Property in Dubai as a Long-term Investment: A few Guidelines

Property market in Dubai shares features of any other international property market. These include (and are not limited to):

• Fluctuation of property prices

• Popular locations for buying property

• Coming up of new property developments

Yet there are regional factors that make Dubai property market stand out. Following are a few guidelines on buying property in Dubai:

• Dubai property sector is constantly coming up with new developments. Check out all of these before investing.

• It is a known fact that property prices in general have been on the rise in Dubai. At the same time, one must not forget that with a plethora of properties, one can easily find what suits one’s pocket.

• Dubai government has limited foreign ownership to a few areas in the emirate. So in case you are a foreign national contemplating to buy property in Dubai, be aware of all available options through a reliable property agent.

• Striking a good bargain is not so easy in this booming property market. But if you know the market thoroughly, you’ll be able to find investments with a good profit margin. So do not be hasty in taking the final plunge.

• Get conversant with the Dubai escrow law. It has indeed made life easier for the buyers, sellers and developers of Dubai property.

• It is also a good idea to rent out your Dubai property. Survey current rental scenario to maximize your chances of making profit.

• There is a vast pool of properties in Dubai that have not been tapped properly due to lack of advertising. Consequently, these are a good value for money. Jumeirah Lake Towers, Business Bay and Festival City still have affordable property units.

• There are areas in Dubai property that have still not reached their full potential. Invest some time beforehand to understand the state of the market and grab these.

• Off-plan sale/ purchase is a regular practice in Dubai property market. Off-plan property units offer good business potential as the prices are usually lower than those of completed projects in the same community. Be well aware of the nitty-gritties of such a transaction however.

• Buying property in state of the art projects like the Palm and the World might look a costly option at the moment but one must bear in mind that in the long run this is a profitable investment.

Dubai Real Estate Vis-à-Vis Global Downward Trend

What would be the fate of real estate in Dubai in the current context of global economic crunch? Following is an analysis of Dubai’s real estate market with respect to the larger economic arena.

At present, Dubai real estate is experiencing the pull of the following dynamic forces:

• Lower mortgage rates as compared to those prevalent in other booming real estate markets of the world. This has made properties in Dubai real estate market more affordable to buyers and investors.

• A general slowdown in business is being experienced by Dubai’s real estate sector these days.

• With more and more properties nearing completion in Dubai, the supply of real estate will rise in the emirate by the end of the year.

Learning from parallels

Dubai real estate and UAE economy at large can be compared to Hong Kong of the 1900s. It witnessed a boom at a time when developed economies in the like of the UK and the US were experiencing a crunch.

The question that rises to mind is whether Dubai real estate and UAE economy are able to sustain the pace of growth and development even in face of global downtrend. In 1900s, negative real interest rates had helped Hong Kong; and in 2007, the same forces are at play in Dubai/UAE. So much so that buying real estate in Dubai is quite a lucrative option for investors from around the world.

Dubai real estate could sustain the global fall

Of course real estate analysts keep calculating the fate of Dubai’s real estate sector, the fact remains there are multiple points of view on the matter. If we go by parallels again, no one should forget the fall of real estate prices in Hong Kong some years ago. But Dubai real estate is way ahead of its Hong Kong counterpart back then.

2008 is looking like a gloomy year for global economy as a result of the following factors:

• ongoing credit crunch

• US mortgage crisis

The economy of the United Arab Emirates has been on the road of growth for the last five years or so. This comes as stark contrast to US economy where real estate prices and the value of dollar have been experiencing a slump.

The coming months are indeed promising for Dubai real estate. At the least.

Dubai Real Estate is Investor-Friendly

With active governmental support, Dubai real estate industry is one of the safest real estate markets in the world. The Real Estate Regulatory Authority and the Escrow Law 8 by Dubai Land Department are phenomenal in making real estate in Dubai a transparent investment opportunity for developers, buyers, and end-users alike.

Last month Dubai witnessed an extensive exhibition of Dubai real estate at the world famous Cityscape Dubai – a business-to-business event that draws millions worth of investment in the region from across the globe. This alone underlines the extent of development in the real estate sector of the region. Around 45000 real estate industry players hailing from over 120 countries participated in the exhibition.

Some of the most prominent names in the world of real estate are from Dubai at present. Moreover, Dubai’s real estate construction and management skills are sought after the world over. The world’s largest real estate exhibition Cityscape Dubai is held in the emirate.

