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The number of real estate brokerages and agents who operate within them will always fluctuate in accordance with market cycles. Wherever there is opportunity, those with a desire to capitalise will readily set up operations.
This phenomenon is not unique to the real estate industry and will occur any where there is economic opportunity coupled with relatively low capital requirements to start a business, where the skill set is not perceived as being particularly specialised or rare, and where there are minimal legal, political or policy barriers to launch a commercial enterprise.
However, in any industry, especially those yet to fully mature and develop such as Dubai’s real estate, there exists a natural process that essentially eliminates the weakest entities. Competition is fierce and only those that compete by applying experience, knowledge, skills, adaptive capabilities and business acumen will survive.
Put simply, as a market or industry matures, only the strongest survive. The cyclical nature of the industry simply facilitates this process by testing who can best capitalise on the opportunities in a growth market and who can best sustain operations in a contractional cycle.
So, the fact that some brokerages are closing their doors is not worrisome from an industry point of view. It is inevitable as the industry continues to mature and the well-chronicled — and welcome — phase of correction the Dubai market is experiencing has played a natural role in eliminating the weakest players that cannot compete and sustain their operations.
It is actually healthy for the industry as Dubai has too many brokerages. At the time of writing, there were 2,389 brokerages registered with Dubai Land Department. This is simply too many for the industry to support during the inevitable contraction or low growth periods. And one of the key drivers of industry maturation is to have fewer, but higher quality, brokerages and agents.
The levels of professionalism, quality and customer service in the industry still require a lot of attention. While good progress has been made by the Dubai Real Estate Institute (DREI) towards elevating the standard of real estate practitioners, too many poor performers remain, effectively hindering the development of the industry into the vibrant, efficient and transparent marketplace we all desire.
Obviously, progress will require the continuance of the good work already done by the DREI and Real Estate Regulatory Agency (RERA), but improvements cannot be achieved by these industry bodies alone. All participants need to embrace the idea that an industry that is comprised of a body of professionals who are knowledgeable, conversant, proficient, ethical and highly motivated will play a significant role in providing sustainable and profitable growth over the long term.
Put simply, the more efficiently and effectively an industry operates, the greater the rewards for all. By my way of thinking, this requires better people, not necessarily more people. As industry leaders, it’s up to all of us to make it happen.
Unfortunately, to introduce a “foolproof” system is always very difficult but there are some common sense steps that every consumer must take.
First, it is always essential to determine the brokerage is registered with the Dubai Land Department. If not, walk away immediately.
In addition, careful investigation as to the reputation, online presence and market visibility of the company should be undertaken along with a meeting at the company offices to get a feel as to the size, resources and stability. In addition, ensure that any individual brokers you deal with are registered and ask for proof of identification.
Only when you are 100 per cent sure that the company looks safe, solid and trustworthy should you consider handing over any monies that may be vulnerable to misappropriation. Ensure you get a written receipt.
In some circumstances, usually where large transactions are being conducted, funds advanced may be held by third-parties such a lawyer or bank in a form of an escrow arrangement. This can help ensure that funds provided are only released when certain conditions are met making it much harder for any party to misappropriate the funds.
With the resurgent real estate market of the past three years, there has been a sharp increase in the number of brokers. However the rate of growth was highest in the first two years, slowing significantly in 2014 and now showing signs of decline. This is due to a number of factors, but also includes the tougher guidelines and policies that are being introduced by RERA.
There are stricter requirements due for introduction by Dubai Land Department.
For example, the pass percentage for brokers taking the mandatory exam to renew their licenses has been increased to 85 per cent from the current 75 per cent. Emirates IDs will replace broker ID cards as part of a new smart system allowing all the details regarding an individual agent to be monitored, including when they change employers. This will ensure that only licensed brokers operate in the market.
Any broker who does not officially record any transaction for six months will be warned and if no improvement is apparent within one year will be deregistered.
In addition, new brokerage firms in Dubai will be restricted from employing more than four agents. If the agency can demonstrate good performance over the first year, an additional broker can be hired.
These requirements are really the initial steps in developing world-class professionalism in a world-class industry. The quest for improvement is never-ending and regulatory frameworks should always be enhanced, updated and improved to ensure the industry operates as efficiently, effectively and equitably as possible.
Source: Mohanad Alwadiya, Special To Gulf News
The writer is the Managing Director of Harbor Real Estate.