Waiting on RERA’s reality check

These are tricky times for Dubai's RERA which is coming under heavy fire from some industry experts, says Andrew White.
Waiting on RERA’s reality check
By Andrew White
Sun 12 Apr 2009 04:00 AM

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.

...................................................................................................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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