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Ethics, in simple words, is about doing the right thing.
Dubai, which is known to be one of the key hubs for global capital, introduced a code of ethics for its real estate sector some years back.
The ethical principles that govern the Dubai real estate market ensure safety for all concerned parties including the investors, buyers, sellers, brokers and others.
They form the core of all real estate activity and its related tasks executed by real estate professionals.
Additionally, the Real Estate Regulatory Agency (RERA) is overseeing the realty policies, creating awareness for these, enforcing regulations and ensuring regulatory reforms when required.
Sam Wani, General Manager of Independent Finance, a mortgage consultancy company, reflects upon the different aspects of ethics in the real estate market.
Dubai's real estate market ethical history
Ethics in real estate is enforced through government regulations.
Prior to 2008, these regulations governing Dubai's realty sector were still at the infancy stage and, therefore, were fairly weak in implementation.
Many organisations used the gaps in regulations resulting in losses for investors.
However, the regulatory regime became much more established and stringent after 2008.
The result is that most investors are now comfortable investing in Dubai, and the system provides many safeguards against unethical developers and intermediaries.
Ethical reforms affecting the realty market
Preceding the 2008 crisis, the lack of strong regulations resulted in losses for many investors and homeowners. This created a deficit in investor confidence and investors stayed away for many years.
However, the reforms in regulations saw ethical practices take root and the industry has gradually won back investor confidence. Most investors now feel safe investing in Dubai.
The only concerns are the normal economic factors affecting the price movements in the industry, which would be true for any other real estate markets in the world.
Biggest ethical challenges in real estate
One of the biggest ethical challenges is the lack of ethical training for real estate professionals.
This is due to the limited training programmes/certifications available in local universities and institutes.
Even though RERA has currently undertaken the lead by introducing many training programmes including realty ethics, it will take time to build a pool of trained and ethical real estate professionals.
The suite of training programmes needs to be the best and also cost effective for them to create impact in the market.
Homeowners and investors should perform due diligence before appointing a real estate agent. It is important to do a thorough background and reference check for agents and the companies employing those agents.
Lapses in real estate ethical behaviour
The boom times of 2012-2014 saw some real estate agents engaging in aggressive flipping.
This was done by pushing investors to invest for the short term, selling the property as soon as the price increased and repeating the process.
This created artificial inflation and property bubble. By early 2014, the prices were soaring high until the government stepped in and ensured that the price hike was blocked and corrected.
Other unethical behaviours include non-disclosure and misselling.
There are two ways of preventing or controlling this. One is robust and sturdy regulations and the other is concrete training.
RERA has taken some steps to impart training and made flipping uneconomical. It has also created standard contracts for the agents' use and tried making non-disclosure difficult.
It is recommended that RERA should institute awards for the most ethical real estate businesses.
This would help ethical real estate companies enhance their brand strength and encourage them to follow these practices at all times.
Code of ethics for Dubai brokers
All registered real estate brokers in Dubai are bound by a code of ethics as highlighted in the By-Law No. (85) which includes 11 principles that they are expected to follow and practise.
These principles are (1) Fair treatment, (2) Respectful treatment, (3) Preservation of privacy, (4) Trust and integrity, (5) Quality observation, (6) Observance of the rules and regulations, (7) Integrity, (8) Obligation towards society, (9) Observance of the interests of the contracting parties, (10) Obligation to preserve the document, (11) Respect of the regulations and procedures of the Lands and Property Department
Here's an insight on leasing regulations and legal notices
Source: Arva Shikari, Special to Freehold