The Impact of Positive Q2 Performance of Real Estate on Property Management Companies

Dubai’s real estate and property management sector is going through an interesting phase of transformation. Effective planning has enabled the city to navigate through the global economic slowdown and strengthen its property sector reforms. While the global property real estate sector was battling for its survival in 2020, Dubai’s real estate market was thriving like never before. The second quarter of 2021 has come up with more reasons to cherish for the real estate head honchos. Due to a decline in property prices & rental rates, the sector witnessed the highest number of transactions in the last two years. 

Dubai’s real estate market set a new benchmark, the highest in the last four years by value of real estate sales transactions. According to the Q2, 2021 Performance report by Dubai Land Department (DLD), 15,638 sales transactions worth AED 36.86 billion were recorded in Q2 2021. There was a quarter-on-quarter increase of 46.76% in sales value and 33.26% in volume.  A 5% of sales transactions were in the secondary/ready market and 38.5% were off-plan.

Dubai Real Estate Sector: Q2 2021 Performance Analysis

The bulletin issued by Dubai Land Department highlights the sector’s continued positive results in Q2 2021. Compared to Q2 2020, Q2 2021 showed an increase of 183.4% for volume and an increase of 237.79% for the value of sales transactions. When compared to Q2 2019, Q2 2021 showed an increase of 78.27% for volume and an increase of 102% for value.

In Q2 2021, 61.5% of all sales transactions were for secondary/ready properties and 38.5% were for off-plan properties. As far as volume of sales transactions is concerned, the off-plan market transacted 6,025 properties worth a total of AED 9.17 billion, and the secondary market transacted 9,613 properties worth a total of AED 27.68 billion. Comparing this to Q1 2021, the number of off-plan sales transactions in Q2 increased by 53.93% and the secondary/ready property sales transactions increased 22.91%.

June Performance Analysis:

Dubai’s real estate sector has maintained an increasing pace of performance, reflecting the vitality, flexibility, and attractiveness of Dubai’s property market by recording 6,388 sales transactions worth AED 14.79 in June 2021, which is the highest in value in eight years, specifically since December 2013 according to the 16th edition of Mo’asher, Dubai’s official sales price index, launched by Dubai Land Department (DLD) in cooperation with Property Finder

The sales transactions in June 2021 are 44.33% higher in terms of volume and 33.2% in value compared to May 2021. Compared to June 2020, June 2021 increased by 173.46% in terms of volume and 204.55% in terms of value. When compared to June 2019, June 2021 increased by 140.87% in terms of volume and 179.13% in terms of value. In June 2021, 62.2% of all sales transactions were for secondary/ready properties and 37.8% were for off-plan properties. 

The top areas of interest in terms of sales transactions for villas/townhouses in June 2021 were – Green Community, Mohammed Bin Rashid City, Dubai Hills Estate, Arabian Ranches 3, and Akoya. As for apartments for the same period, the top areas of interest were – Meydan, Jumeirah Lake Towers, Dubai Marina, Business Bay, and Downtown Dubai.

Dubai’s Skyscrapers are Standing Tall on the Expectations of New Investors:  

Despite all market uncertainties, the Dubai real estate sector has not lost its charm. The Dubai property market has been highly successful in winning the trust of both local & international investors. 

The areas that remained attractive for investors to buy villas/townhouses in Q2 2021 were – Mohammed Bin Rashid City, Dubai Hills Estate, Dubai Land, Green Community, and Town Square as per the bulletin. The areas that remained the top choice for apartment sales were – Jumeirah Lake Towers, Dubai Marina, Meydan, Jumeirah Village Circle, and Downtown Dubai. 

2021 has so far proved to be more positive for the industry as the demand-supply ratio is heading towards stability and is expected to remain relatively resilient to the effects of 2020.

Growth Drivers:

Rising cases of Covid-19, strict travel restrictions, lengthy lockdown phase, economic slowdown, and massive business losses due to lack of demand & job losses, were the top reasons for the global investors especially from Europe, India & North America to invest in the Dubai real estate market. There has been an enormous rise in the number of affluent investors from Britain, Italy, France, and Germany buying villas and holiday homes in Dubai due to rising cases of coronavirus in their respective nations. Even in the middle of the pandemic in 2020, the Dubai real estate market got a big boost from foreign investors. According to the data posted by Gulf News, in 2020, Dubai’s real estate market attracted 19,757 foreign investors, who concluded 24,666 investments worth over Dh35.6 billion.

The triumph of the UAE real estate sector is also attributed to its visionary national leadership for coming up with business-friendly measures like FDI laws, restoration of relations with Qatar, fastest and well-executed Covid vaccination drive, digitization, reduction of interest rates, Expo 2020, increase in LTV ratios for the first time buyers of the property, long-term residency visas, and launch of golden visa to offer a quick pathway to citizenship. 

What Does it Mean for Property Management Companies?

This exponential increase in the number of sales transactions to 15,638  worth AED 36.86 billion in Q2, means a large number of new properties will be ready to welcome their residents in coming months. Without a shadow of a doubt, it is a  sterling opportunity for the property management sector. The increase in the number of new units coming up will also create the demand for more property management and owners’ association services to professionally manage their communities & tenants. The glittering future belongs to those property management firms that can bank on this opportunity. Undoubtedly being a top 3 property management firm in Dubai with over 15+ years of industry experience and a brigade of over 100+ professionals, Kaizen AMS has an upper hand.

