Dubai's real estate on verge of maturity

source Construction Week Online

The Dubai construction and real estate industry is on the verge of maturing, the experts attest. So with speculation dead and fresh finance on the horizon, the Dubai Property Society is on a mission to leave the growing pains behind.

“Previously we were pouring money on the fire,” said MAG Group CEO Mohammed Nimer. “Now we need balanced finance. That means reasonable rates, terms and conditions.”

Nimer, addressing the issue of mortgage availability, was speaking at a private gathering of Dubai-based construction and real estate experts from all sectors of the industry, and a smattering of select media, hosted last week by the Dubai Property Society (DPS).

The issues nagging at the industry, from regulation to communication and finance, were the topics under discussion. The meeting was billed as a means of confronting such issues, in order to begin charting a route towards a path of sustainable growth.

Despite the big names in attendance, the whole was more than the sum of its parts. What emerged was a construction and real estate industry free from the influence of rampant speculation, on the verge of maturity, and grasping for finance to fuel a market that, as all agreed, is waiting to evolve.

Give me some credit

On the finance front, there was good news. Tamweel executive chairman Sheikh Al Nahyan confirmed that the firm, which along with Amlak is responsible for around 70% of the Dubai mortgage market, would resume lending again shortly.

“It will be weeks, not months,” he said. “Tamweel and Amlak will be back in business. It’s just the formalities that are being done on a federal level.”

“When they come back into the market again, things will start moving,” Cluttons Property Consultants partner Ronald Hinchey added.

The issue of regulations was also raised numerous times. “If the Real Estate Regulatory Agency (Rera) was given the opportunity to apply what it has got planned, things will get much better very quickly,” said Asteco CEO Elaine Jones.

Rera, faced with a formidable work load since its inception as a government agency in July 2007, is seeing light at the end of its current tunnel. Existing laws have had the unfortunate side effect of causing some confusion among developers and investors.

“The government needs to issue appropriate laws that are clear,” Al Tamimi partner Lisa Dale said. But the situation is being rectified. Amendments to the laws that have caused confusion will come into force shortly, including the long-awaited Law 13 amendment.

The growing pains of Dubai have perhaps been best expressed through the evolution of the property law over months, rather than years. But continual reform of a market-sensitive law should lead to a cohesive legal system.

Central to the discussion throughout was the industry’s will to embrace a sustainable model of growth. One that history teaches us should be the next step in the Dubai construction story.

The introduction of permanent residency status for foreigners who purchase freehold property was suggested as a means of fuelling such growth.

“This is what people in the industry feel would give the market the sustainability and maturity that it needs,” DPS executive director Adel Lootah reported.

Amateurs were steering the Dubai market previously. Flippers were gambling recklessly on a pattern of growth they hoped was yet to top out, breathlessly inflating young-Dubai’s property bubble.

“But speculation has had its day,” Lisa Dale said. “The flippers had their fun for three years. Now we are moving into a more mature phase of the Dubai real estate market.”

Not all talk

More so than anything that was said at last week’s DPS meeting, the fact that the meeting took place at all spoke volumes for the sincerity, experience and sensibility of those now presiding at the industry’s helm.

“We are a young country,” Emaar managing director and DPS chairman Ahmed Al Matroushi said. “When you are young, you move very fast. But now we are almost mature.”

Liquidity is seeping back into the system, the regulations are shifting into place, and, most importantly, the industry is talking – a sure sign of maturity.

Dubai’s construction and real estate industry may have moved from the fast lane of growth over the past six months, but with safe hands now at the wheel, the senior members of the DPS are not about to slip out of gear.