Dubai should consider cutting property registration fees to 2% from 4


Tourists returning to Dubai will spark off activity in key sectors, and that’s going to provide the base for the economy’s post-pandemic turnaround.
Image Credit: Virendra Saklani/Gulf News

COVID-19 is a short-term challenge… while the UAE’s competitiveness is a long-term affair and built over decades.

The current oversupply situation in residential real estate is of a temporary nature. A fresh influx of people will absorb existing housing inventories before the Expo next year, when demand will start picking up.

Help out investors

Properties fetch 6-7 per cent annual returns and better than in other countries. The COVID-19 might reduce it to 4-5 per cent for a short while. So, despite the crisis, properties are still a better portfolio for investment.

Let’s take a look at the mortgage rates. The mortgage rate is at around 2.5 per cent. So if you are getting a rental income of about 7 per cent, then by paying 20 percent down payment, within 14 years you can cover your EMIs without paying anything out of your pocket.

The government could bring back the real estate registration fees by reducing it by a half to 2 per cent from the current 4 per cent. The real estate registration was doubled in 2014 to 4 per cent to stop flipping. Right now, speculative elements have disappeared from the market. So, a good time to revisit the fees.

Construction is on its feet

The worst for us in the GCC is over. With the opening of the economies, we can see a lot of activities… despite the summer. Economic activity and construction works will grow hand-in-hand from now on.

The outlook for the construction sector which is linked to oil price remains good. If the oil price exceeds the breakeven barrier, GCC governments will invest in infrastructure and housing. We have reasons to be optimistic.

Incoming boost

Dubai’s tourism-related businesses have started receiving tourists following the UAE Government’s decision to issue visit and transit visas. Tourists, upon undergoing the necessary COVID-19 testing, will be allowed to fly to Dubai to enjoy the sun, the clean beaches, luxury hotels and amusement parks, some of the world’s best malls, and taste cuisines at hundreds of restaurants.

From September, the business events season starts. A number of exhibitions and conferences will start attracting professionals to Dubai. The Indian Premier League (IPL) is also poised to give the UAE economy a massive boost with higher occupancy in hotel rooms.

In 2019, international tourism receipts through Dubai’s tourism enterprises reached Dh102.39 billion.

Feed the retail

The retail sector, largely reliant on foreign and regional tourist inflow, is set to recover fast once they start coming. Currently, if you are trying to book a table in a good restaurant like Nammos, Atmosphere, Zuma – to name a few – it is difficult to find a place.

Dubai’s malls are already abuzz with activity. Since the UAE residents are not travelling out, they are spending money in the local economy. A family of four usually spends around Dh15,000-Dh20,000 on average on summer holidays.

Every year, around 300,000 to 500,000 families travel during summer and winter holidays. At a conservative estimate, this translates to an annual spend ranging from Dh4.5 billion to Dh10 billion on air tickets, hotel booking, site-seeing, food and beverage, transport and entertainment.

Part of that is now being spent in the domestic market – so, shops and restaurants across the country will start making money in the fourth quarter and also when tourism picks up.

Our retail team told me that they will recover the lost business of the lockdown phase (April and May) by August and requested me to pay back the 30 per cent of their salary. I told them I will repay if the loss in business could be recovered to a certain level.

You will be surprised everybody is trying that and, hopefully, manage expectations. All the business is coming from the local customers who are spending money on refurbishment and upgradation.

Some more help?

There are a number of initiatives that the government could undertake that might help the economy to recover faster. The UAE could utilise its current competitive advantage of being a ‘safe haven’ status by reviewing and reforming the visa regime to allow more foreigners who would like to move in the UAE for more than six months.

Introduction of a six-month and a one-year visa could help in attracting international investors to stay in the UAE. If this could be made available the same way a three-month visit visa is issued, the UAE will see a massive influx of new residents and investors.

This would also be a good time to look at reducing the government fees to process various documents, i.e., labour permits, immigration and visa processes, business licensing, renewal, amendments, etc.

It takes more than 2-3 weeks and costs more than Dh7,000 (Excluding the bank guarantee) to hire a new employee and to complete all the services, including the labour permits, employment contracts, entry permits, medical, Emirates ID, medical insurance and visa stamping process. These things could be streamlined with reduced costs.

The banks could start funding SMEs to help them grow. This will help them expand businesses, hire more people that will help bring back the skilled professionals who were laid off and re-deploy in the UAE economy.

The pandemic has made my faith and my resolve on the UAE economy much stronger. It is a stress test for us. We shall overcome…

– Rizwan Sajan is Chairman of Danube Group.

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