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Confusion in Qatar
In 2005, the Qatar government issued a rent cap of 10%, which ran for two years, and was followed by a two-year freeze on property rents, which became effective from February 15, 2008. However, rental contracts signed before January 1, 2005 are allowed to increase by a maximum of 20%.
Nevertheless, the report by Global Investment House noted there was a 154% increase in rents for residential properties between 2005 and 2007, followed by a drop of 20% in November of 2008. The authors of the report went on to note:
"We are of the opinion residential rental rates may go down by about 10% in 2009." This was justified by the number of expatriates who relocated to Qatar in 2008, which is expected to keep demand high, while also taking into account the low price of oil, which could have a negative influence on recruitment in the sector, and therefore affect the level of new demand for housing.
Lapse in legislation
One element there appears to be visible issues with is legislation. According to Anani, there is no separate authority assigned to preside over updating and creating laws in the real estate sector, and each matter lies with the government.
"Usually what happens is government departments that think they have jurisdiction over certain matters would have to draft a law and send it to the cabinet ministers to approve, before the Majilis Al-Shura approves it, and then the Emir issues the law," he explains. However, Anani claims it is not the governments' responsibility to regulate the sector when it comes to property ownership and land registration, and it is in fact in the hands of Qatari Diar.
"I think the contracts of Qatari Diar need to be reviewed. Strata laws or joint ownership is not very clear and registration rules are not very clear. There is no mechanism right now - when you have free ownership - to obtain permanent residence, even though this is offered by law you don't know how to get it," he says.
On the contrary, Oayda believes The Pearl is a prime example of something which has been "done right, since day one," in terms of sufficient and comprehensive contracts, but believes there is much room for improvement in other areas.
"I think there is still a lot of improvement to take place, as freehold and strata titles are new to the region." With regard to strata titles, Oayda believes more needs to be done soon, as more projects near completion in the country.
"I think it needs to be streamlined, and that will probably take place once more towers come online. There still seems to be a little bit of vagueness with regard to one owner having one title over a tower, and then strata-ing that tower becomes a little bit of a question mark," he says.
Meilleur, on the other hand, suggests current legislation is already being addressed by the authorities.
"Qatar is in the process of looking at legislation. The legal infrastructure is under development and financial infrastructure is under development in response to the growth. As the market becomes bigger and more complex, it requires different rules and regulations to deal with that, and the government has been constantly reviewing these to make sure they are appropriate for where they want the strategic plan for the country to go," he says.
Conflicting contracts
Anani explains one of the problems which needs addressing, is the issue of each developer having different contracts, as such variation could create unnecessary confusion at a later stage.
"For example, the United Development Company, the master developer of The Pearl has very different contracts than the Lusail area, which Qatari Diar is the master developer for.
"There is no consistency, and you cannot really predict what the system is unless you have access to the contracts, which might vary from one place to the other. I think in the long term this will create an issue - having different systems - especially if a strata law is issued. A lot of correction and action needs to be taken by all developers," he states.
Aside from the negative aspects which tend to come as standard with any emerging market, Meilleur suggests there are some symptoms of the global financial crisis that an emerging market, like Qatar, can take advantage of, particularly when it comes to construction.
"When you're managing these types of projects, [undertaking] construction during an inflationary period it's very difficult to keep to budgets and very difficult to get the human resources you need. Now, that's become a lot easier to do, so it's very good from a construction perspective," he explains. Another positive, he notes, though slightly more brutal, is the effect the financial crisis could potentially have on competitors.
"If you continue to build during this period, what could potentially be competing projects are either going to slow down or be postponed. Therefore, when you come out of the recession - and you will - there's less competition in the market place, so that should bode very well for rental rates and shareholder returns," he says. Even with the admittance that some companies may have to postpone projects in the country, Meilleur voices unrelenting confidence in Qatar's future.
"Qatar is certainly affected by the world situation, it's a member of the community, but I don't think the depth here will be anywhere near what we'll see in other parts of the world. I'm quite optimistic that the downturn's effect on Qatar will be relatively short-term. I would expect by the end of this year, things will be very different.
"This really is a crisis of confidence, and it's a question of people getting their confidence back and believing that tomorrow is going to come," he says.
Oayda appears to share his outlook, and suggests things can only get better for the country's real estate industry.
"I believe now is the perfect time to invest, not only funds, but your personal investments in Qatar, because we're probably at the lowest we'll ever be. I think things are going to get better, and get better fast."
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