

Cityscape Abu Dhabi, the largest gathering of real estate professionals in the Middle East, due to last until the 21st April, includes 250 exhibitors from 36 nations, and 800 chief executives apart from thousands of investors. The event also includes conferences, exhibitions, seminars and related events that gather international investors, developers, government and investment authorities, leading architects, consultants, designers and senior professionals in design and construction of real estate.

Running alongside the Cityscape Abu Dhabi 2010, is a new component to the event, namely 'CityBuild Abu Dhabi', an international trade show for the building and construction industry, which would bring together manufacturers, suppliers, architects, distributers, engineers, importers and procurement decision makers.

Dubai rents stable due to increased demand from neighbour emirates

Rents in Dubai have been stable last month, owing to increase in demand from residents of neighbouring emirates, although property prices have seen a dip due to oversupply, said the latest report by Deutsche Bank.

The rents of apartments and villas grew by 1.1% and 1.3% in March this year, the report by the Bank pointed out.

However, the prices of apartments and villas fell by 1.1 percent and 1.7percent respectively in March 2010, compared to previous month, said the report, which is based on the proprietary price index by the Bank covering 13 main locations in Dubai.

An official at the Bank who spoke to the media, mentioned that migration from other emirates to Dubai have led to increased demand. Moreover, several people have upgraded for better properties and have shifted to Dubai from Sharjah and other Northern Emirates. Several workers in Abu Dhabi, actually live in Dubai, given, the cheaper quality housing here.

According to analysts, Dubai has shown stability for almost eight months now, although the monthly data seems volatile. The fall could be owing to new supply, with Sports City and Business Bay being the most affected locations.

Housing oversupply and lack of financing are the hurdles to any possible recovery in the property market, the note said.

The leading real estate research company, Cluttons, last week said that average residential rent has declined by more than five percent in the first quarter, although the market is yet to bottom out in terms of pricing.

More GCC developers offering extended payment plans to investors

While real estate firms in Dubai are offering incentives and payment solutions to their investors, the GCC developers are offering extended payment plans for settlement of handover amount, said property analysts in Dubai.

The Head of Research and Consultancy at CBRE (CB Richard and Ellis) Middle East, Mathew Green, said that few GCC developers in the region are offering investors extension on final payment due to developers between 9 and 12 months.

There have been few innovative payment plan options among GCC nations, wherein the final payments have been split over a period of nine months to one year, post completion. This offers investors additional comfort to know if they will be in occupation before making the final payments. However, this option has not been much in use in the UAE, Green said.

For few developments, such a payment plan had been in offer since the launch of the product, and the developers have turned out to be financial models, he said.

Moreover, prudent firms with better access to capital will be well positioned to complete their projects, despite high risk of failure on the part of investors towards making timely payments, Green pointed out.

Developers too have been found to be more flexible so as to avoid defaulting units, and have offered investors additional time to make their payments. Basically developers are seeking to lessen risk in the present environment and do not want to draw back liability in the form of defaulted units, Green said.

Green said that increased transparency and better assurances from developers are the need of the hour, to re-build investor confidence. Investors at the final payment stage are actually looking at factors such as the units being tenantable in terms of utilities connections and necessary road infrastructure.

Few smaller developers in Dubai and several projects launched in the Northern Emirates have actually maintained larger proportion of up to 40 percent of payment for the final stage, and this may be a major hurdle in achieving actual project completion, as investors are hesitant to make payments on a property which could now reflect considerable negative equity for them, Green pointed out.

New law defends investors in stalled projects

A new law by the Dubai Government prevents real estate developers from keeping any funds of individual investors, who have invested in projects that have never seen the light of the day, owing to failure on the part of developers.

The Decree No.6 of 2010 by the Dubai Executive Council, says that both industry officials and the government will have to work hard in bringing about transparency in the market, which has seen 50 percent fall in real estate values.

The law also stipulates new rules that help purchasers who had signed deals with developers during the boom-time, but had to remain empty handed, owing to real estate projects that never started.

The Assistant Director General of Excellence and Organizational Governance at the Dubai Land Department, Mohammad Sultan Thani, said that this is just another step towards maintaining transparency in the property market.

The newly amended regulations of Law No.13 of 2008, indicates a sliding scale of refunds to help both developers and investors towards settlements.

The new law states that the developer intending to cancel projects, should notify the investors in writing, to abide by his contractual obligations. The developer should then wait for a period of one month for the contract to be fulfilled by each investor, after which, the developer can cancel the contract, and refund a portion of investor's money, as per the sliding scale.

If the developer has been found to have delayed the project due to failure or negligence, he is not eligible to retain any of the original project funds and should return the money in full.

However, if the developer has not begun construction of the project, due to reasons beyond his control, he can ask the land department to cancel the contract with purchasers and retain 30 percent of the value of the sums paid by the purchasers.

The regulations have clear details about what is deemed as "negligent attitude" on the part of the developer, and what are the factors that are "beyond the control of the developer".

