New reporting requirements for real estate transactions will not impact supply of residential units in the UAE but rather provide further transparency to the property sector, experts say.
Dispelling an impression that new rules may slow down real estate activity, executives and property developers said the sector will continue to attract foreign investment and business as usual as far as property is concerned.
"I doubt this new regulation would cause any slow down in the property sector. As per my understanding from the information that has already been shared, transactions over a certain amount need to be reported, they aren't restricted. All it means is that those transactions will have extra scrutiny and the buyer will have to declare the "source of funds," Shahzad Saxena, chief executive, Safe Developers, said.
Last week, the government announced new reporting requirements for certain real estate transactions to strengthen its regulatory framework for anti-money laundering and countering the financing of terrorism.
The Ministry of Economy (MoE) and the Ministry of Justice (MoJ), which developed the new criteria for real estate transactions in partnership with the UAE’s Financial Intelligence Unit (FIU), asked the law firms to report cash transactions worth Dh55,000 and above to the UAE’s Financial Intelligence Unit.
"We are very familiar with this kind of scrutiny in our construction division as this is the standard operating procedure for banks in regards to any cash transactions in construction companies. And as we can clearly see Dubai doesn't have a shortage of construction or construction companies," Saxena said.
The UAE residential real estate market, which came to a halt as a result of the Covid-19 pandemic, is poised to register a compound aggregate growth rate of more than eight per cent during 2022-27, according to Mordor Intelligence.
The sector, which contributes about 5.5 per cent to the UAE’s overall gross domestic product (GDP) annually, attracted more than Dh150 billion investment during the first half of 2022.
"In regards to whether it would affect the supply of residential units, I highly doubt that too. That being said, I do see a shift happening in the kind of units supplied, in the near future I see developers focusing a lot more on town-houses and mid-income developments," according to Saxena.
He said the reason Dubai has been able to absorb these high levels of supply is because the buyers are able to see the rental demand here.
"This will only grow in the near future due to Dubai positioning itself as a safe haven from all the instability around the world. The fundamental facts still remain, people are moving to Dubai and setting up businesses, they are hiring people and all those people and their families need a place to stay," he said.
Ata Shobeiry, chief executive, Zoom Property, said the new reporting requirements have come at a time when the market is already progressing by leaps and bounds.
"There will be an impact, of course, but it wouldn't disturb the Dubai property market's placement. Investors, in particular, may wait a little until the picture has become clear before putting their money into the market. But, there won't be a massive impact on the supply in the residential market. In fact, buyers and investors will feel more confident since the risk of money laundering and fraud will be reduced to a great extent," he said.
Ayman Youssef, vice-president, Coldwell Banker, said the ultimate purpose of these measures is to establish awareness and to prevent activities in the real estate sector from being exploited for the purposes of money laundering and/or the financing of terrorism, and to aid the competent authorities of the state by reporting suspicious transactions.
"This will help position Dubai and the UAE as a safe transparent market as well as increase the attractiveness of the market for institutional investors," he said.
"Real estate brokerage companies are obligated to implement the guidelines, which will help agents understand whom they are dealing with, a process critical for the success of real estate operations," he said.
Copyright © 2022 Khaleej Times. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).