The news of the higher committee of real estate, recently established by Sheikh Mohammed bin Rashid Al Maktoum, has been welcomed by property stakeholders and developers alike.
While it’s a positive step in controlling the balance between supply and demand of the UAE property sector, the mammoth task requires the right experience and commitment to provide a long-term solution to the UAE’s property crisis.
Here are four key discussion points/questions on whether Dubai’s higher committee of real estate will really be able to control housing supply.
1. What are the aims of Dubai’s higher committee of real estate?
The higher committee of real estate has been established to take control of a UAE property market that has become unbalanced and unsustainable. Over the last five years, falling oil prices and an over-supply has caused the UAE property market to slow down considerably, resulting in stalled projects, redundancies, and a lack of confidence in the property sector.
The ‘build it and they will come’ development model of recent times is no longer sustainable. With an over-supply of properties and new projects put on hold due to lacklustre interest, property prices have plunged. In response to the property imbalance, the higher committee has been created to take control of the situation.
The aim of the committee is to create a sustainable balance between the supply and demand of the UAE property sector while adding real value to projects that will revive the industry and help boost the national economy.
The committee will also study current and future property market needs to ensure that duplication of projects is avoided. The intention is also that semi-government and private investment companies will not have to compete with each other, creating a fairer, more balanced and stronger market.
2. Who is managing the project day-to-day?
One of the biggest factors in the new committee’s success will be the management behind it – who will be running it day-to-day, and whether there is enough experience on the committee to effectively deal with the current property sector issues.
This is what we have been told about the committee members so far:
• Heading the committee is Sheikh Mohammed bin Rashid Al Maktoum’s son, Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai and First Deputy Chairman of the Dubai Executive Council.
• Other members include the General Secretariat of the Executive Council of Dubai, the Dubai Land Department (DLD), and semi-government real estate developers such as The Investment Corporation of Dubai, Wasi, Emaar and Dubai Silicon Oasis Authority.
With a wealth of leadership experience in both business and financial sectors, Sheikh Maktoum, as chair of the committee, will encourage confidence and optimism in the initiative, having gained a strong reputation as a business leader, holding a number of responsibilities in strategic affairs, finance, media and cultural initiatives.
However, there is currently very little information available on how the committee will be run on a day-to-day basis. In order for the new committee to be a success, we will need to see a strong managerial team who can withstand pressure and do the necessary work needed to turn the property crisis around.
The more local and international real estate experience the team has, the better. We need to look not only locally for solutions to our real estate issues, but also take examples from other world-leading cities on how to perfect our industry.
The chairman will have the right to add or cancel members as required, so it will be interesting to see whether the make-up of the committee will change to include a higher percentage of members with different types of property expertise.
Another concern is that the committee members are primarily made up of public sector developers. So far, only one private developer on the committee has been named: Nshama.
There needs to be a better balance of public and private developers on the committee to ensure that the interests of all areas of the property sector are adequately represented.
One final concern is that since this was announced several months ago, we have seen the largest developer in Dubai announce a new multi-billion development. Surely this goes against the theme of the recent announcement?
What we really need to do with immediate effect is to zone and identify boundaries of the current development areas to give existing and future developers and property buyers the comfort, that within certain areas, there will be no additional buildings and projects.
Second on the agenda is, any developments that fall, for example, over $10m or $20m, need to be approved at a board level and a business base made, as to the benefit it will bring to the community and the country.
3. Who will the committee report to?
It’s currently unclear who the committee will ultimately report to. Some possibilities include:
RERA: The Real Estate Regulatory Agency is the regulatory arm of the DLD. Its main roles are to set policies, provide legal frameworks, license and regulate all sectors of Dubai’s real estate industry.
DLD: The Dubai Land Department handles the legalisation and documentation of real estate trading operations in Dubai, as well as organising and promoting real estate investment and spreading industry knowledge.
The Executive Council: The Executive Council is the main decision-making government entity in Dubai under the supervision of the Ruler. One of its main responsibilities is endorsing development plans and monitoring their implementation.
The DLD falls under The Executive Council umbrella, of which Sheikh Maktoum is the first deputy chairman. Although we have been assured that the DLD will be working closely with the committee to provide members with information and support, it is not clear who will have the ultimate say in the decision-making processes.
Without clarity, it’s difficult to understand whether the committee will be responsible for regulating or facilitating the operations of developers.
4. Is this a long-term solution or short-term fix?
The higher committee was created to find a balance between Dubai’s property supply and demand. Reports are currently mentioning strategic 10-year plans for all major real estate projects in Dubai. If the committee is successful in achieving its goals, it will boost investor confidence in the emirate’s real estate market.
But let’s put in place an immediate three-year plan, where it is outlined how to balance supply and demand; set boundaries and borders for developments, put a hold on anything over $10/20/50m going ahead without committee approval, and initiate a system where each development is mandated to explain its benefit to the country, selling plans, etc. This can then translate into a five-year and 10-year strategic plan.
But it’s not just current issues that need to be addressed. These new established, long-term strategies, will then ensure the future growth of the UAE economy by creating a sustainable and balanced property market.
The UAE has always bounced back, and it is starting to already, in a few small areas. Studios are seeing a pickup, as are three-bedroom properties in the Springs. Rents have dropped, and now one sees a growing middle-class staying in the UAE as it becomes more affordable to stay than to repatriate. More and more people are now setting up their home in the UAE.
A few green shoots have started to sprout. What we need is a little more positive news, and a few more positive developments regionally.
Michael Burke is the managing partner at Dubai-focused real estate company, Arabian Escapes