Kaizen AMS has always been well-prepared to cash this opportunity. The credit goes to ‘KAIZENers’ and  our continuous investments in adopting novel technologies such as: chatbots, AI, blockchain, Cloud, and big data to always be a front runner in the industry. Furthermore, Kaizen AMS hires world-class property managers who possess decades of industry experience to ensure the tenant satisfaction score in our communities always exceeds our expectations and industry benchmarks. All these efforts have enabled Kaizen AMS in becoming the first thought which comes to the mind of the developers when they think of an ideal property management firm.

Banking on its experienced, dedicated, and skilled workforce, brand image, and strategy, last year, Kaizen AMS witnessed a large number of prestigious real estate clients who came up with new units choosing us for their Property Management & Owners Association requirements in 2020. This is the reason that despite all market uncertainties due to Covid-19 & market slowdown, Kaizen AMS has witnessed a substantial increase in its profitability and new clients. We thank the UAEs visionary leadership for building a favorable business climate, fostering real estate spending, approving 100% ownership of businesses by expats , fastest ever covid-19 vaccination, and introducing business-friendly laws to drive foreign investments which have reflected positively on our balance sheet. There is absolutely no question mark on our great future. Kaizen AMS is all set to thrive and expand its client portfolio several fold in 2021 and in the years to come.

Villas, Apartments or Townhouses – Which one offers the Best Rental value?

Dubai allures the world with its sky-high residential properties. The city’s villas, apartments, and townhouses are becoming the most sought-after options amongst tenants due to their varied styles, location, and budget-friendliness. However, tenants are still in a dilemma about which property has the best rental value. 

It is pivotal to know the rental value of each property before making your mind to choose among an elegant rental apartment at Dubai Marina, a spacious villa in Arabian Ranches, or a European-styled townhouse at Jumeirah Golf Estates.

This article will guide you in making a better choice which type of property offers the best rental value –

Living in Villas symbolizes luxury due to high space, and a list of private amenities. This is the prime reason villas attract a higher price and rental rates across the globe. However, it is not always the same.  It depends on several factors such as the location of the property, proximity to essential places, number of rooms, space available in the property, etc.

Factors Determining the Rental Value of the Property:

The location has a profound impact on the rental value of a property. Although villas attract higher rents, however, if the apartment is rented at a prime location, the average rent can be much higher than the villa located in a suburb or a very remote area. 

The proximity of a property from essential places such as schools, colleges, hospitals, etc. is also a key factor that determines the demand for the property. Tenants who prefer these establishments nearer to them choose to live in apartments, while those who prefer space, luxury, and living peaceful life away from the city’s crowd prefer to live in villas.

Another key factor that influences the price or the rental value of the property is the number of rooms rented. Generally, villas attract higher rents due to a more number of rooms compared to an apartment or a townhouse, and also offer more privacy. Furthermore, villas offer more private amenities such as pools, gardens, etc. It is also important to note that while renting villas or apartments, there are several additional expenses on top of rent that are incurred by the tenants. These additional costs include – maintenance charges, electricity charges, and the cost of furniture. It is always recommended to buy your furniture if you are staying for long to cut on those costs. Considering villas are larger in size with more rooms, the cost of running a villa is much higher. Even if you are lucky to find a villa with lower rent, after adding maintenance & electricity charges, cleaning costs, cost of hiring a plumber or gardener, cost of maintaining the backyard, and other additional expenditures, you will still find villas several fold expensive compared to an apartment.

Rent Value for Villas, Apartments, and Townhouse:

According to Bayut, the annual rents for 2-bedroom houses start from AED 50k and go up to AED 170k per annum for more luxurious units in an upscale neighborhood like Palm Jumeirah. 

For tenants looking to rent 3-bedroom villas in Dubai under AED 115k per annum, the most relevant options are Mirdif, Akoya Oxygen, Reem, DAMAC Hills (Akoya by DAMAC), and International City. The rental rate for a 4-bedroom villa ranges between AED 90k to AED 800k. 5-bedroom homes are priced from AED 70k in Akoya Oxygen to AED 1.1M in Palm Jumeirah. 

The average rent for a 2-bedroom apartment in Dubai ranges between AED 40k – 70k annually. As per Bayut data, there is a vast range of cheap 2 BHK apartments for rent in Dubai. The top area for 2-bedroom apartments for rent in Dubai in the range of AED 70k includes – Al Nahda (AED 47,000), Bur Dubai (AED 65,000), Jumeirah Village Circle (AED 65,000), Al Warqaa (AED 46,000), and Dubai Silicon Oasis (AED 59,000).

The average rent for a 1-bedroom apartment in Dubai is between AED 21k to 65k per annum.  One-bedroom apartments for AED 21k can be rented for AED 21k in areas like Al Nahda and Dubai South. The rent for a 1-bedroom apartment in Downtown Dubai and Palm Jumeirah then the rent for a 1 BHK is between AED 45k and AED 65k, respectively. 

