Laws, regulations that shaped Dubai real estate market in 2013
Year 2013 saw a broad-based price and rental recovery across Dubai’s realty market. Though the total value of property transactions for the year will be known only early 2014, transaction value in the first nine months of 2013 has already crossed Dh162 billion with the emirate now donning the cap of the best property investment destination across the globe.
UK-based Knight Frank and Global Property Guide have stated property prices in Dubai jumping by more than 20 per cent in the past one year, the pace being the fastest among the cities that these organisations track.
The concern, however, has been whether the price volatility was leading to another bubble – prices having fallen 60 per cent post 2008. But in August, Standard Chartered came out to state that Dubai's property market was not heading towards another crash and the market was more sustainable, influenced by an improved economy rather than speculation.
Goldman Sachs Group followed, saying, fears of Dubai’s real estate market experiencing a bubble were “exaggerated. It added that prices were 36 per cent below their 2008 peak even after rising by about a third from a low in the second quarter of 2011.
And in its effort to control filliping, Dubai took the bold step of increasing property registration fee to 4 per cent with the Dubai Land Department Director-General Sultan Butti bin Mejren, saying, "The move is aimed to stop quick transactions (flipping) which are unhealthy for the market and result in sudden price increases.”
Post DLD’s move, the UAE Central Bank issued its new mortgage lending rule, restricting banks to providing a loan of 80 per cent of the property value to Emiratis and 75 per cent to expatriates.
Though there were number of major projects announcement prior or following Dubai’s win to host Expo 2020 (Read: Expo 2020: Watch out for these mega developments in Dubai…) following are few of the major decisions/events that shaped the real estate market in 2013:
*Registration trustees service introduced
The Dubai Land Department (DLD) announced the launch of its “Registration Trustees” service that will allow for complete customer transactions outside official working hours through licensed legal offices.
The trustees will handle sales, mortgages and leasing by accepting customer applications and sending them to the DLD for processing and printing. All transactions will be carried out under the terms and conditions of the DLD to ensure the legitimacy of each transaction.
*Property buyers' protection law is ready; awaits release
Majida Ali Rashid, Chairwoman of the Real Estate Investment and Promotion Centre, Dubai Land Department told Emirates 24|7 that the Real Estate Investor Protection law (Tanweer) was ready and awaiting clearance from higher authorities.
“Tanweer is ready we are just waiting for final approvals from higher authorities,” said Majida.
Tanweer is the first of its kind regionally and globally, the senior management has devoted considerable time and efforts in discussing its provisions with a large segment of workers in the real estate market and with consulting and legal firms to draft legal articles to reach the ambitions of the emirate in protecting investors. The law is yet to be released.
*Dubai property registration fee doubled to 4%
DLD announced the doubling of the property registration fee to 4 per cent from 2 per cent. The new registration fee covers all property transactions in the emirate of Dubai except for the industrial sector, including warehouses. The new fee structure will was implemented from October 6.
Nearly 110 countries in the world had higher property registration rates than Dubai, DLD Director General said. As per the decree, the fee will be split 2 per cent each between the buyer and seller.
*UAE Central Bank unveils new mortgage cap
The UAE Central Bank issued the new mortgage caps in order to control the rising property prices.
The new rules will limit mortgages for first time expat buyers to 75 per cent of a property’s value of less than Dh5 million, with UAE nationals limited to 80 per cent. Expat buyers will have loans restricted to 65 per cent for homes valued over Dhs5 million, with Emiratis receiving 70 per cent.
For subsequent property purchases, expats will have mortgages lowered to 60 per cent of the new home’s value, with nationals restricted to 65 per cent.
All mortgages for all nationalities when buying off-plan properties, no matter their value, will be capped at 50 per cent. Loans will be limited to a maximum of 25 years while repayments cannot surpass 50 per cent of a customer’s monthly income or total more than seven years’ annual income for expats and eight years for nationals.
Home buyers will no longer be allowed to seek personal loans or use their credit cards to meet their down payment requirements.
*Emaar bans property agents from flipping off-plan until handover
Emaar Properties banned local real estate agents (registered/unregistered) from selling any off-plan property, purchased under their names, until handover.
In an email sent to property agents, the developer said: “For off-plan property, purchase shall be as per PAS policy. Property will not be subject to transfer until handover.” As for ready property, Emaar says real estate agents can purchase only after the unit has been in the general inventory unsold for a minimum of 14 days. However, there will be no restriction on resale, the company said.
*Just 12 minutes to complete your property transaction in Dubai
Developers will now be able to register property transactions and complete them in mere 12 minutes compared to seven days required previously.
DLD tweeted, saying, “The LD has granted developers the authority to register property transactions. However, the department will carry the auditing process and issue the contracts.”
The department added: “Now your transaction can be completed in just 12 minutes instead of 7 days.”
According to DLD, it has successfully achieved a “new” record in saving the client’s effort and time, achieving its objective of offering client satisfaction, transparent transactions and internationally premium real estate services.
*New Dubai rent committee operational
The Rental Dispute Settlement Centre, the judicial arm of the DLD, began operations on November 17.
Established by Decree No 26, 2013, the settlement centre will be based at the department’s head office. According to the Article 16 of the decree, all committees will have to judge all rental lawsuits within a period not exceeding 30 days from the date of referral of the case to them.
Judge Abdul Qader Mousa was appointed as head of the centre. Earlier judgments passed by Dubai Municipality Rent Committee were final and could not be appealed. The settlement centre allows an appeal only in cases where the value is over Dh100,000.
*New regulation for holiday homes
Dubai issued Decree No. 41 of 2013, concerning the regulation of the holiday homes market in the emirate of Dubai.
The decree dictates that Dubai's Department of Tourism and Commerce Marketing (DTCM) will be responsible for the granting of licenses to those parties who intend to rent out a furnished residential property on a daily, weekly or monthly basis.
The decree dictates that DTCM will define the standards that must be met and procedures that must be followed to receive a license; accept license applications and approve or deny such applications; conduct inspections on the properties to ensure they meet the required standards; and create a database of all such licensed establishments in the emirate.
DTCM will start accepting applications for holiday homes licenses before the end of the first half of 2014, Dr Ahmad Belhoul, Chief Executive Officer — Strategy and Tourism Sector Development, DTCM, told Emirates 24|7.
“Following the issuance of the decree, DTCM is now working through the procedures that will govern the regulation of the market and is expecting to announce these procedures within the next three months,” he added.
*New rent decree announced
The Dubai government issued Decree No. 43 of 2013 concerning the percentages of maximum property rent increase that are allowed upon the renewal of tenancy contracts.
The decree states that there should not be any rent increase if the rent of the property unit is less than 10 per cent of the average rent of a similar property in the same residential area. If the rent value is between 11 and 20 per cent less than the average rent of a similar property, the maximum rent increase shall be equal to 5 per cent of the rent value.
Additionally, if the rental value of a unit is between 21 and 30 per cent less than the average rent of a similar unit, the maximum rent increase shall be equal to 10 per cent of the rental value.
If the rental value of a property is between 31 and 40 per cent less than the average rental of a similar property, the maximum rent increase shall be equal to 15 per cent of the rental value. A maximum rent increase of 20 per cent is applicable if the rental value of a property unit is less than 40 per cent or more of the average rent of a similar unit.
The decree applies to landlords from the public and private sectors in the emirate of Dubai including private development areas and free zones.
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