Issues affecting the real estate market can mostly be resolved through negotiations between parties rather than taking a legal recourse, according to a leading property firm.
In an interview with Emirates Business, Elaine Jones, CEO, Asteco Property Management, said: "Given the current market conditions, issues affecting the real estate sector can best be resolved through negotiations. This approach will help resolve 99 per cent of the problems in the real estate market in the UAE, provided the parties concerned are willing to do that."
She said nobody would be happy to be involved in a legal battle. "Negotiation is a much quicker, less expensive and a win-win-situation for all. But one has to have an open mind to find a remedy to a situation. In effect, it will be attitude of people that will eventually enable the resolution of issues affecting the real estate market."
Did Asteco have a problem dealing with people not honouring contracts signed with them?
We have some difficulty with people who sign contracts with us with a full understanding of what the contracts say and later want to change the conditions without negotiations. This is something I have enormous difficulty in dealing with. I am open to negotiating with anybody but not the people who just decide they are going to change a contract without negotiations.
In the early years of our business here, we never even bothered about contracts because when you dealt with somebody in Dubai and you shook hands with them, you knew there would be no problem. I still do business today with people I was doing business about 25 years ago. Frankly, we can still do business on that basis and it would not be a problem. But am afraid that understanding of what an agreement is all about is lacking in some members of the younger generation or the new kids on the block in the market.
Has Asteco recorded any defaults on the sales done in 2007/2008?
We have seen a lot of reworked payment plans in the last six to eight months. The percentage of fallout has not been very high. The real issues have been where people have bought land in areas where no infrastructure progress has been made. So the issue is more institutional rather than individual.
If we sold a property in 2007, a certain amount would have been paid then to secure the property. In 2008 when the downturn took place, many developers offered consolidations, exchanges of land plots and reworked payment plans. The extent to which these properties have defaulted, I cannot really say. Only the Real Estate Regulatory Agency (Rera) would be able to provide figures on that.
But in, say, Dubailand or Dubai Waterfront, if the master-developer decided it was not the right time to proceed on certain projects, consolidations happened.
How transparent are you when it comes to handling the documentation of your investors?
We have an ethic or a process that includes compliance. We would not even unknowingly misguide anybody, and certainly not willingly. Wherever possible, we do our own due diligence to ensure the developer completes the project within the stipulated time-frame and build a property that meets the expectations of buyers.
Further, with Rera coming into existence, we have been able to do a lot more due diligence more easily than we did before.
Today, we can go to the Dubai Land Department or Rera for any issue confronting us.
Do you believe the regulations in the Dubai real estate market are enough for the sector? Do you have concerns about any particular regulation set out by Rera?
Rera is the best thing to have happened to the real estate industry in the UAE. They have big things to achieve and it is urgent. The right steps are being taken and if it takes a little more time, so be it. We know everything is in process within Rera and it will get there. I believe by the end of 2010, we will all be doing exactly what we should be doing and it will all work out properly.
Has Rera set out any standardisation or regulatory requirements for the contracts you sign with your investors?
We have had a great deal of training on Rera forms.
However, we are waiting for those forms to be put into use. The forms are all there, and there are standardised lease and sales contracts, but they are not yet fully in process.
In Dubai, is there a particular form for agents to fill up for leasing activity?
It goes beyond that. Now with Rera's regulations, every property that is built goes onto the Ijari system. So now when I, as an agent, want to prepare a lease agreement, I need to update the Ijari system.
Usually, land plots are registered in the Dubai Lands Department. Sub-developers within a master development will prepare drawings of their project and take them to Dubai Municipality or to the master-developer.
They will then get a building permit either from the Dubai Municipality or Jebel Ali Free Zone Authority and get their detailed drawings done. Once the drawings are done, they will then upload them onto the Al Oqood system. Once that is in place, property firms like us will upload all the square footage details of the units within the building or the development.