The rental prices for 2-bedroom apartments in Dubai range from AED 30k to AED 525k. The higher-priced properties are found in exclusive neighborhoods such as Business Bay, Downtown Dubai, and Jumeirah. 3-bed units are priced upwards of AED 45k in the Al Qusais and Jebel Ali communities. 

The average price for renting a 3-bed flat in JLT is AED 121k and it is AED 137k in Business Bay. 4-bed units can be found for AED 65k in Deira and go up to AED 800k yearly in Downtown Dubai. A 5-bedroom apartment in Dubai is not that common and prices start from AED 150k in communities such as Dubai Sports City, Jumeirah Lake Towers (JLT) and Jumeirah Beach Residence (JBR). 

The latest data from Bayut reveals that average rent for a 1-bedroom townhouse starts from AED 20k in locations like Dubai Industrial Park and goes up to AED 80k in Jumeirah Village Triangle (JVT). The annual rent for a 2-bedroom townhouse would be around AED 40k to AED 130k, depending on the location and whether the property is fully furnished. A 3-bed townhouse for rent in Dubai costs around AED 90k in areas like Noor Townhouses in Town Square with areas spanning over 2,000 sq.ft.  The rent for a bigger townhouse with 4-bed and 5-beds is between AED 100k to AED 300k, annually. Data from Property Monitor reveals that the most popular areas to rent a townhouse are – Dubai South, Mohammed Bin Rashid City, Reem, and Town Square. 

Apartments Emerge as a Clear Winner in the Rental Value:

Living in apartments is far cost-effective compared to living in a villa or townhouse. Furthermore, the service charges and other maintenance costs are also low.  Apartments are also the most desirable option for the tenants as they offer better security compared to any other property type. Proximity to the downtowns and city center is another factor that makes apartments ‘a perfect ten’ for the tenants and boosts their rental value.

Dubai Rent Freeze Law – How it will Impact the Landlords & the Tenants?

For decades, the world has known Dubai as a city, popular for launching distinctive initiatives to attract residents & expats towards its glittering property sector. These measures always had a profound impact on the UAE economy and acted as a catholicon for the residents and tenants in safeguarding their interest while paying rents and security deposits, signing up for contracts, etc. To support those struggling in paying rent due to unforeseen circumstances such as job losses or salary cuts, Dubai has come up with a new draft of rent freeze law to keep the rents in the city fixed for three-years. The rent freeze law is expected to act in the best interest of both landlords & tenants and will make the Dubai property market ‘a perfect ten’ or ‘tantalizing’ for the world. The law is yet to come into effect.

Objective of Rent Freeze Law:

The primary objective of this rent freeze law is to offer relief to tenants and guide them towards greater stability in relocating within Dubai.  Every year, the residential tenants in Dubai face an inevitable challenge of frequent rent increases. The rent freeze norm is expected to curb the pace at which rent increases and will also boost the occupancy rate, making the Dubai property market more attractive for tenants.

An Effort to Boost UAEs Rankings in the ‘World Happiness Report’:

Without a shadow of a doubt, the year 2020 was indeed a tough year for the UAE. The tenants were forced to move or downsize due to rent increases. However, in 2021 things have stabilized, with the Dubai property market again becoming attractive as earlier for the global investors. 

The rent freeze law is also perceived as Dubai’s push to become the happiest city to live in the world. Both Dubai and Abu Dhabi are the happiest cities in the Arab region according to the 2020 World Happiness Report. This allowed the UAE to maintain its first place in the Arab world for the sixth consecutive year. Dubai & Abu Dhabi stands at 39th & 35th spot globally in the prestigious World Happiness report. The introduction of rent freeze regulation will further improve the UAEs ranking in this report and will attract more tenants & investors towards the property sector in the years to come.

How is Dubai Rent Freeze Law Different from other Emirates?

A similar rent freeze has been implemented in the other emirates of the UAE, however with modifications. In other emirates, the rent freeze law doesn’t require a commitment from a tenant to sign-up for a three-year lease. Instead, they set out the rental terms if tenants did remain in the same property for such a period. For example – The rent freeze regulation in Sharjah has a similar rent freeze with a very limited increase within leases of three years or less. However, there are no penalties applied on tenants who are not interested in signing up for three years. Several tenants are waiting for the same thing to be implemented in Dubai.

Points which Needs More Clarity:

Both landlords & tenants like to learn whether the Dubai rent freeze law will apply to one particular type of property or all types such as -residential, commercial and industrial. Another point which remains unclear so far is whether the cap will finish after three years or will continue. DLD is yet to shed light on whether this freeze will apply to new rental leases and existing contracts and by when this law will be signed. Both landlords & tenants also need clarity on whether there will be any lock-in periods, coverage of free zones, or any specific types of residential property which will be carved out.

Who will be the Biggest Beneficiary of Rent Freeze Law?

Residential landlords will be the biggest beneficiaries of the rent freeze law. They will now be able to attract many new tenants who were earlier hesitant to rent better and luxurious properties due to the frequent rent increase. 

Furthermore, rising work from home culture due to Covid-19 will further boost the demand of the residential property sector as tenants are spending more time at home. These are signs of glad tidings for the residential sector in the coming years.

