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- I am coming from overseas and looking to rent a home. I heard about ''district cooling.'' What exactly does it mean?
District cooling for the provision of chilled water has emerged globally as a way to provide cooling to buildings in a more environmentally sensitive way. It is considered to provide great benefits in the long run and helps save on the costs of electricity. Most units serviced by chilled water district cooling are offered at slightly lower rental rates. However, ask how your cooling charges will be calculated and which are included in the cost. As to consumption charges, I assume you will have a BTU metre installed in your apartment. If so, you will be billed directly by the cooling services provider. The DEWA savings will be offset somewhat as you may incur an additional utility charge as some unit owners equipped with district cooling will be passed on the slightly higher utility charges involving the remuneration of the capital cost of providing the infrastructure.
- I have accumulated a portfolio of 17 apartments and a couple of villas in Dubai. Is there still a way to make any profit during this slowdown period?
There are too many investors who are under the illusion that investing in property is almost a ''set and forget'' proposition, but nothing could be further from the truth. The property industry is incredibly dynamic and requires constant attention as factors influencing its performance as an investment are as broad as they are complex. Investing in property is no different from investing in any other assets. Its purpose is to create wealth but it needs to be nurtured and managed just like any other investments. With a portfolio this large, you need professional help to manage your investment, particularly during times when yield is harder to generate. It requires careful thinking about what its true earning potential is. You need a good property manager who will ensure that you maximize returns from your property portfolio and enable your long-term strategy to be realised.
- I have a one-bedroom flat in Dubailand. When I bought it, the selling rate was at Dh550 per square foot. Should I still rent it out or sell it?
Properties located in non-prime areas such as Dubailand have been doing very well even in the current market scenario. Even in the recent past, the more affordable properties in the market were doing quite well in terms of significant value growth and ongoing sales activity as there remains a supply gap in the truly ''affordable'' property segment. As mid to upmarket properties in prime locations have become unaffordable for some homebuyers and investors, people have turned to more reasonably priced projects which promise capital appreciation even in the current climate. You will still make some profit if you sold today; however, values will still improve as the infrastructure gets completed. Retain the apartment for at least five years to continue to enjoy at least 8 per cent net annual return.
- Am I right in thinking that rental rates are not as affected by the market slowdown as sales prices?
The current industry climate has affected sales prices more although rents have also fallen in certain areas which means the market slowdown has varying effects on different areas and property types. What determines whether the landlord can raise your rent or not is how your rental level compares with the new and updated index. You should familiarise yourself with Law 43. It introduced certain restrictions with regard to the calculation and implementation of legally allowable increases. It does not set out to control the rental value of new contracts and where a property is to be let for the first time or to a new tenant. It is up to the owner and prospective tenant to agree as to how much rent should be charged. For your peace of mind, you can compare your rental rate to the current market rate by using the RERA rental increase calculator. While it has its limitations, it is a useful tool that is also being used by landlords as a reference point.
- Question of the Week: I have just received an offer from a bank representative to refinance my property. Is this an opportunity I should avail myself of or not?
I can say the answer is yes but only if it makes financial sense. In short, you need to make some quick but careful calculations.
There are some very attractive mortgage products in the market with a few providers offering rates as low as 3.99 per cent or even 3.49 per cent which signal that competition among UAE banks for a higher market share of the mortgage market is getting pretty intense.
There are a number of things you need to consider such as if there is an early payment penalty for your current mortgage. It may be that you need to pay a hefty fee to exit the existing contract. While 3.99 per cent is an attractive rate, how long are you guaranteed this? Interest rates will eventually rise and this needs to be understood by mortgagors as the attractive rate enjoyed today will be replaced with a significantly higher rate in two years' time, requiring increased payments to cover the hike.
Will you need to pay establishment fees for your new mortgage contract? With the mortgage market becoming so competitive, you should be able to have any fees waived.
Also make sure that you can pay out your new mortgage contract at a future point in time without penalty. This is an unnecessary expense that you should not be burdened with.
Source: Mohanad Alwadiya, Special to Freehold
The writer is CEO - Harbor Real Estate
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