Given the current market conditions, sub-developers would actively start selling the project six months before its completion. So the unit is being pre-registered and a deposit will be taken from the buyer.
Names of those who have paid the deposit will be uploaded onto the system. If they decide they want to sell it off, they will have to go back to the Dubai Land Department and get their names released from the system and confirm they have received the money. The new buyer's name will then be recorded there.
As an agent, when it comes to leasing the project, every property unit carries a property number that will go on every single document, including the one with the Dubai Electricity and Water Authority. So, even when the ownership of the property changes, the property number remains the same.
I believe by the middle of next year, all the systems will be running more smoothly in Dubai's real estate sector.
What are the current sales transactions recorded by Asteco since September this year? By what percentage has that gone up compared to the previous two quarters?
Percentages are difficult to accurately communicate, but we have seen the enquiry levels for well-built, well-finished properties double during the third quarter versus the other two quarters of this year.
The focus of our sales business has changed significantly this year, with the demand we have seen in the market. Many of the key projects we handled and sold in 2005-2007 have completed their construction cycles or are anticipated to be completing their handover during 2010.
The demand so far this year has moved away from projects under development (off-plan) to properties that people can access and look at in their finished state.
What is important now is to view actual finishes, layouts and views. I believe there is still a great value in purchasing properties from projects not yet handed over, but our customers need to be sure the projects will completed in the near future.
In some cases of the projects we sold this year, a limited inventory was held by the developer until the project's completion and handover. This is where the majority of our sales in 2009 have come from.
Where are the strong indicators for residential interest coming from?
Strong interest levels for residential projects have been witnessed for Jumeirah Lake Towers, The World Trade Centre Residence, Emirates Living, Downtown Dubai and Palm Jumeirah. Palm Jumeirah has seen very significant demand growth during 2009 and is currently one of our most active markets.
In the UAE real estate market today, are buyers outright cash purchasers or are they essentially mortgage takers?
A large portion of GCC nationals tend to be cash buyers who often tend not to borrow from banks. Even when they borrow from a bank, it is a short-term loan for five years rather than a long-term mortgage.
The average expatriate living in the UAE, however, would like to go in for a mortgage, and we see mortgages being increasingly available to property buyers in the country.
So, essentially, the real estate market here is still playing catch-up at the moment where mortgages are concerned, and the evolution of buying for long-term reasons is still happening.
What are the leasing volumes recorded by Asteco in the last three months? By what percentage has that gone up compared to the previous two quarters of this year?
Our leasing volumes over the last three months have been a significant part of our overall transactional business volumes in 2009.
We continue to be active in many of the major master plans of Dubai. For example, we have seen strong residential interest levels targeting Discovery Gardens, Arabian Ranches and Palm Jumeirah.
Tiara Residence on Palm Jumeirah is a very good example of a well-finished project where we have leased units almost as soon as they hit the market earlier this year.
The overall demand for new office space, too, has grown significantly in the third quarter versus the levels of enquiries we were receiving in the first and second quarter of this year.
Is the office realty consolidating and upgrading as well?
It seems many businesses in Dubai have now accepted the current world economic climate and seem to have pushed on with their plans to relocate or upgrade their space.
In some instances, we have seen companies consolidating multiple locations housed in lower grade facilities spread across Dubai into single, newly-finished buildings. These firms have relocated to new locations and higher grade buildings while taking advantage of the suppressed current rental levels. Strong interest levels for offices have been witnessed for JLT, Al Barsha and Sheikh Zayed Road close to DIFC.
Many of the relocating companies are looking for significant lease lengths to lock in the value they are securing now. It is again difficult for us to put an accurate percentage on the enquiry level but I would say it has approximately doubled during the third quarter versus the first and second quarters of this year.
What about the international interest in the UAE?
It is increasing. However, we need greater transparency in visa issues and Shariah, and debt and inheritance laws. These are crucial issues that need to be dealt with urgently.
We want people to come and live here and spend, and for this they need to feel secure about the regulations.
Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.