Waiting on RERA’s reality check

These are tricky times for Dubai's Real Estate Regulatory Agency (RERA), the government-owned property watchdog which is coming under heavy fire from some industry experts.

And RERA's controversial rental index came under further pressure last week after respected real estate broker Landmark Properties issued its own figures, considered by many to more accurately reflect the downturn in the market. Landmark is a serious player and one worth paying attention to, boasting annual sales transactions of AED8bn ($2.18bn), and leasing transactions upward of AED1bn ($272.25m).

RERA's figures are taken from the height of the boom in summer 2008, when Dubai's population was enjoying record growth, and try as they might, developers just couldn't throw buildings up quickly enough to house the masses.

For a two-bed apartment on the Palm Jumeirah you were looking at a minimum of AED210,000 ($57,100), while in the Marina you would get no change from AED150,000 ($40,800).

Nine months later, and Landmark's figures paint a stark picture of the changing economic climate, and the drop in demand that has stymied growth in finance, trade and industry hubs the world over. The new index puts a two-bed on the Palm at a minimum of AED140,000 ($38,115), and the Marina at AED85,000 ($23,100). That represents a difference from RERA of 33 percent and 43 percent respectively.

Having just moved into a new apartment myself, I was quietly thrilled to discover that I'm paying a fair price for my new place, according to Landmark. I might have shaved another five thousand off for the year, but at least I'm not stumping up a RERA index-sized chunk.

Personal victories aside, good news for tenants has been all too rare over the last few years, such has been Dubai's extraordinary growth since the turn of the century. But RERA itself can prolong the cheer later this month when it revisits its own calculations, bringing them into step with a market that that has changed dramatically since last summer.

The thing is that if RERA's downward revisions don't at least match those of Landmark's, then people will be right to wonder which index they should follow.

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From one Dubai agency to another, and it was good to see the city's utilities authority confirm last week that it had refinanced a $2.2bn Islamic loan that was due to mature in April. The Dubai Electricity and Water Authority (DEWA) has the backing of 18 international, regional and local banks, and has already said it will not hike charges to consumers this year, to the relief of residents.

DEWA became the third Dubai government entity to tap the loan market in order to refinance existing debt. In February, Borse Dubai raised a $2.5bn loan to refinance part of a $3.4bn loan and also last week, Dubai Civil Aviation refinanced a $1bn Islamic loan.

In the current credit climate, and especially for a city grappling with significant challenges in the wake of the slowdown and the resultant outflow of foreign investment, that's pretty good work.

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It will be interesting to see the Qatar royal family's response to a request by Britain's Prince Charles that they rethink a modern design for Chelsea Barracks in London.

The Prince does not approve of renowned architect Richard Rogers' glass-and-steel design for Chelsea Barracks, which is majority owned by Qatari Diar, the development arm of the Qatar royal family, and has asked that the Emir intercede to amend the plans. Owned by Qatar but located in the UK, Chelsea Barracks is set to be the site of a right royal battle.

Andrew White is the editor of Arabian Business English.

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READERS' COMMENTS

Harmful official rental index
Posted by Venkat, Kuwait City, Kuwait on Sunday 3 May 2009 at 10:15 UAE time


The harms of a regulating authoroty publishing a rental index, though helps to remove the information void, is that it tends to dislocate the natural rent determination process as RERA's indicative rents can be a pivotal point of rent fixation even if that is not the equilibrium rent.

Errors by RERA, either on the upper side or on the lower side, will lead to bargains by the tenant or the landlord as the case may be, which is an interventionist bestowing of bargaining power. Lower publishing frequency leads to sticky rentals as well.

I feel that RERA should scrap its own rental index program and let the market players compete for an index and the market will ultimately adjudge and rely on the accurate index provider.

If tenants/landlords see a private player publishing a rental value which is higher/lower than what they pay/recieve, the reaction would be to pooh-pooh the publisher rather than assigning a sense of sanctity to it. This will in turn lead to either the publisher withdrawing the index or working harder for accuracy.

Having said these, the thirst for information and resultant lack of willingness to criticise the information provided and sometimes, the lacklusture in attitude in the region will result in index publishers getting their not so accurate index published and them continuing to get the advertisement they need, the main objective of their service. When both the poor and the good data provider get equal amount of publicity, then why bother to run the extra mile for accuracy??

The Market
Posted by Aninsider on Sunday 12 April 2009 at 14:01 UAE time


The RERA rental price index (govt) is a carefully "managed" piece of data to pretend to be bringing transparency to the rental market just as prices became so ridiculously unsustainable at the boom.

Now that rents are in free-fall this is just another charade to put a floor under the slide.

The sneaky little DEWA Municipality Tax of 5% on the rental contract value is also at risk if rents fall too far.

This is a nice earn that Dubai Municipality/Govt. are surely budgeting on that is now rapidly taking a 50%+ price haircut on!!

Oh the joys of controlling the "open" market!!!

RERA should get their act sorted
Posted by raj, dubai on Sunday 12 April 2009 at 13:17 UAE time


RERA is one main source of confusion. today also private developers are collecting more than 30% payment with no construction in site and their payment plans are still timebased rather than progress based.

RERA has to step up their awareness campaign and be strict with these developers who claim to be not a part of that scheme!

RERA a toothless mutt
Posted by Geriant, Dubai, UAE on Sunday 12 April 2009 at 12:04 UAE time


RERA has consistently shown itself to be a feeble watchdog and it is high time it came clean about its fumbling of the rental market. Landmark was bold to disclose the hurtful figures, but this kind of open communication from responsible members of the real estate sector will do much more to restore confidence in Dubai property than the blatherings of a government agency intent only on protecting investors, largely local, from the grim realities of market forces.

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