Do you actually own your house?

Transparency and disclosure should be the hallmarks of any mature property market, says Ed Attwood
Do you actually own your house?
By Ed Attwood
Sat 18 Oct 2014 09:41 AM

Thinking of buying a house in Dubai? Then you’re not alone. As rents rise close to their pre-crisis levels, many of the city’s inhabitants are wondering whether investing in a property makes a lot more sense than lining the pockets of their landlord.

Last week, however, Arabian Business reported a piece of news that may make many potential home-buyers think again. Master developer Nakheel has raised the application fees for villa extensions for owners living on the Palm Jumeirah or in Jumeirah Village or Al Furjan. The new cost is in some cases as much as 233 percent higher than it was before. So if, for example, you have a villa on the Palm Jumeirah and want to add a 1,000 square foot extension, you will have to pay an application fee worth an eye-watering half a million dollars — and that’s before a brick is even laid.

Now I am sure there are many who won’t shed a tear at the thought of the well-heeled residents of the Palm Jumeirah being prevented from adding an extra ballroom to their mansions. But that misses the point. When you buy a piece of property, you should be able to make the changes you wish, subject to certain planning restrictions and associated fees that should already be in place.

By comparison, rival developer Emaar states in the terms and conditions of its ‘Alterations & Home Improvement Fact Sheet’ that, in addition to submitting the standard paperwork, homeowners are required to pay a refundable deposit of AED5,000 to cover any damages to common areas and a flat fee of AED2,000 per application.

In this case, the goalposts have been shifted after the property has been sold. One resident told us that the large plot sizes were actually used as a selling ploy by Nakheel; buy small, and you can extend your house cheaply as your family grows. It seems like many swallowed the bait.

Is there any rationale for the price hikes? The decision seems to have been made ‘overnight’, according to another resident, with no prior warning. The justification, according to the same resident, appears to be related to the extra load that any extension would put on the development’s water and electricity supply. However, a draft letter on Nakheel’s website that the developer suggests owners wanting an extension should fill in tells a different story.

“…Nakheel will not supply nor approve any extra electrical load as a result of the villa extensions,” the letter reads. “We [the owners of the villa] are solely responsible for obtaining DEWA approvals on the required load for the extension(s) and we will not include Nakheel in any separate case or additional demands resulting from not acquiring the required NOCs. As such, neither Nakheel nor any of its subsidiaries shall be deemed to be part of our negotiations with DEWA and therefore shall not bear any liabilities.”

So if the developer is washing its hands of that extra burden on the utility supply, then why does it need the extra money? After all, Nakheel’s most recent financial statements indicate the company is in — relatively — good shape. Just a couple of weeks ago, the firm reported a net profit of more than $700m for the first nine months of the year, higher than its entire profits for the whole of 2013.

There may be a good reason for all of this, but we haven’t heard it yet. Transparency and disclosure should be the hallmarks of any mature property market. Sadly, it seems that for one of Dubai’s biggest developers, the only important thing is money.

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