Dubai Real Times: Asteco

Dh 10

September 2009

OFFICIAL MAGAZINE OF REAL ESTATE REGULATORY AGENCY

Highs and lows of the real estate trade

INTERVIEW

Highs and lows of the real estate trade

By Linda Benbow

How long have you been in Dubai?

29 years and always in property.

What was the property market like then?

Very different; Arenco and the Rulers Office had the largest portfolios of property. Leasing and property management were the core businesses.

Were you surprised when the change in freehold ownership was announced in Dubai?

Yes, very surprised.

How did it affect Asteco initially?

The company had been working on The Palm, Jumeirah for a number of years before it was brought to the market. We were instrumental in the sale of the first plots and greatly enjoyed the experience.

There have been many changes and new laws since then – what changes/laws would you like to see soon – and why?

The Strata/Home Owners association law needs to be enacted as a high priority.

Elaine Jones

What was the idea behind forming Dubai Property Society (or Dubai Property Group, as it was first known)?

Dubai Property Group (DPG) was initiated by Ahmed Matrooshi in the late 1980's with a view to bringing ethics and standards to the leasing and property management business. Arenco - Asteco - Better Homes - Cluttons and Union Properties were invited by Ahmed, who at that time was the Director General of Dubai Development Board, to form the founding committee.

He started talking to a software company to set up a portal for the listing of all rental properties. He invited DPG to attend the presentations from the IT company and the plan was that we were going to have a central portal where everyone was going to list their properties for rent, so that anybody who was interested in finding a property would go there

to search for one.

This was the late 1990s and what we have to appreciate from all of this is that Ahmad Matrooshi was very innovative because this was actually before its time. Had we, perhaps, understood it all better, we would all have embraced it and it could have been more successful than it was.

Ahmad used to get us together for meetings, but we always talked about things such as landlord and tenant law, standard lease agreements and morals. We found the meetings useful because it was a good opportunity to really talk about what was happening in the market and we were able to take get a good reading of it because, between us, we probably had the lion’s share of the market, especially Arenco and Union Properties. And Dubai Development Board too, of course, because that was the association where Nationals who didn’t have enough money to go forward with their projects would get assistance from the government in managing the construction and then rental of their property/ies. We used Al Tamimi & Associates for legal matters, they were very helpful in writing our Code of Ethics and suchlike.

Then, when property was launched for sale, Dubai Property Group (which has since changed its name to Dubai Property Society (DPS)) became very, very important. And, now that RERA has been established, it will take over a lot of the aims which DPS originally had.

RERA, of course, has the support of everyone in the industry and, as it is part of the government, it has the power to enact laws and do a lot more things.

What happened when DPG was first set up, was it difficult to attract others to join?

We had an immediate positive response from the major real estate companies in Dubai at that time.

However, the membership really grew after freehold property was available for sale to non AGCC Nationals in 2002. Shortly after that Adel Lootah, who is an entrepreneurial, networking type of person started organising network events, forums and focused on the membership.

Originally, those of us who were on the initial board were interested in the nuts and bolts and legalities of the trade, but then the situation changed and there was a need to get things legalised, processes set down, matters discussed and formalise the industry. We now look to RERA to do these things. Marwan bin Ghalita, CEO, Real Estate Regulatory Agency, now has his ‘verticals’, his objectives, in place, i.e. valuation, sales brokerage, leasing, property management and strata title management. We are working with him, endeavouring to get everyone together to deal with these matters.

Buyers, especially international ones, seemed to like to discover that there is a property group in Dubai,

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laine Jones, CEO of Asteco Property Management, has seen a lot of changes in her chosen career and talks about her memories of the real estate industry during the past 29 years.

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Early rendering of The Palm Jumeirah

which is useful to them when checking on prospective sales. Now, of course, they can check with RERA, the official body where the trade has to register prior to carrying out its duties. RERA ensures the knowledge and competence of those that engage in the trade; we, real estate brokers, have to register our staff at the police station prior to obtaining a Brokers Card for each of them. We have to take an exam to make sure that we all know and understand Dubai’s real estate laws.

How has the market evolved and changed?

What was lacking from most people who bought in the early days was ‘due diligence’. There was so much excitement that this never entered people’s minds because they just

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Dubai Marina

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wanted to secure a plot on The Palm (Jumeirah).

Before the Palm was launched, there were 99 year leases on offer to expatriates: six towers at Dubai Marina and properties at Emirates Hills.

What was really significant is that when plots for properties on The Palm were launched, it happened at the same time as the announcement that foreigners would be allowed to buy freehold. Simultaneously. The opportunity to own something on this iconic project – a huge manmade island in the shape of a palm tree – sent out signals to people who said to themselves “we want a bit of this” – especially as the initial prices were extremely sensible, following our extensive research. The concept of foreigners buying freehold on The Palm, made people re-look at

the 99 year leases for foreigners that were previously a real estate ‘first’ in Dubai. Suddenly there was a bigger market, for sales especially.

A team of eight of us from this company set up an office at The Palm to handle sales. This was in the days before Nakheel was set up.

We sold all the plots we had to offer and, of all the cheques we collected, only one was returned and that was because the numbers and words did not match up. The concerned buyer returned to the office immediately to correct it, he didn’t want to lose the chance to own here.

