Industries of all sorts have been severely hit by the credit crunch occurring not only in western countries but also in developing nations. Governments have been forced to provide financial and economic packages to encourage transaction in an attempt to regain control over the current economic crisis.
The government of the United Arab Emirates has developed a range of new rules and regulations to aid the ailing economy with a particular focus on Dubai. One of the main targets was the Dubai real estate market, which was subjected to considerable changes and improvements. In the hope to attract investors, the government is determined to have implemented a renewable residency visa before the end of Q1 2009. It will be valid for six months and is designed for individuals interested in obtaining a freehold property.
The Central Bank has committed to a bond program of US$10 billion which was designed to meet the Emirate’s monetary obligations and allow the completion of developmental plans, relieving Dubai from the pressure of having to settle its debts on its own.
Furthermore the Real Estate Regulatory Agency (RERA) of the Dubai Land Department has established a regulation which is aimed to secure the off-plan market. This ruling forces developers to have paid 100% of the land price prior to reselling the property off-plan. Several developers of Dubai properties have been required to revise strategies and pricing policies to fit the current situation. Madai’n Properties are offering to cut 30% off the price of purchase on some of their developments. Similarly, Deyaar announced that it is soon to implement a price reduction scheme on four of its residential projects, providing repayment tenures of up to five years to assist the owners in the constraints of the credit market.
These efforts are an innovative and good start to secure clients’ trust, however it is not sufficient to match the extreme fall of market selling prices since Q3 in 2008 which has been estimated to about 40%. Despite the efforts, the persistency of the majority of sellers’ in demanding prices near the original purchase price coupled with most banks’ continued refusal to lend money result in very few transactions taking place.
New Property Regulations in the UAE, ETE, 16 June 2009.
Dr Geoff Pound
Image: “Several developers of Dubai properties have been required to revise strategies and pricing policies to fit the current situation.”