Impact on Investments:

Real estate industry experts believe that the rent freeze law will drive colossal investments into the Dubai property market and will also have a favourable impact on the occupancy rate. Furthermore, the law will eradicate all elements of uncertainty and boost tenant’s confidence by allowing them to plan their finances more effectively. The law will also channel more investments into the sector.

According to the Director-general of Dubai Land Department (DLD), Sultan Butti bin Mejren, “the law would ensure that tenants need not move frequently due to rent increases. He said the law would also give landlords a clear idea of income that could be expected. Experts have said the planned changes would steady the market.”

Win-Win Situation for Both Tenants & Landlords:

The draft law to freeze rents has been widely appreciated by both tenants and landlords. According to the Dubai Land Department (DLD), the proposed law will stabilize the market for both tenants & property owners and will minimize rental disputes. 

Several Dubai residents are anxiously waiting for more information on the draft law. The law will provide assurance and peace of mind to the tenants that their rent won’t increase, which will ultimately lead to higher tenant satisfaction. Rent freeze regulation will also provide stability to the tenants in managing their finances. 

Dubai rent freeze law will also act as a boon for the landlords in overcoming the challenges involved in securing tenants due to the oversupply of rental properties. This regulation will also boost the occupancy rate of the properties as most of the tenants leave the properties in search of low-rental accommodations, majorly due to frequent increases in rents. Once the tenant leaves due to an increase in rent, it becomes an uphill battle for the landlords to find a replacement. Furthermore, the losses incurred by the landlord due to vacant property until they find a new tenant are much higher than the profits from the increased rent. It makes sense for the landlords to watch the market as well as the competition while negotiating rents with the potential tenants.  The best bet for the landlords is to convince the tenants to pay a fixed rent for three years to ensure the property remains occupied for the whole term.

The experts view the rent freeze law as a step further to Dubai’s rent cap law which exercises restrictions on increasing rents at renewal. The rent freeze law will facilitate tenants in effectively managing their rental liabilities as the rent will remain constant for the specified term. Furthermore, fixed rent will also encourage the tenants to continue at the same property after three years.

Expo 2020 to Dubai 2040 – Accelerating the Real-Estate Sector in Dubai

2020 was a tough year for the UAE’s housing market, surrounded by a massive supply glut. According to Global Property Guide, the prices for Dubai’s residential property fell by 4.88% during the third quarter of 2020. This was followed by a year-on-year (YoY) decline of 3.27% in Q2 2020, 5.06% in Q1 2020, 4.05% in Q4 2019, and 4.52% in Q3 2019. During Q4, house prices in Dubai fell by 1.36%.

The foremost reasons for this decline in property prices are – excessive supply aggravated by low demand due to the COVID-19, an increase in property registration fees from 2% to 4%, implementation of 5% Value-added tax (VAT) to home sales after three years of the completion of the project, oil price slump, and the after-effects of Federal Mortgage Cap, introduced in 2013. 

As the countdown for Expo 2020 Dubai begins, the real estate sector has a chance to come out of the rough phase and make the most of this opportunity. Industry experts believe that Expo 2020 will defy all odds for the real-estate sector and will boost property sales, stimulate the job market, and will ensure that the sector thrives despite market fluctuations.

Expo 2020 to Act as a Panacea for the Real-estate Sector:

There are a lot of expectations of the real estate industry from the EXPO 2020  due to a list of favorable policy reforms and schemes launched by the UAE government such as: the Golden card visa, 100% foreign ownership for enterprises, easy payment plans, long-term residency options for professionals, and the flexibility offered by financial institutions in debt repayment, and foreign retirees scheme.  

The Impact of EXPO 2020 on Dubai Property Market:

Real estate gurus predict that Expo 2020 Dubai will expedite the pace of growth of the UAE real estate market. The event will have a favorable impact on the competitiveness of the real estate market, infrastructure, economy, trade flow, which will spur the sales of the real-estate sector. These schemes will boost investor confidence and foster more investment into the UAE real estate market.

Expo 2020 will bring transformational change to Dubai’s property market in terms of both sales & value. Since the announcement of Expo 2020 in Dubai, there has been a colossal increase in sales of hotel rooms as 25 million expected visitors will rush to book their accommodation well in advance. Expo 2020 will also flourish the sales of residential property as thousands of expatriates will move to Dubai before, during, and after the event. The grand event will also have a favorable impact on the commercial real-estate sector with increased demand for office space as experts predict that post expo, an exhaustive list of global logistics & marketing firms will relocate or expand in Dubai to service-related event driven demand.

The real-estate sector will also have a profound impact on supportive government policies such as – easing of ownership and visa regulations, over recent months. This will work wonders for the real estate industry and create even more favorable conditions for real estate growth. The grand event will have a favorable impact on the prices and will attract more investment in the near future. 

There were several large-scale real estate and retail projects announced in the run-up to Dubai Expo 2020 that form a part of the wider expo experience to be provided by Dubai. The most significant real estate and retail developments among those are Mohammed Bin Rashid City and Dubai South.

A list of new infrastructure projects worth billions of dirhams has been announced which will have a major impact on Dubai South. Several experts believe that post Expo, Dubai South will emerge as a microcosm of unconventional real estate and architecture. The expo site at Dubai South is spread across 4.38 Sq. km. It is equipped with world-class infrastructure and imposing structures and has hosted several high-profile events in the past. Dubai South has close proximity to Al Maktoum International Airport and is easily connected with every part of Dubai through a new metro line, Route 2020.

