Why RERA is prioritizing ethics in real estate
Across the world, the real estate industry is subject to legal constraints within national, state and local jurisdictions. Although the provisions may vary, real estate transactions are conducted within a robust legal framework, as assets tend to be inherently capital-intensive. Governing bodies often ramp up or refine the legal clauses in response to changing social, economic and political circumstances. However, irrespective of how refined the regulations become, implementation is subject to the ethical conduct of all industry stakeholders.
Stephen E. Roulac, who authored the book ‘Ethics in Real Estate’, put it succinctly when he said, “laws are only as good as the personal sea of ethics in which each of us operates”(1).When he was soliciting funding to support the publication of his work, one top-level executive went as far as telling Stephen, “I didn’t know there were any ethics in real estate”. However, this cavalier attitude is now being actively opposed by industry stalwarts, who have begun to stress on the criticality of ethics, in the context of real estate.
Dubai, for its part, has been in the news for a series of regulatory reforms and reorganization in real estate sector, throughout 2019. Sheikh Mohammed has led efforts to boost transparency in the sector, in time for the upcoming Expo, by tying up loose ends and creating favourable circumstances for investor confidence and safeguarding the interests of all stakeholders. Both Dubai Land Department (DLD) and its regulatory arm Real Estate Regulatory Agency (RERA) are central to the implementation and enforcement of changing real estate legal provisions in Dubai. Besides legal amendments, RERA recently issued an open circular to real estate companies, requiring them to abide by a set of 10 ethical principles, in what can be termed as a first-of-its-kind initiative among leading markets(2).
Real estate ethics by RERA
As the conduct of real estate firms has a direct bearing on the public opinion of Dubai’s real estate, RERA has laid emphasis on trust, as the first in its list of principles, and mandated that firms actively gain and maintain the confidence of the public. This is a critical underlying principle that complements the recent rebranding initiatives of the government, aimed at positioning Dubai as a leading global investment safe haven. Real estate firms have been directed to not divulge confidential information unless required by the law, as per the second of these ethics principles. It’s significant that RERA has chosen to be explicit about this issue, especially in the light of growing data breach concerns and major political scandals, such as Facebook–Cambridge Analytica. Similarly, the third principle revolves around conflict of interests, in the event of which, firms are expected to use their discretion, take appropriate measures and ensure transparency in all respects.
“This ultimately means that Dubai’s real estate market maintains its reputation as one of the best investment havens in the world,” Marwan Bin Ghalita, CEO of RERA, said in the circular. In line with Marwan’s words are the fourth and fifth principles that demand honesty and integrity from real estate firms, regardless of customers’ race and religion. These principles are aimed at facilitating an anti-discriminatory environment in real estate, which can attract more foreign direct investment (FDI). The sixth principle seeks utmost legal compliance from real estate firms, after DLD discovered unlawful practices, like the presence of online property listings that are devoid of a mandatory Trakheesi permit number.
The seventh and eighth principles require real estate firms and companies to provide high-quality services to the customers and commit to transparency every step of the way, while the ninth principle demands protection of customers’ rights. Firms are encouraged to adopt emerging technologies and provide top-notch services, by utilizing the support initiatives of DLD that promote and encourage innovative practices in real estate. DLD has statutory bodies in place, like the Rental Disputes Center, to safeguard the rights of customers, yet the concerned parties are advised to refrain from misleading, withholding vital information and deceiving unsuspecting clients.
Finally, RERA has urged firms to incorporate social responsibilities and strive to add value to the society. Firms and companies should—in the words of Marwan Bin Ghalita—“work to respect the values and principles of the society.”
The timing of the announcement
As per DLD’s records, real estate transactions worth AED106 billion were recorded in the latest financial year, which constitutes a year-over-year growth rate of 12%. Also, on November 24, DLD recorded a total of 515 real estate transactions worth AED 888.3 million, which is an 11-year high, according to Property Finder(3). It is worthy of note that, of the total 515 transactions recorded in a single day, 387 were off-plan properties. The aforementioned trends can be attributed to new initiatives and reforms taking shape in the lead up to the much-awaited Expo 2020.
In light of these promising numbers and tell-tale signs of growth, there are strong indications that the cumulative efforts of Dubai’s policy makers is beginning to bear fruit. With a new period of sustained growth in the offing, the Dubai real estate markets need to be an international model for probity and strong ethical foundations, to ensure that the markets are in an optimal state to thrive, and promote the interests of all stakeholders.