The scale of Cityscape Dubai has multiplied both quantitatively and qualitatively with every passing year. The sheer number of participants has leapt up 28 percent as compared to last year’s figures; double as compared to those of Cityscape Dubai 2005.

Cityscape Dubai has recently come up with an information service that incorporates news feeds from over 2500 international sources. A number of regional and foreign real estate experts provide analytical reports therein. This will help generate more investor confidence with its reliable information base.

Over the last few years, Dubai real estate has been able to inspire investor confidence and loyalty due to the implementation of rules and regulations aimed at ensuring interests of everyone concerned. From a legislative perspective, there is scope for more regulations that draw more confidence from international investors.

A Study on Dubai’s Property Market

The property market in Dubai is always in a state of flux. The most sought after question in the minds of investors, realtors and developers alike is what would be the scenario of Dubai’s property sector in the days to come. There are a number of factors that affect the property matrix at a given place and Dubai is no exception. Following is a study on Dubai property market which will attempt to throw some light on the present and future state of affairs in this regard.

The most prominent factor that has influenced property sector in Dubai is the supply-demand equation. At present, a large number of property units are under construction in Dubai. At the same time, there is an ever-increasing demand for all kinds of property units in the emirate. Dubai property boom has been the talk of the town ever since the inception of the freehold property law.

Types of investors tapping Dubai’s property market:

• The large number of properties available in the market attracts investors wanting to get some quick returns.

• The constant inflow of jobseekers to Dubai accounts for expatriates always on the lookout for residential property in the emirate.

• Tourists drawing towards this booming holiday destination wish to have a comfortable living experience.

Property developers in Dubai are constantly vying with each other to offer attractive launch prices. The availability of property units in state of the art projects like The World and The Palm has transformed Dubai into an investor’s dream come true.

Increase in demand means increase in prices. Investors in Dubai property market have got great returns to their investment, which in turn has acted as a catalyst in drawing more investors. Consequently, there has been more demand of property in Dubai and so on. It is in cyclic fashion that the Dubai property market moves.

It is not an unknown fact that Dubai is a luxury holiday spot and a bustling business hub on the global arena. This has spurred on demand for property in the emirate. Since the supply lags behind demand, any property that arrives on market shelves sells like hot cakes. And for a hot price too!

The other major factor besides supply-demand dynamic is delay in the delivery of property. In more instances than one, property units in Dubai have been under-construction for longer than estimated. This creates a further pull in the already stretched state of Dubai property market.

Drawing all points together, one can begin looking at the silver lining to Dubai’s property clouds (ahem). A lot of property projects in Dubai are nearing completion. In other words, there will be a sudden increase in supply in the months to come, which in turn will bring property prices down. But again when all this again increases demand, the eventual state of affairs will be largely guided by how Dubai property market will even that out with even more supply!

Time will tell… but it is certain that Dubai will remain a hot spot for property buyers from all over the world. With new rules and regulations providing for safer deals and a strong value of a number of foreign currencies, investors will continue to look out for opportunities in Dubai.

Escrow law 8 makes off-plan property investment in dubai the safest in the world!

All You Need to Know About Dubai's New Escrow Law


What is the new escrow law in Dubai?

Dubai real estate will have major impact from the newly formed escrow law. The said escrow law is Law No. 8 Concerning Guarantee Accounts of Real Estate Developments in the Emirate of Dubai. The law states that all funds received by real estate developers with respect to a property have to be administered through an escrow account, which in turn will be regulated by the Dubai Land Department.

Who all have to subscribe to the escrow law?

All real estate developers who engage with the sale of units off-plan and get payment from buyers/financiers before the completion of the property development have to comply by the escrow law. This will apply whether the respective property development is in the planning phase or under construction.

What is the time-frame for complying with the escrow law?

The escrow law came into force on June 28, 2007 with an allowance of six-month transitional period. In other words, all concerned have to subscribe to the law by December 28,2007.

Who will keep record of property developers subscribing to the escrow law?

Dubai Land Department will keep a register of property developers in Dubai who have been licensed to carry on real estate business.

What will be the consequences of non-compliance with the law?

Unless a property developer is registered with Dubai Land Department under the escrow law, s/he won’t be able to carry out any activity related to real estate development
(including advertising).

Where can one get the registration form?

