Arguably, Sultan Butti Bin Mejren has one of the most exciting jobs in Dubai government. After all, what is the emirate best known for if not its continuously changing skyline, displaying new skyscrapers, luxury villas and, of course, the tallest building in the world?
However, with reports of falling property prices and softening demand over the past 12 months, Bin Mejren’s responsibility as head of the Dubai Land Department (DLD) can be no walk in the park.
A market overview for the first quarter (Q1) of 2016 by property consultants JLL painted a picture of subdued demand and limited supply. Residential sales prices dropped 10 percent year-on-year, while rents fell about 3 percent, compared to the previous year, it said.
Meanwhile, policymakers are still working to convince investors haunted by tales of hefty losses sustained during the global financial crisis – when Dubai’s then under-regulated property market crashed, partially-built projects were abandoned and a handful of dishonest developers fled with mountains of cash – that such horror stories are a thing of the past.
Bin Mejren has witnessed the economic ups and downs of the past decade and more, having joined the DLD as a writer of legal documents in 1986, when much of Dubai was still a desert, and worked his way up to become director-general in 2006, two years before the crash.
In 2014, he became a fellow of global industry body the Royal Institution of Chartered Surveyors (RICS), in recognition of his work to improve transparency in Dubai’s real estate industry.
In an interview with Arabian Business at his office in Deira, Bin Mejren discusses his predictions for how the market will fare in the coming months, what the government is doing to tighten rental regulations and other laws, and why he believes the emirate will always have a strong appeal for international investors.
“The year 2015 was good from start to finish,” he begins. “The total value of deals reached AED267 billion [$72.6bn], an 8 percent rise from the previous year, according to our annual report, and lots of projects came to fruition during that time. It was a strong year for the sector and trading was good.
“We started 2016 with reports of oil prices coming down and it affected the market a little bit, but not too much.
“The value of all first-quarter deals stood at AED54.78 billion [$14bn], and I can tell you that as of June we have reached the AED100 billion [$270bn] mark, which means we expect the total value of deals in 2016 to exceed last year’s figure.”
With oil prices forecast to rebound from their current low of $48-50 per barrel to $60-70 per barrel by the end of 2017, Bin Mejren says the market will perform well through to 2020.
“I believe Dubai real estate will be even better in 2017, 2018, 2019, and keep growing after then,” he says.
His glowing description of the market is at odds with industry pronouncements. Recent reports by some of the world’s biggest consultancies, including JLL, Savills and Knight Frank, have warned that sales and rental indices are declining and growth will remain sluggish this year as the strong US dollar and uncertain regional economic conditions affect investment activity.
However, many of those reports have also noted that the market appears to be bottoming out and is likely to pick up from the end of 2016. ValuStrat’s Q1 Dubai Residential Price Index claimed there had been no monthly decline in its index for the first time in almost two years.
“There are always [negative] reports about the market,” Bin Mejren says. “Look, during the crisis, people said Dubai real estate would not recover for another 10-15 years, but it had started to pick up three years later. And you can see it in our figures; there are lots of good stories.”
The DLD has licensed 60 pipeline projects this month alone – a robust figure, he says – and some of the emirate’s biggest developers have chosen to launch high profile projects this year, including Emaar’s Dubai Creek Harbour tower, set to be taller than the Burj Khalifa.
Across the region, investor activity is expected to pick up with a positive impact in Dubai. CBRE’s 2016 EMEA Investor Intentions Survey, published in March, reported that 48 percent of respondents predicted their purchasing activity would be higher than last year, compared with 15 percent who said it would be more subdued.
One strong aspect of the Dubai market is the high level of foreign investment, says Bin Mejren. The DLD’s transactions report in January revealed that 150 different nationalities had invested a total of AED135 billion ($36.7bn) in Dubai real estate in 2015, of which GCC buyers accounted for about $11.9bn, or 32 percent.
Outside the GCC, Indian nationals were the highest value foreign investors, accounting for $5.4bn of property transactions, followed by Brits, who invested $2.7bn.
“Investors come from all over the world and they like to invest in Dubai,” Bin Mejren says. “There is a lot of opportunity for them here, a lot of development activity, they can make money. Foreigners always take the biggest share of transactions and we think it will remain this way.”
Still, concerns abound as some foreign investors complain they were left with deep holes in their pockets after schemes such as The Pearl and The World islands shuddered to a halt years ago due to lack of financing.
The recession had a crippling impact on many off-plan investors because regulations at the time failed to adequately protect their funds. New laws have been introduced since then, for example, requiring investors’ funds to be looked after by a third party escrow account so developers cannot run off with the money.
While some investors claim they are still suffering because their funds are tied up in delayed, stalled or abandoned schemes, Bin Mejren insists this is because of historic problems that could not arise today because a tougher legal framework is in place. In some cases, he notes, developers of stalled schemes even introduced compensation measures enabling investors to transfer their interests to different developments.
