STRATA UPDATE The learning curve may be a little tough, but I am confident there are enough well-qualified people available within a reasonable timeframe. Interestingly, teaching the owners will also take some time, as their understanding and perception may well be different to the reality.” There will be much to be done. Once the requirements are revealed, there could be a small windfall of business for key professions. Top of the list, according to Kelly, are surveyors. “Buildings generally have not been surveyed, except by the contractor,” says Kelly. “They are going to need proper surveying, with proper methods. The cost of doing all that for a big development is massive. “A lot of people have underestimated the process of making buildings strata-compliant: they want a tick in a box equivalent to a title, but the cost of the tick may have caused them to back off a bit.” Kelly predicts that it is the market that will drive compliance, if international experience is anything to go by. “Elsewhere in the world a strata-compliant title has been worth up to 20% more and the bank finance level was higher,
“A lot of people have underestimated the process of making buildings stratacompliant: they want a tick in a box equivalent to a title, but the cost of the tick may have caused them to back off.” Stephen Kelly
and that will happen here in five to ten years,” he says. “We will end up in a substantially better position than the one we are in.” The current position is one that needs to change, and the desire for that change is strong among industry professionals. While it is worth asking if the industry is ready for the regulations, there seems to be no doubt that their introduction will be a good thing for the market. “Yes, we are ready for the regulations,” said Jones. “We are so desperate for the regulations because it will re-invigorate the market and reignite the interest in buying property here. It is such an important thing for the whole market. “Of course there will be challenges, but that is fine – we will work through them, and there may need to be adjustments,
SURVEYS ESSENTIAL FOR TRUE VALUATION Jones Lang LaSalle has recently suggested that credible valuations are part of making the market transparent and, in turn, attracting foreign and institutional investment. “The lack of regular, accurate and professional real-estate valuations results in enhanced financial risk exposure to a diverse spectrum of stakeholders,” said the company in its March 2010 MENA House View. “These include banks and other lending institutions, investors and general business entities that own the real estate from which they operate their business. “As real-estate markets across the region continue to mature and become increasingly open and transparent, it is essential for the real-estate industr y to develop and consistently apply common standards implemented by professionally-trained valuers able to demonstrate independence, integrity and objectivity.”
22 April 2010
but they can be addressed. But we need to be regulated properly and follow a consistent system, so that all buyers and all developers know what has to be delivered and received.” This is a view echoed by Kelly. “I do not think investors appreciate the benefits the law will bring to them,” he says. “They would have a title similar to that from Australia or Canada, with clearly-defined units and consistent methodology following survey rules, so you know exactly what you have purchased. It is hugely beneficial for investors.” Defining title is the main purpose of the law, but one often masked by the publicity and public interest around the property-management aspect.
The fundamental theory of strata law is that it is a system for the subdivision of buildings, resulting in titles being able to be issued for owners that comply with world standards. As it stands, the law currently only really provides for traditional subdivision – taking a plot and making it into smaller plots. “There is a reason we do not have a lot of foreign ownership, especially institutional, and it’s partly to do with the title system for buildings with multiple ownership not being at a level comparable to other locations those institutions are used to investing in,” says Kelly. “So part of the strata law was to take property registration to the next level. “The whole region is going this way. There needs to be a system for proper subdivision of buildings; this is especially important for mixed-use developments. There you really need two layers of subdivision. You need to be able to break the building up into separate use components, then you need to subdivide those individual parts that have multiple ownership again. “The first Emirate that sorts the regime out can say ‘invest here, you are protected’. “Institutional investment will go anywhere to make money, but normally there are quite stringent rules as to where insurance companies will invest: traditionally it is commercial property. “I would think that, when the law comes in, there will be more confidence in this area. We have acted on behalf of people buying portions of multi-owned buildings, and at the moment there is a degree of uncertainty. We can give them a reasonably good idea of where we think it will be once the regulations are issued, but we can’t say exactly how it will work until the regulations appear.” Introducing the regulations to make all this possible quickly was always going to be a tough call. The law itself
Published on Apr 21, 2010