They are as follows:

  • Over 8,200 property units have been sanctioned for development in Dubai South after Expo 2020. This includes – schools and malls, within a 700,000 sq. ft. area(2).
  • A list of commercial development projects has also been planned for Dubai South and an area of 1.5 million sq. ft has been allocated to it.
  • Dubai South will be benefited from sustainable practices as the government will power the event through a solar project and will reuse and repurpose 90% of the construction materials used after the event. Several companies based in Dubai South in the renewable energy business will be benefited from it.
  • Expo 2020 will initiate redevelopment work at District 2020 – an area located in Dubai South where the expo will take place. Some of the buildings such as -the Sustainability Pavilion, for instance, will live on as a center for child and scientific education. The Dubai World Trade Center Conference and Exhibition Center will also remain after the expo.
  • District 2020 will have 700,000 sq. ft. of residential space, education facilities, and parkland equivalent to six soccer pitches. 
  • With proximity to  Al Maktoum International Airport, District 2020 will act as Free Trade Zone (FTZ) and will facilitate the businesses to function tax-exempt.
  • The Expo site at Dubai South will go through a transformation phase with 8,228 units currently under construction. This will lead to the establishment of several new homes, schools and shopping centres.
  • The AED 10 billion investment in building metro lines in Dubai South will have benefits far beyond Expo for Dubai residents as well as for the global expats working or visiting the city.
  • Billions of dollars will be invested into Dubai’s infrastructure to improve its global image as well as its rankings in business competitiveness. It will also attract thousands of talented expats to the city who will buy or rent property, which will spur the sales of the real-estate sector.

Dubai 2040: 

UAE launched its ambitious Urban Master Plan – Dubai 2040 on Saturday, March 13, 2021. The plan outlines Dubai’s strategy for sustainable urban development to cater to the requirements of the rising population of the emirates. The top agenda of Dubai 2040 is to improve the effectiveness of resource utilization, develop vibrant, healthy, and inclusive communities, and double green and leisure areas and public parks to create a healthy environment for the residents and visitors.

The Need for Dubai 2040:

As per govt. data, UAE’s population is expected to increase by 76% in the next two decades (i.e from 3.3 million in 2020 to 5.8 million by 2040). The commuter-adjusted or day-time population will also increase from 4.5 million in 2020 to 7.8 million in 2040. Dubai 2040 focuses on building infrastructure as per the needs of the rising population and ensuring Dubai maintains its spot among the best cities to live in.

Dubai 2040 envisions the establishment of a list of green corridors to connect the service areas, residential areas, and workplaces, ease the movement of pedestrians, bicycles, and sustainable mobility throughout the city. The plan revolves around optimum utilization of space available in Dubai and the development of infrastructure to support residents and foster a more favorable business climate.

Dubai 2040 – A Forge Ahead for the Real Estate Sector:

The real-estate sector will be the biggest beneficiary of Dubai 2040 as construction work will take place on a very large scale. The ambitious program will lead to the expansion of urban areas by increasing the space for health & education institutes by 25% as well as an increase in the areas used for economic, commercial, and industrial activities to 168 sq. km. To accomplish these tasks there will be a vast requirement of real-estate firms. Dubai 2040 is a billion-dollar opportunity waiting to be cashed in for the real-estate sector. 

   Here are some of the highlights of Dubai 2040 :

  • Increase in the land area used for hotels and tourist activities by 134%
  • Increase in the length of public beaches by 400%
  • 60% of Dubai to comprise of nature reserves and natural areas
  • 55% of Dubai’s population to live within 800 metres of a main public transport station
  • Billions of dollars will be invested in infrastructure to make Dubai a global hub for innovative start-ups, and international corporations
  • Focus on improving the efficiency of resources, fostering a vibrant & inclusive environment
  • Doubling the size of green cover and leisure areas to offer a healthy environment to the residents
  • Developing comprehensive legislation and planning governance model

 Dubai Urban Master Plan:

Dubai South will also  be the biggest beneficiary of Dubai Urban Master Plan which is focused on development and investment in five main urban centres (three existing and two new centres) that foster the growth of economic sectors, create employment, and improve lifestyle. 

The existing urban centres include Deira, Bur Dubai,Downtown and Business Bay; Dubai Marina and JBR .

Dubai 2040: What’s there for the Property & Strata Management Sector?

Dubai 2040 will also be a boost for property & strata management firms such as Kaizen AMS as real-estate firms will be requiring support in terms of design & construction, strategy, handover process, and tenant management or retention etc. 

KAIZEN AMS –  ISO 9001:2015 certified top property management firm in Dubai, offers end-to-end solutions in Property Management, Owner Affairs, Unit Management, Handover Services, Community Management, Lease Management, and Investment Advisory. KAIZEN AMS has across 12,000+ units and is also a proud corporate member of the U.S. Green Building Council. 

Key Factors to Consider When Choosing Property Management Firm

Property is indeed one’s most valuable possession. It requires professional and proactive management to nurture it. To ensure that a property always remains in better shape and its value doesn’t deteriorate, it is of paramount importance to choose an experienced, transparent, licensed, and responsive property management firm.

