New real estate planning committee in Dubai: need, scope and function
Ever since his accession to power, Sheikh Mohammed bin Rashid Al Maktoum has undertaken several reforms to safeguard Dubai’s interests across all sectors. Earlier, in his ‘Letter of the New Season’, the Ruler of Dubai laid out six important directives for the immediate future, addressed to regional administrators, leaders and citizens. Among other things, the directives included a call to action, aimed at the real estate sector in particular. As a consequence, a real estate planning committee has come into existence recently. Maktoum bin Mohammed Al Maktoum, Deputy Ruler of Dubai, will chair the committee, which comprises of senior real estate stalwarts in Dubai(1).
Once operational to its full capacity, the committee will strive towards striking a balance between supply and demand, by streamlining real estate developments in Dubai. Besides the recommendations to avoid general glut and bring real estate in line with national economic goals, Sheikh Mohammed has also directed the committee to ensure diversification in real estate offerings. Comprising of senior representatives from the Dubai Land Department (DLD), Dubai Executive Council, Investment Corporation of Dubai, Emaar Properties and Dubai Properties – among other semi-government companies – the cross-disciplinary committee has been instituted at a crucial juncture, when the need to align ambition with performance is at an all-time high.
Asteco estimates that around 24,300 apartments, 8,500 villas and 3.6 million sq. ft. of office space will add to the Dubai real estate market, by the end of 2019(2). While this could potentially translate to a rise in market overhang or glut concerns, the sales volume is expected to spiral upwards on the back of new ownership regulations, visa reforms and the upcoming Expo 2020.
According to Sudhakar Rao, Chairman of Gemini Property Developers, the need for a committee to streamline real estate supply stems out of both external and internal factors. “Internally, the inventory problem needed a solution, especially one enforceable by a governing body. Externally, the global trade is plodding and some financial markets are in dire straits, which makes markets like Dubai an attractive option for global real estate investors. When such opportunity knocks on the door, it is better to be ready”, Sudhakar Rao believes.
Real estate accounted for at least 25% of overall GDP growth in 2018, which speaks for itself. Therefore, Sheikh Mohammed has instructed the committee to draw a strategic blueprint and an elaborate plan for real estate developments in the next decade, hoping it can add real value to the national economy at large. The strategic plan will, among other things, address ways to mitigate the overlapping of interests between private and semi-government developers.
For starters, the committee will examine the status quo of Dubai real estate and all the external factors in play. Based on the observations, the committee will then ascertain the market needs, the inessentials, the demand-supply gap, the ideal construction pace and plausible adjustments, keeping economic development as the bottom line. Promoting transparency and innovation within the real estate ecosystem remains the cornerstone of the planning committee. To that end, the committee will urge developers to take up innovative projects and adopt a quality-over-quantity approach to development. Any deposition of existing members and admission of new ones will remain purely the prerogative of the Chairman.
A collaborative forum that features the Deputy Ruler, the DLD and representatives of the developer community, in a close-knit committee, is a significant step towards Dubai’s transparency goals. It allows inter-disciplinary collaboration and the consolidation of multiple perspectives on a single platform, to achieve a common goal. According to Sudhakar Rao, Sheikh Mohammed has shown keen business acumen and pragmatism in selecting the members of the new committee. “By bringing all the parties with vested interests in Dubai real estate under one umbrella, Sheikh Mohammed has upheld the transparency imperative and facilitated inclusive development,” the Chairman of Gemini Property Developers believes.
Thanks to improved regulatory conditions and long-term residency options, the real estate market is expected to stabilize further and continue to mature in 2020. With Expo 2020 around the corner, real estate—short-term rentals in particular—is bracing for significant boost. The timely introduction of the planning committee provides a much-needed impetus, market confidence and fresh outlook for future developments. Such initiatives also encourage foreign investors, whose confidence in the market often hinges on the extent of government involvement. From the macroeconomic standpoint, FDIs are very consequential and the impact the planning committee is likely to have cannot be ignored.
According to Sudhakar Rao, the scope of this initiative will be far-reaching. “In the short-term, the committee will work towards mitigating inventory overhang. Subsequently, by using such precedents, the committee will plan the course of Dubai real estate for the next decade. “Therefore, the market will benefit from the proactive, responsive and guiding influence of this initiative”, Sudhakar Rao says in closing.