Property developers can get hold of the registration form from the Dubai Land Department.
Registration is compulsory along with bearing a valid trade license.

Without being registered, can a property developer conduct advertising?

Before advertising a property development through regional or foreign media, the concerned property developer must obtain a written permit from the Dubai Land Department.
This is compulsory and is additional to getting registered with the Department.

Can a property developer sell units from a development after registration?

After getting registered with the Dubai Land Department, a property developer must apply for a guarantee account (escrow account) for managing the funds received from buyers, investors or financiers.

What are the documents required to apply for an account?

• The trade license of the property developer;
• The developer’s certificate of registration with the Dubai Chamber of Commerce and Industry;
• The original title deed of the plot on which the property is to be developed;
• A copy of the contract for the sale/purchase of the plot between the property developer and the master developer;
• A letter from the master developer stating approval for the development;
• Architectural plans approved by Dubai Municipality and the master developer;
• A building permit issued by the concerned authorities;
• A financial statement prepared by the consultant of the property developer and certified by an accountant (with details of cash flows and amount payable to the
creditors of the development);
• A copy of the developer’s pro forma sales contract for off-plan sales; and
• Developer’s undertaking to start construction after getting hold of master developer’s approval to sell off-plan.

Note: If it is not possible for the developer to submit all of the documents listed above, s/he must provide all documents available at the time
of application. However, the outstanding documents have to be submitted to Dubai Land Department as and when acquired by the developer.

Who will manage the escrow account?

The property developer will enter into an agreement with a bank/financial institution certified by Dubai Land Department. A copy of the same will have to be submitted with the Department. The respective bank/financial institution becomes the account trustee and will manage the escrow account. This will be done under constant supervision of the Dubai Land Department.

Which banks/financial institutions have been certified to be account trustees?

• HSBC
• Dubai Islamic Bank
• Tamweel
• Amlak Finance PJSC
• Abu Dhabi Commercial Bank
• Commercial Bank of Dubai
• National Bank of Dubai
• Emirates Bank

Which funds need to be deposited in the escrow account?

• Any funds obtained by way of mortgage for the property development;

• Payments by buyers/financiers for units on the plan;

Note: If a property developer has more than one property development
up for sale, s/he must open separate escrow accounts for each one of them.

How are deposited funds managed?

The property developer will be able to get payments from the escrow account for contractors’ and consultants’ costs on the respective development only on obtaining an invoice of the same. For drawing money from the escrow account, s/he has to apply to the account trustee. A certificate from the project manager stating the completed stage of development has to be attached with the claim for payment. Before issuing payments, an engineer from the account trustee will inspect and confirm the completed stage of development.

When are the profits of the property developer issued?

5 percent of the total amount of the escrow account will be kept in the respective account by the Dubai Land Department for one year after the property developer has obtained a certificate of completion of construction on the development. Funds will not be released to the property developer unless an year has passed after all the units in the development are registered in their buyers’ names.

Are there any costs for subscribing to the escrow law?

Yes, there are. These are given hereunder.

• According to the escrow law, the Dubai Land Department may collect fee for services
provided under the law. However, the amount has not been mentioned.
• The developer has to pay costs (if any) of the account trustee.
• The developer also has to pay for costs involved in the opening and management
of the escrow account.

Note: There are no costs for registration or obtaining written
permit for advertisement from the Dubai Land Department.

What are the penalties for violators of the escrow law?

A fine of not less than 100,000 AED and imprisonment for an undefined period will
be imposed on anyone who engages in any of the following activities:


• Developing property without a license;
• Submitting false documents/statements to the authorities in order to obtain a
license;
• Advertising units from a bogus property development knowingly;
• Misappropriating funds paid to the developer for the development of the property;
• Being an auditor, preparing false reports or concealing facts;
• Being a consultant, approving false documents; and
• Being a developer, dealing with an agent who has not been registered with the
Dubai Land Department.

The registration of a property developer will stand cancelled if s/he:


• Declares bankruptcy;
• Violates any laws connected with real estate development;
• Cancels his/her license; and
• Doesn’t start construction within six months after getting hold of approval from Dubai Land Department for selling property off-plan.

Can there be any further rules and regulations on the escrow law?

The Dubai Land Department will issue rules and regulations concerning the advertisement of property developments. The Department has also made it clear that it will issue further rules for escrow accounts through the recently established Real Estate Regulatory Authority (RERA).