Selecting the right property management (PM) firm can be an overwhelming task, especially for the first time. There can be multiple questions coming to the mind such as – what should be their experience level, regulatory requirements, fees, client’s list & testimonials, reviews, etc. This article will clear all your doubts once in for all.

Here are some tips on choosing a great property management firm: 

Property Management Experience:

Experience always speaks louder than words. The number of years of relevant industry experience property management (PM) firms possess always holds an upper edge and is an ideal way to evaluate its potential. It is vital to go through its list of clients served available on the website or in the company’s publication. This will provide an idea on whether the property management firm only possesses experience in serving clients with similar requirements or is also well-versed in catering to the dynamic and inimitable requirements of real estate clients from diverse backgrounds.

Technology:

Technology has played a vital role in facilitating easy accessibility and keeping the property management firms closer to the tenants. There is no need for the tenants to visit the office as they can communicate with property management firms through phone, WhatsAPP, email, and electronic communication means. 

Leveraging its state-of-the-art customer communication platforms, Kaizen AMS provides 24/7 Support via calls, emails & WhatsApp. We offer real-time reporting & solutions for all maintenance-related issues to elevate the standards of customer experience. Kaizen AMS simplifies the move-in & move-out process for the tenants through automation by building a seamless process for all other requests via. its innovative online platform. All of our internal & external business stakeholders can connect with us via. phone, Whatsapp, email, or by scheduling a video call with the Experience Manager.

Research:

Spending time & money on research might sound like an extra cost; however, it is indeed an undeniable fact that this exercise can avoid choosing a wrong property management firm. 

Prioritize a PM firm which has more experienced Community Managers. Visit LinkedIn and select the name of the property management firm. Then click on the employees’ profiles to find out the details on their work experience in serving various communities and whether it matches your requirements. Selecting a property management firm with an experienced staff is some sort of assurance of receiving quality service with minimal complaints from your tenants.

It is also crucial to research the staff turnover. A high staff turnover reflects that experienced staff rarely stays with the company. This dilutes the experience of overall staff, which can take a toll on the level of services offered. It also makes sense to do a cost-benefit analysis of the fee charged by the property management (PM) firm and the level of services offered.

Devoting time to investigate these facts will reflect on the delivery of the service and can save you from making costly mistakes.

Compliance:

While selecting a property management firm, it is recommended to check whether the firm complies with the guidelines set by RERA – Dubai Land Department

To stay tall in terms of compliance, a property management firm must possess all necessary certificates such as – tax compliance, business registration, insurance certificate, and other local authority requirements. Any extra professional affiliations and certifications such as International Standard Organization (ISO) will be a plus. 

Reporting:

Reporting is a key requirement for business engagement. The property management firms which release business reports on a timely basis have better chances of securing more business from bigger & compliant real-estate firms. The primary objective of these reports is to make all relevant stakeholders aware of its current situation with a strategy to improve the numbers in the near future. 

Some of these business reports include – 

  1. Tenancy reports: these reports offer regular updates on occupancy, turnover rate, and pending notices
  2. Financial reports: these reports provide information regarding the business margins, a summary of rent collected, agency fees, other service fees, and managing expenses
  3. Ad-hoc reports: these reports offer insights on industry trends and the factors which can act as disruptions. Thus, it facilitates in making quick decisions.

Go through Internet Reviews & Testimonials:

Based on internet reviews, real estate firms evaluate which property management firm matches their requirements even before initiating the conversation. It is important to check Google reviews and Yelp reviews of the clients they are working with or have worked with along with comments across social media platforms. They both work best as a valuable  resource while comparing multiple companies at a time.

The information on the quality of work delivered by the property management firm can also be collected through personal or professional references or relationships. This is one of the most viable & reliable ways to analyze the capabilities of the property management firm.

Thoroughly Review the PM Agreement:

Property management agreement clearly outlines the business relationships between a client & property manager. The document offers briefs on the services offered by the property management firm, the owner’s responsibilities, contract duration, and termination clauses.

The property management agreement must clearly explain the insurance protection policy – including to what extent the firm is insured. Whether the PM firm has just appropriate general liability insurance, or it possesses property-casualty insurance, errors, and omissions (E&O) policies, etc. Property management agreement must be read carefully and required changes must be made before signing off. It must be made sure that the document has no disagreeable clauses.

Property Management Fees:

Property management fees must be reasonable to offer quality services with better margins. It is important to decide which payment model should be followed as some property management firms charge a fixed fee, while others charge a percentage of rent collected, or a blanket fee based on the business needs. Some companies also charge a commission-based rate combined with other incentives paid for excellent services offered to the tenants. 

Financials:

Financials of a property management firm play a critical role in its selection. Selecting a financially sound PM firm ensures that there won’t be challenges in employees receiving their salaries on time and are better taken care of. This will boost their morale and will also result in the client receiving improved services. 

On the contrary, selecting a property management firm with poor financials reflects that its employees are or might be in near future face challenges in receiving salaries which will lead to low morale, poor service, unexplained delays, and other bad traits. It is also an invitation to fraud and other unwanted events which will ultimately have an adverse impact on the brand image. 

