4 years of waiting
The four years it took to pass the law is quite a long time. Dubai is one of the emirates of the UAE, and land law here is governed by UAE federal law, not Dubai's domestic law. Historically, the land in each individual emirate belonged to its ruler. He could transfer individual plots to the ownership of citizens, reserving the primary right to dispose of them. Any petition regarding land ownership rights and any related dispute was brought to the Sheikh's court.
When the Emirates were formed, the new federal legislation ignored the issues of property rights. Indirectly, the ownership of land by foreigners was allowed, indicating that the regulation of property rights after the death of the owner takes place in accordance with the legislation of the UAE. However, persons who are not citizens of the UAE or GCC member countries (the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar and Saudi Arabia) were not able to register ownership in the Land Registry of the Emirates.
Recently, the UAE legislation has adopted the concept of ownership of real estate and its lease. At the same time, free enterprise zones were created to attract investments with minimal government interference in the activities of companies. As a result, there was a need to provide investors, including foreign ones, with the right to own real estate,
In fact, the new law grants unconditional ownership rights only to citizens of the UAE and GCC, their companies and limited liability companies. However, at the discretion of the ruler and in certain territories, foreigners can also own real estate (freehold), as well as rent it for up to 99 years.
It is assumed that foreigners will have the opportunity to become owners of real estate built in the territories allocated for construction to three development companies with state participation – Nakheel, Emaar and Dubai Properties, which will have the right to apply to the Dubai Land Registry with a request for registration of a real estate object in the name of a foreign owner. The purchase of real estate by foreigners, or rather its registration, will be taxed at the rate of 2% of the value of the property, 1.5% of which is paid by the buyer, and 0.5% by the seller.
However, all these details are not yet official – the procedure for the entry into force of the law provides for additional regulations of the Dubai Land Department, which should determine all the specifics.
Exceptional status
The fact that the process has finally moved forward is encouraging. However, it will take several more months before it becomes clear what actions should be taken by buyers of real estate in Dubai in order to register it into legal ownership. But it is already obvious that this law will stimulate price growth in the future. Firstly, guaranteed ownership will attract more conservative buyers to the market, which will affect the increase in demand. Secondly, a solid legislative framework will allow banks to simplify the mortgage lending procedure, thereby increasing liquidity and boosting demand.
However, there is still no shortage of demand. Until recently, Dubai's main policy was to invest extremely intensively in projects aimed at gaining the emirate an exceptional status in the eyes of the world community. The beginning of this process was laid by the magnificent seven-star Burj al Arab hotel, built in the shape of a sail on an island specially erected for it. This building is now known all over the world and has become a symbol of Dubai. The successful implementation of this project has shown, firstly, that there is nothing impossible in Dubai, and, secondly, that such large-scale actions will help the emirate enter the "top league" of the world economy.
In terms of status, the artificial island of The Palm Jumeirah can be considered an analogue of Burj al Arab in residential real estate, the scale and cost of which are staggering. From the point of view of promotion and sales, the first "palm" turned out to be so successful that a whole series of "island" projects was launched, surpassing the already gigantic original in scale. Two more "palm trees" – The Palm Jebel Ali and The Palm Deira - were created by analogy with the original project, and the Dubai Waterfront surrounds The Palm Jebel Ali with its segmented crescent. But the most ambitious project can be called The World, a group of more than 300 islands that make up the outlines of continents. This offer is for the most affluent buyers.
Not only islands
Artificial islands have increased the coastline of Dubai by hundreds of kilometers, but no less grandiose construction is unfolding on the continental part. The largest project is being led by Emaar, whose Burj Dubai super skyscraper will include both residential and commercial areas, as well as the world's first hotel from Armani. It is claimed that Burj Dubai will become the tallest building not only in Dubai, but also in the world, and although the exact height is kept secret, it is estimated at about 700 m. A whole ring of high-rise office and residential buildings will be built around the skyscraper. The full implementation of the project is scheduled for 2008-2009.
