How the changing visa laws will impact the UAE real estate market
Theoretical physicist and futurist, Michio Kaku, once remarked that America’s greatest ‘secret weapon’ is that nation’s H-1B visa, which facilitates temporary residency for foreign employees, in specialized occupations. Of course, the US isn’t the only economy that has benefitted from the contributions of expatriates. The UAE’s large population of non-Emirati residents has played an important part in the country’s rise as a region commercial hub and globally integrated modern nation. In a move that reflects the characteristically hospitable Emirati spirit, however, the UAE has gone beyond the American model and introduced several regulatory changes that will deepen its engagement with its expat population.
The UAE is, in fact, probably unique in that non-Emirati’s form the vast majority of its population. It’s estimated that an overwhelming 88.52% of the nation’s residents are expatriates(1). In recent years, the UAE government has initiated several steps that can be termed bold and progressive, especially in the regional context. While apex monetary bodies have maintained a long term appraisal that is consistent in being quite positive, the UAE has been proactive in leveraging opportunities and attaining a robust future-ready status, to further enhance its options as an economy. The UAE’s 5 and 10 year long term residency visas, renewable retiree visa and Gold Card permanent residency visa, need to viewed in this context.
Gemini Property Developers MD, Prabhakar R Rao, believes that the slew of new visa regulations will create a direct and apparent impact on the UAE’s real estate market. Mr. Rao points out that, while the UAE has consistently attracted investors looking to leverage comparatively high rental yields and high returns on luxury properties, in the past, a greater sense of permanence within the expatriate community will stimulate further demand. In addition, according to Mr. Rao, the new visa regime will drive an aggressive diversification and expansion of the UAE economy, which should result in an enhanced influx of capital into the local real estate market as well.
The UAE is ticking all the boxes in holistic development
The effect of the general overall cooling of the world economy, post the 2008 crisis, has been exacerbated in recent years by the sustained lower crude prices, in the economies of the GCC. Breaking away from established practices, the United Arab Emirates is seeking to diversify beyond being an oil based economy. The country is proactively investing in transforming itself into a regional commercial hub as well as a leader in future-ready, sustainable and people centric urban development. While the upcoming Expo 2020 can be said to be acting as an inflexion point, it is itself a reflection of a broader commitment to digital transformation and technology driven smart living, made by the UAE authorities. The easing of the norms on 100% foreign ownership of companies, for instance, is not just indicative of a desire to boost investment, it will help in the influx of pathbreaking technologies as well.
So how do these changes affect the real estate market? Profoundly, as a matter of fact. It is one thing for a nation to introduce a more welcoming visa regime, but this needs to be accompanied by a compelling ‘story’ to attract the interest of the expatriate community. Real estate investments are big-ticket items and the only way to spike interest in them is by the creation of real value. Taking the specific case of Dubai, which is a real estate market that attracts global interest, the cumulative value of real estate transactions in the city was more than AED 34 billion, for the first five months of 2019. According to data issued by the Dubai Land Department, this constitutes an increase of 33% in comparison to the previous year, with the figure having been AED 24 billion in 2018(2).
According to Mr. Rao, while the change in visa laws is a welcome development in principle anyway, what has made them so markedly influential is that the UAE has articulated an attractive vision for the future, and demonstrated a commitment to its manifestation. Mr. Rao considers several related changes in regulation, such as those securing investor holdings, the simplification of wills for non-Muslims and many more, to be equally as influential. Furthermore, the development of infrastructure and amenities, as well as the creation of world-class institutions, further reinforces the argument for an expatriate to choose to extend their engagement with the UAE to more than a career opportunity. Mr. Rao points out that introducing a retiree visa will not result in a bump in purchases, simply on the basis of well-manicured gated communities with onsite golf courses and spas etc., ultimately, the fact that several of the region’s premier healthcare facilities are in the UAE, is an essential pre-requisite. Other demographics of expatriates, of course, have different concerns and priorities. This is why, according to Mr. Rao, the UAE administration’s several recent progressive initiatives, the holistic development of the country, and the changes in visa laws, need to be seen as affecting the local real estate market as an ecosystem of influences.
Turning tenants into homeowners and speculators into long-term investors
An infusion of expertise and capital are the two most stimulating things for an economy. The UAE administration’s creation of new visa categories that incentivize talent and capital not only make sense for the national economy, they also represent a great opportunity for investors. Evolving into one of the most inclusive and diverse populations in the world, and especially so within the region, the UAE has set its sights on emerging as a template for a nation state of the future. Most estimates note that a very significant portion of the UAE’s expatriate population wants to continue to remain in the country, if given the opportunity. The new laws facilitate this desire and are already creating an impact in a steadily growing percentage of homeownership, among expatriates. In a recent report, reputed think-tank, the International Institute of Finance, has pointed to this trend and confirmed these effects in the UAE real estate market(3). Broader buyer demographics, increased cumulative investment figures and a more mature market are also likely to drive more long term commitment among institutional and other overseas investors.
Mr. Rao believes that the UAE’s status as a thriving center of regional and global commerce has been bolstered further by its emergence as a wellbeing oriented, people-centric modern nation state. In Mr. Rao’s opinion, recent expat-friendly changes in visa rules will contribute towards creating the perfect synergy for expatriate residents, the larger economy and the UAE’s real estate sector. Diversification of business activities and emphasis on tech-driven innovation will attract even more aspirational and ambitious professionals, while incentivizing those already here to deepen their roots. On the whole, especially in the light of the size of UAE’s expat population and its influence on the economy, these new visa regulations might be seen as a trendsetting example of facilitating investments across borders and nationalities, in line with a more integrated world economy.