When the Land Department cancels a certain project, an auditor will be appointed at the expense of the developer and a trustee of the escrow account will be asked to repay the sums deposited into the account to the purchasers within a period of 14 days from the date of cancellation.

In case the trust is found to be short of cash, the offending developer will be given 60 days to make the payment, or the land department will take the necessary measures to protect the rights of purchasers, including referring the matter to competent judicial authorities.

Work on Emirates Park Towers development on track

Construction on the Dh.1.8bn Emirates Park Towers development, is on track, with the casting of the final rooftop concrete work in progress, the development team of Emirates Airline and Group has announced.

The Group has confirmed delivery of the South Tower of the development, to Marriott International, the leading hotel management company, during May 2011, as scheduled. The adjacent North Tower will be delivered in 2013.

The entire Emirates Park Towers development comprises a 1,612 room twin-tower hotel and apartment property in Dubai.

The twin towers will stand 365 meters tall on completion, when they will be the tallest single-use hotel and residential apartment buildings in the world.

Designed by Archgroup International, the towers will be an iconic addition to the growing skyline of the city, agrees Ali Mubarak Al Soori, Vice President, Chairman's office, Facilities/project management at Emirates.

The construction is on par with the best international standards. Despite the real estate sector setback, following the recent global economic recession, the demand for best quality space has always continued in the best locations, he said.

Built along the Sheikh Zayed Road, next to Dubai's Business Bay district, in proximity to the Burj Khalifa, the Emirates Parks Towers is likely to be one of the leading business and luxury hotels in Dubai.

Among the amenities in the new hotel are 18 food and beverage outlets, conference halls and meeting rooms, business center, banquet hall, health club and 3700sqm spa, retail outlets, gymnasium and swimming pool.

Dubai rentals competitive, even as Abu Dhabi rents drop 10-30 percent

Rentals for apartments and villas in Abu Dhabi and neighbouring areas have dropped by 10 to 30 percent, say real estate agents.

It is for the first time in five years, that the supply of housing units in Abu Dhabi, has outgrown demand, particularly, in localities such as Mohammed bin Zayed City and Khalifa City A.

The agents expect that in a period of five months, rents will drop by about 30 percent when new buildings, including the 14 towers at the Al Reem Island are delivered to the market.

The UAE nationals who own housing units may try to resist their temptation and wait for months with empty units, although the drop in prices will get inevitable in 2011 and 2012 with several thousands of units entering the market.

The General Manager of Al Ghanem Real Estate, Abdul Rahman Al Shaibani, said that he hopes rents would drop by 20 percent inside Abu Dhabi and more than 40 percent outside the city during summer.

However, the Manager of Al Mamazar Real Estate, Ahmed Al Hammadi predicts that rents for new units in Abu Dhabi are unlikely to fall. He points out that it would not make sense to lease out two bedroom units at Al Reem Towers for less than Dh.200,000 as the cost for owners was very high.

But, he agreed that the new towers will affect the rent of the old units in Abu Dhabi, as few of the tenants with high incomes, may relocate to areas such as the Al Reem Island, Corniche, Airport, Khalifa, Electra and Muroor roads.

During the year 2009, high rentals in Abu Dhabi had compelled several residents to relocate to certain areas of Dubai, such as The Gardens and Discovery Gardens, in search of more competitive rental rates.

This year, even as there is a drop in rentals in Abu Dhabi, Dubai rents continue to remain competitive enough to offer a better choice to people, reveals a real estate analyst.

The Director General of Truth Economic Consultants, Ridha Musallam, also an economic expert, when speaking to the media, revealed that a rental decline of 10percent within Abu Dhabi city, and 40 percent in the outer areas is expected, although this will not bring Abu Dhabi employees living in Dubai, back to the Capital before the end of next year.

Musallam revealed that few major developers have even begun to freeze their housing projects to avert sudden huge retreat in rents. For instance, the three Etihad Towers, due for completion in June, has not stopped, despite completing the buildings and supplies.

The analyst explained that about 7000 units will be supplied within Abu Dhabi and the outside areas. In this case, there will certainly be a drop in rent. Abu Dhabi will also witness a drop in demand of up to 20 percent during summer, as several expatriates send their families home during this season.

Dubai records entry of 10,000 new residents every month

More than 10,000 residents are reported to be entering Dubai every month, as the emirate's population crosses 1.8million mark in the first quarter of 2010, revealed a data by the Dubai Statistics Center (DSC) yesterday.

The population in the emirate has grown to 1,801,000, an increase from 1,676,000 recorded during end of first quarter 2009. This indicates a 7.5percent rise during the past one year.

The population has further gone up by more than 30,300 residents, or 1.7percent, during the first quarter of this year, from the 1.77mn last recorded towards end of 2009.

The latest data is a total contrast from the statements earlier made by external agencies that Dubai's population would shrink, with the slowdown in the emirate's real estate and construction sectors.

Few analysts are now of the opinion that increasing affordability and availability of residential supplies within the emirate, is the reason behind the growth in Dubai's population. Active population in Dubai during the day averaged at 2,638,778, towards end of 2009.