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- I sold a property in the UK and want to reinvest the money into a property in Dubai. There are so many off-plan properties being launched, it's hard to know which one offers the best value. Alternatively, I feel safer buying ready property that I can rent out. What would you recommend?
When a client comes to me for advice about where to invest, there are a multitude of questions that I will ask before giving a comprehensive answer. Is this the first time you have purchased property in Dubai? If not, where else have you bought? How much are you looking to invest and will you need to take out a mortgage now or at some later stage and is this feasible in your circumstances? How long would you want to keep your investment? Are you attracted to a certain type or location of a property or is it just the return on investment that you are after?
There is no doubt Dubai is one of the most attractive and best-performing property markets in the world at the moment, although there is less impetus now than there was a year ago. With the World Expo 2020 under its belt and the government's solid commitment to complete major infrastructure plans, we will see many new developments taking shape over the next six years, hence it is important to consider your options carefully.
Off-plan is always an attractive option given the staged payment plans, but never buy anything that you ultimately cannot afford - that is rule number one! Do your due diligence on the developer because, while there is stronger investor protection in place now. you should be confident of the quality that is being delivered.
Speak to a property expert who knows about the number of projects and their delivery dates in a particular area. You don't want to be faced with a heavy oversupply of units when you are looking to rent or sell on completion.
If you are a more cautious investor, however, then something that is completed and less speculative will suit you better and now is a good time to buy as a rental investment due to relatively low borrowing rates and peaking rents. The choice of area will then come down to what you can afford, but you should focus on a gross yield of between 5-8 per cent, which is possible in emerging areas.
In summary, if you don't have experience in this market, you should take time to consult an expert before making a decision based on your personal circumstances.
- I am in the process of buying a villa, which is currently owned by a company registered with the Jabal Ali Free Zone Authority (Jafza). I was told there are advantages to owning a property through an offshore company, so I'm wondering whether to transfer the shares of the company or buy in my own name. What would you advise?
The first question that I would ask you is, do you require a mortgage to purchase the villa? If so, then it could be difficult to get a mortgage if the property is held in an offshore structure as opposed to you as an individual. Should this not be the case, then you might like to consider taking ownership through a Jafza company. It is a choice that doesn't often occur to many buyers, but one that should be seen as a viable option to circumvent concerns about the inheritance law in the UAE.
For the same reason, ownership was previously structured through British Virgin Islands, Cayman and Channel Islands companies, but since January 2011 a new law has been in effect mandating Jafza as the only offshore jurisdiction that can be used to hold property in Dubai (this does not apply to Abu Dhabi). Specific details about inheritance should be discussed with a specialist lawyer, but basically all real property could be subject to Sharia upon the death of an individual, whereas a company ''never dies'' and the distribution of its assets will be exempt as long as the shares are held outside the UAE.
The last point is whether or not you take ownership of that particular company. A lawyer will advise you about the necessary due diligence that needs to be carried out on the company and you are likely to be party to a warranties and indemnity agreement with the seller for your own protection. A no-objection certificate will need to be obtained from the developer of the property and Jafza and the sale will be subject to the usual 4 per cent transfer fee and 2 per cent agency fees.
- I have a property that I rent out in Arabian Ranches, but my tenant is paying way below the market rate. He has been occupying the property for three years. It is in our rental contract that I can give him three months notice to vacate, but he said that I can't do that. What can I do?
Unfortunately, the clause in your tenancy contract is superseded by the current laws and regulations set out by the Dubai Land Department. You can only give a 12-month vacation notice through the Notary Public or by registered post and thereafter you will not be able to rent your property to someone else for two years. You can, however, raise the rent to the extent regulated by the rental increase calculator (RIC), which can be found at www.dubailand.gov.ae, although you cannot expect to achieve the current market rate.
It is a difficult and frustrating scenario for landlords, but these measures were put into place to help control the cost of living in Dubai. If you have a good relationship with your tenant, then you are both free to agree an increase regardless of the RIC, to help alleviate your disadvantage. You can also offer to make a contribution to their costs of vacating the property, such as moving and agency fees, but this is unlikely to be acceptable if the rent price differential is too high.
The only comfort, but not justification, that I can offer is to not lose sight of what you paid for the property three years ago and look at your rental yield on that price and the property's capital appreciation over that period. If you bought during the peak in 2007-08, that will be a different story.
Source: Helen Tatham, Special to Property Weekly
Helen is Managing Partner of Prime Places Real Estate, a boutique agency based in Dubai. Previously she was Director of Residential at Knight Frank and has been an observer of real estate trends in the UAE for more than ten years