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Question of the week
My apartment is finally ready. When I stated that I would like to inspect the apartment, the developer said they had already completed their inspection, and I would be wasting my money as they believed the apartment to be satisfactorily finished. Is this right?
Technically, once an official Completion Certificate has been issued for the building by the Dubai Land Department (DLD), it is deemed ready for handover and your contractual obligations regarding transfer of ownership remain. Nevertheless, I doubt if the developer has your best interests at heart in this instance.
You have the right to inspect (snag) your apartment, and report any legitimate issues to the developer for rectification. Items which can be remedied in the short term should be fixed immediately; and remember, once you have taken ownership of the apartment, the developer is obliged to fix any issues that may arise for a full twelve months following the transfer of ownership.
It is in your interests to snag your apartment, and I strongly recommend you engage a professional to do this on your behalf. There is a good chance that it will save you a substantial amount of money in the long term and provide you with some peace of mind.
I own a third of a floor of office space in Business Bay, with two other parties sharing the balance of the floor space. We are having difficulty in finding reputable tenants at a reasonable lease rate. Can you offer any advice?
The issue of multi-strata ownerships, particularly when looking at office space, would be a concern as prospective tenants do not want to negotiate or deal with multiple owners.
One solution requires the willingness and commitment of all owners to form a type of cooperative or rental body. Under this concept, the owners would commit their space to a “rental pool” to offer to prospective tenants. This pool would be managed by a third party appointed by the owners so that tenants requiring space owned by more than one person would be dealing with one central body representing those owners, and all owners benefit from the rental receipts garnered from leasing “pool” space.
This concept requires commitment, discipline, participation and cooperation from the owners, but if implemented with full owner support, will provide superior returns in an office market that is currently extremely competitive.
Do you think more affordable segments of the market offer any investment opportunities?
Definitely. While the greatest growth in the Dubai real estate recovery has been seen in the middle to high-end villa and apartment segments, there will be an increasing requirement for housing at the affordable end of the spectrum.
An investor taking a long-term view when creating a property portfolio will recognize that there is tremendous value promising extremely healthy returns in the affordable segments as demand will only increase as Dubai’s economy continues to grow.
Already, apartments in developments such as Skycourts, JLT and MotorCity have witnessed substantial capital appreciation, while villas in areas such as Dubai Silicon Oasis have appreciated significantly as well.
While it may be glamorous to invest in the more luxurious or iconic locations, sometimes it’s just as lucrative to invest in the lesser known and more affordable developments.
Would an asset bubble be reappearing in the Dubai real estate industry?
The recovery has been created by a number of market factors and catalytic events, the Expo 2020 bid win notwithstanding.
Confidence has returned to the emirate as solutions to debt issues have been identified, we have a booming tourism industry, and a geo-political position which has been a prime attraction to capital fleeing troubled regimes around the region. Seeing this, you will understand why demand would be accelerating in a post-recession world as these fundamentals all add up to a compelling case for investment.
I have been considering taking advantage of the low office rental rates and relocating my business. Do you believe rates have bottomed out?
The office segment in Dubai has definitely bottomed out, and there are instances of rental growth emerging in some areas such as DIFC and in some space configurations.
For example, there is a relative shortage of Grade A, large floor-plate, single owner space. This type of space is favored by larger, often multinational companies and, with Dubai’s economy rebounding strongly, demand for this type of office space has been growing rapidly.
Vacancy rates outside the CBD/DIFC area are still quite high. In developments such as Business Bay, many buildings are suffering from fragmented ownership and configurations issues. However, depending on your size requirements, you may still find space that suits your needs at reasonable leasing rates.
Source: Mohanad Alwadiya, Special to Freehold
Managing Director, Harbor Real Estate