While selecting a property management firm, it is important to review its balance sheet, cash flow statements, P&L statement, liquidity ratio, acid test ratio, and audited books of accounts.

Reasons to Choose Kaizen AMS as Your Property Management Firm:

Here are the top reasons to Choose Kaizen AMS as your preferred property management firm:

  • 13000+ units managed across the UAE
  • Developed list of ERP, CRM, and Maintenance platforms inhouse which easily gets integrated with client’s systems
  • Proud corporate member of the U.S. Green Building Council
  • ISO 9001:2015 certified company
  • Some of the highest occupancy rates in its managed properties across U.A.E
  • Proud winner of a list of prestigious industry accolades such as – Superbrands, multiple awards including Gulf Real Estate Awards for ‘Best Employer in Real Estate’ and ‘Best Consultancy in Real Estate’ –2018, ‘Best Owners Association Management Initiative’ & ‘Best Media and Communications’ -2019. Additionally, the most recent include being featured on the Influential Companies of 2020 list by CM Today publication.

What’s the Impact of Non-payment of Service Charges on Strata Management Firms?

In the last year, there has been a significant decline in the collection of service charges for Strata management companies which have dropped by more than half as collections dropped significantly. This is certainly not good news for OA Management firms as the decline in service charge collection means they will be left with fewer funds to be spent on the maintenance and upkeep of the property.

Why are Homeowners Refusing to pay Service Charges?

The primary reason for the non-payment is rising job losses. Several homeowners have lost their jobs due to the current market slowdown, making it difficult for them to pay their service charges. Furthermore, several homeowners are also taking undue advantage of the situation and avoiding the payments deliberately.

RERA’s Guidelines for the Service Charge Waiver:

According to the Real Estate Regulatory Authority (RERA) – “the waiver only extends to 2019 fines and so far, there has been no extension of this to service charges.”

Considering the situation prevailing at that time, in April 2020 RERA announced exemptions of all fines pertaining to the service charges in 2019. RERA also held discussions with strata management companies (acting on their behalf) which were affected by the non-payment by homeowners. 

RERA’s Suggestions to OA firms on reducing the Service Charges:

Here are the key highlights of RERA’s instructions to OA management companies:

  • RERA suggested OA management firms review and monitor the project operating expenses to reduce service charges. This move is directed towards combating the financial impact of Covid-19 as several homeowners lost their jobs or have experienced salary cuts.
  • RERA has advised OA management firms to reduce their annual budgets which will also curtail these charges. This is undoubtedly glad tidings for the homeowners. Homeowners are looking for some sort of discount; however, they have to pay the charges as approved by RERA.
  • RERA has issued guidelines for OA management firms on the number of notices any homeowner can receive, the penalties for non-compliance, payment timelines, etc. 

The Impact of Non-payment of Service Charges:

Service charges are not a burden or additional expense but the payment towards all good reasons. There is a common belief among many homeowners that these charges are misused for personal gains, however, the truth is completely different. Service charges are spent on maintenance activities and to keep the building operations running smoothly. Their funds have a dedicated government regulatory bank account. The terms of these accounts and industry regulations ensure that they don’t go overdrawn. 

Here are some of the adverse impacts of the Non-payment by homeowners:

  1. Interruption in Maintenance Work: Non-payment of service charges by homeowners leads to lack of funds with strata management firms. This will ultimately pause the ongoing maintenance work and result in the discontinuation of several useful services and maintenance work until funds are available including the disconnection of common area utilities by the utility service providers
  2. Decline in the Value of Property: Home is the biggest asset for everyone. Avoiding the payment puts ongoing maintenance or development work at a temporary halt. This ultimately leads to a decline in the value of property or an asset, which is a far costly affair.
  1. Delays in Essential Services: The non-payment of service charges by the homeowners results in the short-term financial stability of the block. This adversely impacts the homeowners as all essential services (such as – cleanliness, security, MEP maintenance services, maintenance of HVAC system, roof repair, maintenance of gyms, swimming pools, repair work, etc.) will be put on hold due to non-payment.

What can OA Management Firms do to Avoid Non-payment?

As per the process, if the owner does not pay the service charges and ignores three warning notices, the OA will notify RERA and the owner can be declared and registered as a defaulting owner.

In every case, non-payment of annual service charges is unlawful and should not be used as a tool against the OA. The OA must make the payment towards maintenance of the building and that obligation should not be hindered by the owners. RERA approves the annual service charges once the financial statements are completed and filed. 

How to Avoid Non-payment of Service Charges?

  1.  Maintain Transparency:

Most of the challenges in the payment of service charges arise due to a lack of transparency and a communication gap between the OA firms and the homeowners. On a quarterly basis, project updates must be sent with the homeowners informing operational as well as financial matters.

  1. The Significance of Paperwork:

To avoid any confusion as well as for legal purposes, it is important that landlords maintain a comprehensive document that clearly outlines the summary of charges to be paid, the reasons for the increase in charges or difference from the previous year, modes of payment, details on the payment due dates & late payment charges, and the contact details of relevant people or departments owners can speak to clarify their doubts or queries related to service charges.

