Reforms to Boost Dubai real estate

It is a well-known fact that industries such as real estate and infrastructure are significantly influenced by Government decisions and policies.

The recent series of reforms announced by the UAE federal government authorities as well as local government bodies – including the landmark reforms to allow ‘IOO percent foreign ownership in companies and a 10-year residency visa for investors and high-quality professionals — will go a long a way of boosting investor confidence that will have a profound impact on the real estate market.

Additionally, various authorities’ announcements to reduce fines and fees — including the latest decision by the Dubai World Trade Centre to cut companies’ registration fees in free zones — will help smaller companies to survive and others to expand the business.

The three-pronged stimulus programmes, undertaken by the authorities, will give a major fillip to real estate, construction, information technology, small and medium enterprises sectors. In addition, these bold measures along with the easing of liquidity through the Dh50 billion package announced by Abu Dhabi will help to bank and manufacturing sectors while considerably easing pressure on the business community.

The icing on the cake was the announcement on releasing Dh’l4 billion back into the economy stuck as deposits for laborers’ employment and bank guarantees —in addition to the mandatory insurance scheme of the Dh60per worker.

These decisions could not have come at a more appropriate time when the high cost of living and higher cost of doing business had started to take its toll on the small and medium enterprises (SMEs) who are finding it increasingly difficult to manage the cash flow — or lack of it. These reforms now set a very convenient environment for businesses. However,
what is missing is the lack of credit — loans to SMEs. Small and cash-strapped businesses now need funding by banks — that will help them bounce back. The authorities and lenders could work together to gradually open up the liquidity tap for SMEs so that they could come out of the current situation.

In the real estate market, which is adequately regulated now, these decisions will have a very positive impact. The current low-price environment along with the new reforms announced by the government will help bring back home buyers and investors.

With the market shifting towards affordable homes, we believe, the end-users are now gradually moving towards buying properties. As ticket size is reducing, a one bedroom apartment is currently offered by some of the developers just under half a million and two-bedroom apartments at Dh650,000 to Dh800,000 bracket.

if finance is available more easily, — the market will pick up fast as it will encourage many families with regular income to buy homes either for their own use or rental purposes.

While Indians remain the biggest foreign investors in Dubai’s real estate, money flowing in from China, Central Asia, Africa and the Middle East will drive the growth in the real estate sector going forward. With prices coming down further, they would see the higher return of 6-8 percent per year as a the motivation for investing in
Dubai’s real estate.

Land and property transactions value declined to Dh57.9 billion in the first a quarter of 2018, down from Dh8‘l billion recorded in the corresponding period last year. This is one of the steepest declines in transaction levels seen in recent years. However, on a month- to-month basis, real estate transactions increased by Dh1 billion in May 2018, up from April 2018. Dubai recorded in excess of Dh17 billion worth of real estate transactions in May, based on figures published by the Dubai Land Department (DLD). The figure increased from around Dh16 billion in April.

If we take this as an indicator, then it looks like that investment is coming back to the market, slowly. However, we need to wait for a few more months to see if this is a trend.

With an end to the Syrian and Yemeni conflict on sight and a resurgence of oil price, there are multiple reasons for all of us to be hopeful. Following the usually quiet summer months, we hope to see the light at the end of the tunnel.

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