“All the [negative] stories you have heard about are from before the crisis,” he says. “Since then there have been no more stories like this because RERA [DLD’s regulatory arm, the Real Estate Regulatory Agency] is catching everything and there have been new laws.
“If a developer wants off-plan sales, he has to hand over the title deeds for the land and complete at least 20 percent of the project before selling any of it.
“And we have the ‘Tanmia’ initiative, intended to resolve old disputes and bring stalled schemes to completion.”
One of Bin Mejren’s ongoing objectives is to improve transparency. This year, Dubai was ranked the Middle East and North Africa (MENA) region’s most transparent real estate market for the second year running – it climbed 23 places to forty-eighth out of 109 markets in JLL and LaSalle Investment Management’s joint Global Real Estate Transparency Index, published in June.
“Dubai has made good progress, recording a 10 percent improvement in its score over the past two years,” JLL MENA’s head of research Craig Plumb said at the time. For example, the DLD now lists all registered real estate brokers on its website and the number of transactions they have been involved in – “it’s all very transparent,” Bin Mejren says.
However, Plumb added that significant constraints remain, including limited public information on transactions and lack of a market-wide index of real estate performance. He suggested the RERA rental index – a market rents calculator that DLD recently decided to update annually instead of three times a year – should be published quarterly to better reflect fluctuating market conditions.
Bin Mejren does not respond directly when asked whether the index could be published more frequently, but implies this is not on the cards: “The index used to be updated [three times] a year but as from the end of last year we will issue it just once, every October.”
However, the DLD this month set out plans to launch a performance index, possibly in partnership with a specialist index provider, to allow investors to track the state of the market. It is also halfway through a two-year, $1.36m project to survey every rental property in Dubai and build a new RERA index that more accurately reflects the property’s size, location and condition. Rental and service charge costs would take into account characteristics such as square footage, date of construction and quality of shared facilities. The survey will create the emirate’s first comprehensive real estate database.
“This is a big project,” Bin Mejren says. “We have 135,558 [rental] properties in Dubai and have surveyed about 21 percent of the total, so around 29,000. By the end of the year we will have finished the survey and put the details in the system.
“This piece of work will help with what you say: regulating rental prices. At the moment when we do the index we do not know all the details about a building but when we finish this survey we will – whether it is an old building, new building, low-rise building, tall building. And we can devise a formula to calculate the rent.”
For the time being, tenants can file a case with the DLD’s Rental Dispute Center “if they are not satisfied with the indicative rental cost according to the index”, he says. “The index is only a guideline and anyone who does not accept it can ask for a revaluation.”
The judicial body was set up in 2013 and has settled around 12,678 rental disputes to date, according to Bin Mejren, who directs Arabian Business to the DLD’s mobile app that provides live updates on the number of cases being lodged. Twenty-nine cases have been filed on the day we meet and this rises to 30 as we speak. A further 4,537 disputes are in the preliminary stage of hearing. On average, between 20 and 30 new cases are lodged each day and the number has remained consistent over the years, Bin Mejren states. “Having a special court for rental disputes has been a huge success.”
Bin Mejren has previously voiced concern over arbitrary rent hikes by landlords. He tells Arabian Business that although the dispute centre is very effective, rent laws in general need updating. He says his department is developing a draft law aimed at regulating different property types, from commercial to residential to retail.
“We have the rental index, we have laws regulating the increases, and we have a dispute tribunal. But our current rental law is quite old and does not distinguish between the three main sectors of real estate.”
The new law is one of 12 pieces of legislation that the DLD has on the statute books at present and intends to finalise this year, Bin Mejren reveals. “Some of the laws amend older versions while others are completely new. We know we have to keep our laws fresh to match the development of the property sector and keep people coming here.”
Another draft law is intended to better regulate the auctions market (“We already have an auctions law, a small bylaw, but it is old and we need a new one”). Another seeks to regulate the management of public spaces in development schemes. He declines to provide further details.
Meanwhile, the DLD is working with the Department of Economic Development and Dubai Municipality on plans to develop an affordable housing sector in Dubai. In the UK, ‘affordable’ housing is defined as a residential property that costs up to 80 percent of the market average and is typically subsidised by the state. The DLD study is intended to produce Dubai’s own definition of ‘affordable’ and make policy recommendations for stimulating growth of the sector. A meeting is scheduled for two months’ time and action will be taken after that, Bin Mejren says.
However, he insists the price of Dubai property in general is in line with other international cities such as London, New York and Hong Kong. “Dubai is a free market and no one sells properties at [exorbitantly] high prices,” he says.
Bin Mejren is a calm and humble government official who speaks quietly and politely. With an academic background in Islamic studies and law, he says his passions other than real estate are scuba diving and photography – in particular underwater photography, but he also enjoys taking pictures of a range of other subjects.
With Bin Mejren at the helm, Dubai looks on course to bring its ever evolving real estate landscape into line with global standards and modern investment patterns.For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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