Thursday, March 1, 2007

If you're worried about eviction by new landlord, you can leave now!

Some of us met with Jeevan J D'Mello of EMAAR regarding feedback on our previous requests. It seemed that despite the job title of 'Director' he was not actually a company director, more a manager, lacking the authority required to negotiate deals and sign off agreements on behalf of his company without recourse to his bosses (who *are* actual company directors presumably). Anyhow, we appreciated him meeting us even if he wasn't really allowed to do anything except repeat the EMAAR PR releases.

He did at one point generously state that if tenants were worried about having a new landlord who might evict them, EMAAR would (probably) accept them terminating their tenancy now, with a refund of outstanding rent. In other words, if you are worried about eviction and higher rents from a new landlord in a few months time, you always have the option of facing that now instead. What a deal!

Regardless, we pushed EMAAR to try to get some movement on the points at issue. In particular:

1. That EMAAR extend the leases of existing tenants who wish to, such that any new owner would be bound to accommodate the tenant for at least the duration of their current tenancy plus one year

Amazingly, despite Hamptons being self-styled property 'experts' and EMAAR being the country's largest property developer and 30% owned by the Dubai Government, both claimed not to know with certainty what the rent laws actually were! And these are the 'experts'!? By this evidence, Dubai has some way to go in terms of legal development and business competence. Despite assuring us that they think you would have to be offered at least another year, they would not put it in writing and said that despite their understanding of the laws "there are no guarantees". Indeed.

Despite insisting that they have a waiting list of investors interested in capital growth not evictions, Mr D'Mellow stated absolutely that his bosses would not permit any lease changes to provide any more security (such as a year lease extension) to tenants other than what the law provides for (which they were unsure of anyway). The Rent Cap Laws aimed to stabilize rents, yet average rents in Dubai continue to climb at double digit rates. Despite the Dubai Government's stated aims to stabilize costs in Dubai and stem rampant inflation, it appears the 30% Dubai Government shareholding in EMAAR has not been used to influence EMAAR's decision towards preserving a large amount of reasonably priced rental accommodation in the Emirate.

2. That EMAAR offer more incentives, more time and more flexible payment plans for those who might be interested in buying.

It seems that only a tiny minority of affected tenants will actually buy. The few who do buy will largely do so through having succumbed to the "buy now or else" bullying tactics employed by EMAAR. After all, if people wanted to buy apartments at market rate, there are plenty of those for sale in Dubai already. Far too many in fact, with more coming on stream all the time.

Mr D'Mello agreed to raise the point regarding further small discounts with his directors, but since EMAAR is about to start its 'closing down' style sale imminently, it seems that they are more interested in money now regardless of who it comes from than in repaying the loyalty of customers with several years standing.

On a lighter note, Mr D'Mello assured us that the reason for the snap sale is nothing to do with any impending shock to the market in the next couple of months that EMAAR management have got wind of (think floating currency and massive interest rate hikes to fight inflation or the potential for Iranian military responses against US interests in the region). But then again, EMAAR also stated that the decision to sell was based on requests from tenants and just a couple of weeks ago that there were no plans to dump Lakes stock into the market in a similar fashion to the Greens sale.

So in the end, it's every tenant's choice. EMAAR is not going to change its mind and you must pin your hopes on a successful visit to the Rent Committee if you don't plan on buying, because it's pretty clear the new buyer will see you as a liability not an asset and do whatever they can to get you out as soon as the law allows.

Such uncertainty and instability has become part of the Dubai experience, and it's something we all have to factor in when making decisions about our future. As inflation rages, the calculations most of us made to justify coming here increasingly don't add up. Those who came a few years ago have seen costs double or triple since then. Many companies will be doing the same calculations and looking for more stable cost bases elsewhere.

The problem for Dubai is that on the one hand it is trying to convince real estate investors that property prices and rent receipts will rise impressively forever, while on the other hand telling international companies that costs will stabilize. There is an obvious contradiction, but at this point it's difficult to see which argument is going to give out first.


Anonymous said...

Well folks..looks like our time is up. No point in crying over spilt milk.

I've checked though all my contacts and I am pretty certain that the Rent Commitee is totally in favour of the tenants, so I for one, am going to stay put.

I can't afford to buy. Not at Emaar and not anywhere else for that matter.

Whatever said and least we got a chance to put our feelings to Emaar and the fact is that Emaar did at least meet our reps.

So thanks to all of you who stuck their necks out for us.

Anonymous said...

I'll stay as well.Let's find a way to contact the Rent commitee,to make a unified dicision for all who wants to stay as a tenant.
Thanks to all of you for what you have done so far.

Anonymous said...

The US housing market is tanking. Average prices 8.5% down on April last year. But look at the 'dream' locations of Florida and California where you have sun, sea, sand and all the theme parks and attractions (remind you of anywhere?)... markets there are really hitting the skids. Over 10% falls in less than a year. Now the subprime mortgage lenders are folding, and the danger is now spreading outside of that.

Of course Dubai is not the US. But the same "it will go on forever" mentality was being spurted by realtors in the USA just a year ago. They ain't shouting now. They argued that the economic fundamentals are sound, high employment, historically low interest rates, etc. But prices simply got too high, people borrowed too much and were exposed to even small interest rate rises.

Dubai is highly exposed. Massive price rises funded largely by risky borrowing. The same economics are at work; prices are driven by nothing by speculation, the belief that prices can only go one way.

Where the US leads economically, expect the rest of the world to follow in 12-18 months. EMAAR and the real estate industry can say its all bulletproof and the government won't let it happen here. But how can they stop it? Ban sales at reduced prices!? They can't stop prices going up and they certainly cannot stop them coming back down. Take a look at the Dubai stock market if you believe any different. Markets go where they want, regardless of what governments might want.

Anonymous said...

Dear All,

Latest update from Emaar/ Hamptons as follows:

1.) Those who continue as Lessees: No change, and the protection they have remains through country/Emirate specific rules / Laws.
2.) Tenants that are not willing to wait to see what will happen with new Landlords and decide to move out immediately will have a possibility to apply and receive a refund from Emaar worth 3 month of the respective Apartment rent.
3.) Buyers:
a. An additional discount equivalent to the relevant Apartment rent.
b. A payment schedule based on application and approval with 20% down payment, 40% after 2 Month and the remaining 40% after another 2 Month.

Anonymous said...

I checked with someone I know from Hamptons this morning and they told me that they are offering a further refund of three months of current rent to tenants who want to buy. This is in addition to the 3% discount.

Also, if a tenant wants to move to another apartment within the building, he has first preference after the current occupant. That's good news at least for me, coz I wanted to move into a 2-bed.

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