By Ed Attwood
Transparency and disclosure should be the hallmarks of any mature property market, says Ed Attwood
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.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.
The question raised in headline is a genuine concern of house owners with existing additional land in the house.
Based on the data given in the article, extension permit will cost AED 500 per square foot of BUA compared to earlier cost of AED 150 per square foot of AED.
If the reported new permit cost is implemented extension will not be feasible and hence the new rate of AED 500 will cause much reduction of revenue to Nakheel as compared the current rate of of AED 150.Therefore, for Nakheel it will not be a wise decision.
There is a reason we are still only a tier 3 market.
I would expect them to have a better understanding of the price elasticity of their customers than you do. Hint, they are hitting the high-end properties, the most inelastic segment
They will probably get it one way or the other (either from the current owners or from those buying from disgruntled owners at a discount after factoring this)
But this article is just scratching the surface of (lack of) property rights.
Who said UAE is an area of Low Crime?
This is scandalous, and so very typical of Nakheel. They should change their corporate name from Nakheel, to "GREED IS GOOD" as it really lives up to the fact that this sort of moving of the goal posts suggests.
Nakheel is not an Ambassador for Dubai's positive image unfortunately, although it should be & very much so.
Wake up Nakheel, and consider the longer term implications of your behaviour. and keep things within reason.
It's not a bad thing if this prevents a lot of unsightly extensions. They also create a lot of disturbance during construction that can drag on for many months, usually in the nicest months when it would be nice to use the garden. If people want a bigger house they should move, and if upping fees encourages that then so much the better.
I'm watching some cowboy builder errect a shack on the back of a perfectly good new villa in Jumeirah Park as I write this, I wonder if the owner has his eye off the ball! Be careful an extension does not devalue your property with shoddy work...
Same goes for DEWA (utility bills) which has close to doubled in the last 12 months. No one knows how. DEWA says they have not increased tariff, many got there meter's checked and they are fine, Most residents say their consumption pattern has remained unchanged over the last year & some get same high bill when they are vacation. This was the general complaints in DUBAI FM 102.3 today from very many listener residents. What is intriguing is there is no measurement of "FUEL Charges" for both Electricity and Water and its units appearing in the Bill. As a SMS business owner I am charged Director's housing Fee when we renew our Trade License annually, and then "double-charged" in the DEWA Bill. I am a resident of UAE for 21 years & while we appreciate the modern infrastructure provided, the rise in fees and indirect taxation is quite unfortunate & Authorities should consider that seriously.
True one of the expat taxes is alive and well.
At a time when oil has sunk in price, the fuel surcharge for DEWA is still the same, if not increased.
Nothing changes huh.
This is unbelievable from Nakheel. In a case where we want landscape our garden with some tiles and grass costing around 12500, Nakheel is demanding a fee of AED 2500 which is 20% of the cost.. This is attrocious..
I think the Housing Fee should be abolished. DEWA has in fact raised their fees dramatically this year. Electricity fees should not exceed monthly food costs and in Dubai's case it does, so are we (expats) subsidizing Dubai? I was on vacation, and my DEWA was the highest it has ever been and this is frustrating to say the least. If Dubai is to become a fully functioning modern society they must install a system that is not manual and address the fees. Why is the fuel charge so high? Glad you raised this issue. Many have their companies pay their DEWA, so they are not worried, but what if companies get fed up with paying it, I guess that's when more voices will be raised in complaint of this exploitation. This might be the straw that breaks the camel's back!