What is RERA?

The Real Estate Regulatory Authority – RERA – has been formed under the affiliation of the Dubai Land Department recently. RERA will regulate real estate activities in Dubai (including the escrow law). With administrative and financial autonomy, RERA will supervise and regulate real estate developers, real estate agents, financiers and co-owners’ associations.

Why have RERA and escrow laws been founded?

RERA and escrow laws have been founded in order to eliminate the risks involved in Dubai real estate market hitherto. These had amounted to: • Property developers with no clear title to the development or the corresponding land;

• Lack of a proper record of real estate related activities in Dubai;
• Lack of uniformity in rules and regulations concerning real estate;
• Risks in the mortgage market that go against the property buyers’ interests; and
• Uncertainty involved in the completion of a real estate project.

Dubai Property Market - Buy or Rent?

Property market in Dubai accounts for a major economic force in the emirate. All of us know about the state of the art property projects Dubai comes up with every now and then. Property market in Dubai has been witnessing a growth spurt over the last few years. At least for once, expatriates moving to this wonder city ponder over whether to buy or rent property in Dubai.

Expatriates constitute of a major portion of Dubai’s population. Seeing that the property market in Dubai is quite high in demand, they are often caught in the dilemma of paying mortgage for a personal property, or going for rent which is usually lower than the former.

Looking back at Dubai property market

2002: For the first time in the history of Dubai property market, it became possible for foreign nationals to own freehold property in Dubai. At that time, property prices were quite lower as compared to the present scenario in Dubai. Consequently, with lower mortgage rates to pay, those who bought property at that time took a wise step indeed.

2002 onwards: Due to cheaper property prices, more and more people went in to buy property in Dubai. As a result, there was a great demand (exceeding even supply!) which in turn made the prices shoot up. At present, rents are usually lower than monthly instalments.

Buy or rent property in Dubai – some pointers

• Stay of 3 years or even lesser period: Don’t buy property in Dubai if you plan to stay in the emirate for three years or less. Renting property would be a better option for you. A number of projects will soon get completed in Dubai making rents sink a bit.

• Stay of more than 3 years: If you’ll stay in Dubai for more than three years, you could definitely consider buying property in Dubai. Dubai property experts believe the market trends will reverse in a few years. So buying property in Dubai now may turn out to be a profitable step in several years. Choose a longer period for paying back your mortgage so that it’s not a crunch on your pocket. You could even rent this property later.

Points that will help one decide whether to buy or rent property in Dubai

• How long do you plan to stay in Dubai?

• What kind of property do you wish to have?

• When do you want your invested money back?

These points are paramount in giving you a sure shot answer to your worries. Because of the dynamic nature of property sector in Dubai, one needs to sort these wrinkles out.

Dubai property landscape rises vertically with the property boom

Property developers in Dubai are aiming to reach newer heights of Dubai skyline. Property units are selling like hot cakes in Dubai even before construction gets completed. Residential property prices in Dubai have faced a rise of 20 to 100 percent in comparison to last year’s figures. In fact, this has been the trend in Dubai since the turn of the century.

Anyone with some money to spare in Dubai is investing in its ever-widening property market. Buying and selling of property in Dubai has become a trend. Even those not directly involved with property or in need of it are purchasing residential property to gain profits by selling it later on.

Dubai property landscape is rising vertically everyday. With every passing day, property developers in the emirate are coming up with still more ambitious projects. Dubai has acquired a Manhattan look, thanks to the towering buildings, rather towering ambitions of property developers in the city.

The prices of apartments in Dubai have gone up by 125 percent since last year in areas surrounding Burj Dubai. At the beginning of this year, new laws stating the ownership of residential property by foreigners have acted as a catalyst to the property price boom.

High-rise luxury apartment towers mushroom all over Dubai and dozens more are under construction. Dubai property market is dominated by world-renowned names such as Nakheel, Emaar, Dubai Properties and Damac Holding. The ruler of Dubai aspires to transform the city into a throbbing financial trading centre.

Last week, Dubai saw the completion of 155th floor of the much speculated Burj Dubai and this week saw 156th floor in shape. Already the world’s tallest, the Burj stands tall at 585.7m (1922ft). And still growing! Ultimately the tower will have 164 floors and scope to have more if it faces competition from anywhere in the world.