One man came late and used threatening behaviour with a paper-knife as he said he “had to own something here”. I told him that if that was the way he behaved then he absolutely was not the kind of

person that we wanted living there!

No due diligence (checking on plans, property, etc prior to purchase) was done because of the excitement. Also, it wasn’t possible because, in those days, who would you go to? The Palm, for example, is all reclaimed land, and it wasn’t actually all there when it was first put out for sale. So it certainly wasn’t registered as land plots.

For Emirates Hills, Emaar was created to be the master developer, but there was no mechanism to ring up the company and find out who owned a particular plot and whether he was the rightful owner who could onward sell it.

Now, with RERA’s pre-registration, you can go to them and say “I want to buy this property from this man, is he the rightful owner, is it free from commitment and is he entitled to sell it to me?” Also, with RERA’s registration process, they can confirm that the owner has a No Objection Certicifate (NOC) which is only given after the owner paid all his monies due to the developer, etc.

In the mid 80’s there were horror stories of a man who was renting villas out to people, taking their money and giving them keys – the villas weren’t his to rent out in the first place!

At least now, you can go to a qualified broker, like Asteco, and can be

assured that the property has been through the system, is registered as a property available for rent, and does actually belong to the landlord stated on the form. Registration is done on the on-line Ijari system which RERA has on its website for professionals.

Ownership can be complicated.

If, for example, someone has inherited the property from their father, under Sharia law it doesn’t necessarily mean that only one person has inherited. You, as the prospective renter, should know whether you are dealing with the right heir or not, otherwise there could be complications later. By using the Ijari system, the plot number, utility numbers, etc verify who the owner(s) is. This system is linked up to other government data and can be seamlessly checked.

Even if a property has not been registered, you can still go to RERA and ask if they know anything about it, and the likelihood is that they will know something about the developer or other useful information which they can tell you.

To me, the huge advantage for prospective clients, is the ability nowadays to do due diligence.

The registration of brokers is something that Dubai Property Society wanted right from the start.

RERA has enacted many of the ideals and aims of the original DPS and I think that this is wonderful and all for the good of the industry. Not everything has been done yet, but

these things take time, and it is good to see that, behind the scenes, work is progressing on many good ideas.

A lot has already been done in a short time.

RERA are dealing with their various ‘verticals’ by regulating training and providing qualifications to individuals, and with the soon-to-beannounced strata title management.

It means that you know the calibre of the person you are dealing with, plus the individual and the organisation are accountable, as RERA has the ability to take both to task - and this will clean up the industry.

RERA holds many workshops; we send the valuations staff to the relevant ones, management department to the strata ones, and the leasing staff to the leasing ones, etc. I personally attend some of these, just to see what is being taught and to update myself.

The IT department at RERA were very helpful when the company decided to make its computer system similar to the Ijari format so that information need only be typed in once.

We modified our system to be compatible with theirs – it took time, but is worth it.

How Asteco has grown and changed?

Asteco will be 25 years old on 8th March 2010. We have enjoyed a steady growth and the business is doing well. Everything changed again late last year, with the global financial situation, and now everything

Villa at Emirates Hills

has gone back to what it was before.

So, where management has always been our core business, anyway; with the changes in the market, which, actually, will now become a mature market; and whereas for a few years we enjoyed people coming in to buy properties off plan - in quantities – we will now revert back to, what in UK is called an estate agent.

There will still be project sales, slower than before but still there, for the next two years or so. Most developers who are not constructing new projects are finishing what they have and are holding inventory. The volume of transactions that we saw in the past few years will not happen again. That is fine. Companies were lucky enough to make extra cash when the going was good but will now revert to the smaller, but sufficient, profits they made before. We have accepted that fact.

Now the concentration will be on property management, or strata management, together with home owners associations.

Asteco has other business plans which we will be launching next year.

Have any strange things happened to you in the past?

Many years ago, during the early 1980s, we had a phone call from a tenant who complained about a very unpleasant smell. We called the police to investigate and it turned out to be food rotting in a freezer after holidaying tenants had turned off their

electricity.

There was a dead body once, in the bath in one of our vacant villas in Jumeirah. I had the keys to the villa, so I was the one who received a phone call from the police asking me to open up the doors.

In my early days here, I have collected clients from outside a supermarket to take them to view properties, only to discover that they were not the ones that I was supposed to show around.

I have heard some strange reasons from clients who are late paying their rents. During the 1980s one man insisted that he couldn’t pay because of the hijack of a plane in Korea. I could never work out what he meant. That was his story and he was sticking to it.

What are your views on the city’s future?

Dubai has seen many changes during the long period that I have lived here. It survived the Iran-Iraq war in 1981, which affected trading very badly – and Dubai is a trading city. If it can survive that, and the Iraq-Kuwait war, plus the far eastern problems, 9/11 and more, then it can survive a global financial crisis, surely. Dubai has an incredible resilience and an ability to find a new opportunity.

Asteco now has offices throughout the emirates as well as in Jordan and Qatar, which gives us a chance to see how different markets in the region are faring. The UAE is not alone. It’s a good place to be.

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Villas on one of the fronds of The Palm Jumeirah

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