“When you make an informed decision, nine out of ten times you get it right”
The Grid: Could you share one piece of advice for investors considering Dubai real estate today?
Binesh Panicker: Investors must do their own due diligence and not listen to brokers purely. Brokers will push deals linked to higher commissions mostly. Of course things are changing with RERA picking up its game.
The Grid: Talking of RERA, tell us more about how government impacts this sector in your opinion.
Binesh Panicker: I have been in the market for nine years now. The biggest difference today is the level of information sharing. There is a press release by the DLD almost every day targeting a different segment, whether in relation to the Dubai Rental Dispute Center or a new regulation or something else. This is helping buyers and sellers and investors to make informed rather than forced decisions. When you make an informed decision, nine out of ten times you get it right.
Since the inception of the RERA laws, Dubai has completely changed. Real estate became a major contributor to GDP for Dubai after the freehold laws were launched (since 2009). It is not even eight years since then that, to prevent what happened before, DLD has put systems in place to regulate buy and sell and leasehold: rental market, owners association law, etc. In the community management sector there are tie-ups with international associations too (e.g. US CAI officially inaugurated here recently).
The Grid: Have international contemporaries played a great part then in sculpting the changes we have witnessed in the last decade?
Binesh Panicker: What we have to understand is that the rules overseas, though they may have served as benchmarks to exceed, cannot be implemented directly here. There are local nuances that need to be considered e.g. Shariah. So there is discussion and discourse and new reforms are born out of this exchange of ideas, knowledge and experience. As a result, Dubai is quickly becoming the centre of RE education in the Middle East. Because Dubai has done so much to put systems in place, other countries in the region are noticing and approaching Dubai for informative discourse. So in many ways it is playing the role that you have just described.
DREI is the educational arm of the DLD that trains their professionals. DREI trainers are invited to train staff in other countries at the DLD equivalent entities in those jurisdictions. This I believe is a huge achievement for a market as young as Dubai. Even with in the UAE, Dubai is a model example that other Emirates are learning from in this regard. If you look at Dubai from this angle, it gives investors another layer of confidence. It has set precedents for the region to choose from.
The Grid: Lets home in on this aspect. Could you give an example of a new precedent that protects investors?
Binesh Panicker: With the legal framework put in by the DLD over the last few months, it is protecting foreign investors and their money like never before. Money raised by developer must be put in escrow. Usage is strictly allocated amongst marketing and phases of construction and release is subject to approval from RERA once the developer provides satisfactory proof and validation. DLD will not release the required certificates to progress otherwise.
The Grid: What about demand, i.e. investor appetite. What is the single most notable difference today, beyond nominal quantity?
Binesh Panicker: Compared to a few years back when people literally were buying papers, investors today are less easy to please. You can’t just state as a developer that you will launch or deliver at a certain time. If you are a new developer from the UK or India with even 100 years of experience, people will still hesitant to jump on to the bandwagon and invest with you in your project in a new market like Dubai. This is a hugely constructive challenge to the industry.
The Grid: In what way is this constructive?
Binesh Panicker: Coupled with the challenging macro indicators and the tightening of regulation, this has impacted the attitude of developers completely. Now it is a buyers market. New developers understand this – it is not easy for a new developer to establish itself now. This has led to a developer landscape that is no longer so fragmented.
The Grid: What should new developers do then to succeed in an increasingly discerning marketplace?
Binesh Panicker: Lets take the example of the SP Group. A huge Indian legacy enters Dubai. If you look at Danube, they target NRIs (e.g. advertisements in Hindi). SP Group in contrast is targeting NRI and other nationalities. Their marketing is very good. It is not about spending money and putting up hoardings. It is about connecting with people.
A new developer needs to come into this market and start building as soon as it announces. For example, Modelux Properties built 60% of their property before they started selling. They had ready show apartments. You don’t have to convince people when they can see what you can do. So my advice to new developers in Dubai with an international portfolio is to bring in your own funds and start building before you release it for sale. You must be willing and able to invest in your own development. It will give people a lot more confidence.
Another example is AG Tower. They started building way before they started selling. This especially gives security to end-users – those who buy to live in – which is a growing investor segment. It is their lifetime investment after all. How else will you compete as a foreign developer with local developers here? Build and then sell.
This is an extract from an interview with Binesh Panicker, Editor-in-Chief & Co-Founder, Property Time
Property Time is Dubai’s leading magazine dedicated to the emirate’s ever growing real estate sector, which attracts investors from all over the world. The firm also owns a property search and review portal www.propertytime.ae
Interview by Tasneem Mayet, Research Director, The Grid Media Ltd
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