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For Dubai to remain a globally attractive Property market, the government has started efforts to bring more efficiency and transparency in business practices. And rightly so, it became the first government to officially support the international property measurement standards (IPMS) — an advanced property measurement and valuation tool that could be accepted globally.
“Real estate is a truly global sector, whether we are talking about investors, corporate occupiers, advisors or asset owners,” says Rob Jackson, Director of Rics Middle East and North Africa. “To ensure Dubai remains competitive and transparent and to be an attractive market for global real estate investment, stakeholder groups need consistency gained through international standards, which enable them to compare like for like across various global markets.”
Rics is founding member of the IPMS initiative since it was first conceptualised in 2013. Jackson says adopting the latest international standards ensures that property professionals worldwide speak the same language.
IPMS is being developed by the International Property Measurement Standards Coalition (IPMSC), a group of 63 professional and not-for-profit organisations from around the world. The goal of this coalition is to ensure that property assets are measured in a consistent way so that there is more transparency and public trust in the marketplace. This will create stronger investor confidence and increased market stability.
At present, property assets such as homes, offices or shopping centres are measured differently around the world. From the point of view of a global investor or occupier, having different standards of measurement makes it very difficult to assess or compare real estate assets. For instance, in some property markets common areas such as lift shafts and communal hallways are included in floor area measurements, whereas in other markets they are not. Some markets also consider off-site parking and swimming pools as communal areas, but that is not case with others. This creates ambiguity in the measurement process.
According to a research conducted by JLL, a property’s floor area can deviate by as much as 24 per cent, depending on the method used for measurement.
IPMS looks to clear that ambiguity and bring uniformity and consistency in property measurement. This is still a work in progress as only IPMS: Office Buildings has been published, while residential standards will only be released by the end of the year. But many see this as one of the major steps towards attaining greater efficiency and transparency in the property market.
It is more so relevant for Dubai, which has had the reputation of being a highly speculative market. “The reality is that the real estate sector in the region is underpinned by a wealth of speculators who are not typically concerned with anything other than generating returns,” points out Sallie Bowtell, Partner at Trowers & Hamlins, noting that many new policies and regulations have been implemented by governments in the GCC to control speculative investment. “A standard of measurement that can be adopted on a uniform basis is one of these steps to ensure a more consistent and transparent approach to the development of property and the pricing of it.”
Jackson agrees that unregulated valuation practices can create significant risk in a real estate market, yet international standards do exist and have been adopted widely across the globe, “especially after the last economic crisis where poor valuation practice was deemed to have had a major contributing role”.
He adds: “Dubai is taking positive steps to adopt IPMS and it is being welcomed by investors, advisors and occupiers alike. However, improved regulation should be put in place surrounding property valuation.”
However, there are a number of challenges as the industry adapts to a new measurement system, particularly for a market like Dubai. Authorities acknowledge it’s going to be a long and complex process, which can also be resolved through greater participation and consultation among all the stakeholders. “The main challenge is in the communication and clarity of the implications of its implementation,” says Jackson.
For example, he adds, it is not proposed that all existing property title deeds and drawings need amending on a retrospective basis. He says the transition will be progressive and there will be a period of dual reporting — while initially property floor spaces will be reported to existing standards, but also reported to IPMS standards. “For example, the IPMS measurements may appear in brackets, thus providing clarity to parties who are familiar with both sets of standards,” he explains.
Jackson says Rics is also working to produce a converter tool, which enables quick and simple conversion from IPMS to several current standards should clients require dual reporting. “We are working with the Dubai Land Department
[DLD] to look at including a conversion to current Dubai measurement standards, which will further facilitate the introduction of IPMS,” he says.
Bowtell suggests that an assessment of the difference between the IPMS and the current standards in each of the jurisdictions would need to be undertaken first, to determine the extent of the change actually required to comply with IPMS.
“Assuming that there are some marked differences, some of the key initial challenges would be to train surveyors and then implement the changes,” says Bowtell. “The main challenge however would be to set a date from which the requirement to comply with those standards will apply.”
Industry observers say there is already some initial movement in that direction as IPMS for offices is now starting to be adopted in the UAE. Several new commercial developments are adopting IPMS and working in collaboration with the DLD.
“For the first time, stakeholders at all stages of a property lifecycle are talking the same language in terms of floor space, which is very positive and is also leading to far fewer disputes. Investors now know exactly what they are buying, occupiers know exactly what they are leasing, advisors can provide clear, unambiguous information to their clients,” says Jackson.
The next goal is to publish and implement the IPMS for residential sector. Although the Dubai government has pledged its support to the IPMSC, it is yet to officially adopt new standards, mainly because it wants to start with new properties, including off-plan.
Jackson says already the Dubai, Abu Dhabi and Aj-man governments have been involved in the consultation process for IPMS Residential to ensure the standard will be fit for purpose when introduced later this year.
He says industry stakeholders understand it’s going to be a progressive transition, supported by a period of dual reporting and introduction for new greenfield site developments.
Source: S. A. Kader, Special to Property Weekly