The land department in Dubai is working on a new rental law, which will give separate weightage to commercial real estate like offices, malls, health and educational property, apart from residential. The law replaces the current ‘one-size-fits-all’ rental regulation, top officials said.
This is likely to pave way for every property asset class to have their own rental index and contractual obligations between negotiating parties. If the law gets effective, it would be another major step in the Dubai Property market, as it would mean more equitable relationship between the tenant and the landlord. At present, the Dubai Rental Index dominates the residential property sector, and is updated annually.
Last month, the Land Department announced a ‘unified lease form’ on all rental contracts in the emirate. According to Marwan bin Ghalifa, Head of Real Estate Regulatory Agency, this was done to get a new rental law that covers all types of property assets and not just draw on the provisions within a single unified law.
Amendments would also be made to another regulatory regime, the laws pertaining to homeowners associations, which would be improved to bring in transparency. With more freehold projects getting greenlighted, the department aims to clearly stipulate the rights of developers and property owners.
The Land Department is also working on another major regulatory initiative, placing a strong foundation for Real Estate Investment Trusts (REIT). At present, REIT is active in market, which pools together institutional funds into single or multiple properties for yield generation.
According to Bin Ghalita, more overseas funds are awaited, as REIT would be a good vehicle through which they can operate. While individual investors pull out easily at times of uncertainty, institutional investors stick on long term, even during the ups and downs in the market cycle. Hence, more such investors are required.
Emirates REIT began by investing in commercial realty, and then established a second one to become income-generating residential property in Dubai and RAK.
In the year 2006, the Land Department monitored more than 16 laws and has expanded into the regulatory arm. With more services being pushed online, an overseas investor can have a ready set of data on likely yields depending on location from smart map app. It is now up to the investor to make informed decisions when investing in Dubai, as the transparency has already been built it.