For several kilometers along the coast there is a complex of multi-storey buildings Dubai Marina. In total, it will include more than 200 buildings, including a number of the tallest skyscrapers, including the Princess Tower with a declared height of 400 m. It will be the tallest building in the world, fully occupied by residential premises. Ultra–modern architectural style, luxury finishes, state-of-the-art technology and striking scale are the features of Dubai Marina, a complex that will have an imposing and easily recognizable silhouette.
A few miles from the coast is potentially the greatest of all Dubai projects – Dubiland. According to the designers, it will be a series of separate complexes and recreation parks rather than a single whole. Dubiland will surpass Disneyland in Florida many times in size and will eventually become the main attraction of Dubai in the international tourism market.
The latest news is the announcement of Falconcity of Wonders as part of Dubiland's "city of wonders". This is another confirmation of the general Dubai trend towards creating grandiose and eye-catching projects that have no analogues in the world. In terms of Falconcity of Wonders, it resembles the falcon - bird depicted on the national emblem of the UAE, copies of some of the most famous buildings in the world will be built in it. However, these are not just models – in the Falconcity version, the Eiffel Tower will be taller than its Parisian original, it will house both residential residences and offices. The Great Pyramid will also be larger than its Egyptian prototype, and it will not have tombs, but hotels and private apartments.
If there is one thing the Dubailand project lacks, it is an adequate road infrastructure. Alas, the roads in Dubai do not yet correspond to the general level of development of the emirate, but there is every reason to believe that the authorities will seriously take up this issue.
On a different scale
Of course, potential investors are attracted not only by the grand scale. Relatively small projects are also launched in Dubai on a monthly basis, such as villa complexes or townhouses, as well as multi–storey residential buildings. Some of them, such as the Arabian Ranches Golf Resort, are aimed at a wealthy buyer, they offer large plots and luxury buildings. Such projects are usually of interest to buyers of country houses for their own use, since it is not easy to rent such real estate in Dubai.
Other projects are designed for a buyer with more limited capabilities. Let's not forget that, despite the significant increase in the value of Dubai real estate in recent years, its comparative accessibility has been and to a certain extent remains one of the main advantages of the emirate over other destinations. In addition, the construction of relatively inexpensive apartments was carried out taking into account the further rental of housing.
Since investors make up a considerable percentage of real estate buyers, a significant part of the already completed properties are now on the rental market. It is significant that with the phenomenal pace of Dubai's development, competition in the rental market remains fierce, and the cost of hiring has been increasing for many years. In 2005, the rate increase averaged 35-40%, so at the end of last year, the government of Sheikh Mohammed was forced to intervene - in November, a decree was published limiting the increase in rates in 2006 to 15%.
The very fact of the appearance of such a decree indicates the concern of the Emirati authorities about the likely imbalance in the rental market.The huge volume of real estate under construction, scheduled for completion in the next year and a half, could be unclaimed by tenants if the rates were too high. A large number of residential premises would have remained empty, at least for the first time, which could not but affect the investment attractiveness of Dubai real estate. If investors start to get rid of their acquisitions en masse, then the market can only be saved by the authoritarian intervention of Sheikh Mohammed - for example, by imposing a moratorium on sales. Such an unpleasant scenario does not look at all fantastic, and therefore the proactive steps of the Dubai authorities are more than relevant. Right now, they just need to find levers that will prevent the emergence of an investment bubble after another round of price increases associated with the adoption of a new law.
So, the further development plan for Dubai is more or less clear. The only way is to further develop the region by attracting tourists and potential residents here, as well as large corporations with hundreds and thousands of employees. In just a few decades, Dubai has gone from a small, stuffy village on the edge of the Arabian Peninsula to a world-famous business and cultural center. Now it is impossible to determine where the limit of the development of this phenomenal city and its real estate market is. Nevertheless, it is clear that price growth will be sustainable if supply and demand are maintained in a reasonable ratio, in accordance with the laws of the market, and not with the strong-willed decisions of Sheikh Mohammed and his Government. Anyway, the rapid rise continues...