  1.  Seek Assistance from a Property Management Firm:

Timely payment of service charges is critical for the swift operations of the block. In case landlords struggle to collect rent from the tenant if the property is rented. In that case, they can seek help from a professional property management firm that is backed by a team of dedicated experts to get this all ticking over like clockwork.

Key Trends that Will Drive Real estate Investments in the UAE in 2021

The UAE real-estate sector was attracting significant investments from across the globe until disrupted by Covid-19. The pandemic has negatively impacted the exotic residential properties but had a significantly positive impact on the non-residential and industrial real-estate sector.

As the prices of properties are declining, it is of paramount importance to have an understanding of the recent market trends to make a wise investment decision that fetches better returns. It is also important to make a quick decision as prices won’t be down for long, banking on the list of government initiatives such as FDI Laws, restoration of relations with Qatar, Covid vaccination, technological developments, co-habitation laws, and above all the upcoming Expo 2020 which is expected to attract more than 25 million visitors in late 2021.

Here are the Top Five investment opportunities that can work wonders for the real-estate sector in 2021.

1. Non-residential Sector to Emerge as the Biggest Revenue Generator:

According to MarketLine’s September 2020 report titled – ‘Construction in United Arab Emirates’, the UAE’s construction industry generated a revenue of $84.4bn in 2019. The non-residential segment was the biggest revenue generator, accounting for total revenues of $56.6bn which is around 67% of the industry’s overall value. In the coming years, the share of non-residential segments including mixed-use developments can expand up to 75% in the UAE.

2. The Rise in the Demand for Industrial Real estate:

Going by current demand and ROI, industrial real estate is indeed an apple of an eye for the commercial real estate sector. Post coronavirus, there has been an exponential surge in online shopping across UAE, which has increased the demand for logistics. With rising cases of Coronavirus in the UAE, there has been a continuous increase in online shopping as customers are avoiding physical visits.

As per the study conducted by Mastercard in Nov 2020, 73% of UAE consumers are shopping more online since the start of the Covid 19 pandemic. The study also reveals that 54% of consumers are spending more money on the virtual experience. The increase in online sales is fostering the growth & expansion of the industrial real-estate sector as companies across all sectors are now requiring more cold storage facilities, distribution & data centers, and warehouses to store their products to cope up with the rising demand. Top logistics players such as Al-Futtaim Logistics, Emirates SkyCargo, ATS, CEVA Logistics, Amazon, etc. are investing heavily in building their logistics and supply chain infrastructure to meet the current & future demand of the industry. The future of industrial real estate looks promising in the coming years.

Amazon Supply Chain Model: Case Study

Despite being an e-retailer, Amazon has always found it cheaper to handle logistics itself rather than using third parties. The company’s supply chain network in the Middle East is almost as vast as established players such as FedEx or UPS. Since 2015, Amazon has spent billions of dollars in building its own global end-to-end logistics network which is equipped with the latest vans, and trucks, and aircraft.

In the UAE, Amazon fulfills a large majority of customer orders from DXB3 which is the biggest fulfillment center in the UAE. Announced in 2018, DXB3 is spread over a 23,000 square meter facility located in Dubai South. The center ensures that the demand is met during the busy year-end and festive seasons. To increase its penetration in logistics, Amazon has adopted the approach of delivering the packages through its last-mile team or through local courier companies called the Delivery Service Partner program. The program has allowed Amazon to increase the speed and flexibility of the delivery of its packages which ultimately benefited its customers to get faster orders.

3. Second Home Syndrome:

There is a rising culture among global elites to have a holiday home internationally. In the last few years, Dubai has become one of the most preferred cities in the Middle East for the rich to have a holiday home. This will boost the city’s real potential for rental income in 2021 that can offset ownership expenses.

Secondly, there is also a rise in the culture of the “co-primary residence,” or an apartment near the office in the city. As executives who decamped to luxury suburban villa communities on the outskirts of Dubai ease into one year of work from home, their mindset has changed indefinitely. Many of these executives are interested in exploring a second home that is closer to the office. This will be a big boost for central Dubai’s residential market.

4. Tough time Ahead of Commercial Real-estate sector Due to Remote Working:

According to a 2019 survey by International Workplace Group., the UAE had one of the lowest remote work participation rates before coronavirus. Merely 10% of the UAE workers reported working from home 1-2 days per week, compared to a global average of 62%. However, post coronavirus, almost 40% of the UAEs population is working from home. This has adversely affected the commercial real estate sector as most of the office buildings remain underutilized. This has also raised concerns among real-estate investors about the security of the income.

There has also been a rise in teleworking which has also negatively impacted the demand for secondary offices, with the overall share of the office sector shrinking from 40% to 35% in the first three- quarters of FY 21.

5. Discounts on the Properties Located in the Urban Areas:

2021 will witness an exodus of residents fleeing the expensive, populated, and high-density urban areas into the suburbs for more space and budget-friendly accommodation. This will leave thousands of landlords in the dust, who will be unable to evict non-paying tenants but still responsible for the upkeep of the property and paying all expenses associated with it such as – taxes, insurance, and the mortgage. In 2021, investors will be eyeing these properties to ride out the current wave and buying these rental investments at a much discounted rate.

Conclusion:

These five investment trends hold the drive for real estate investments in 2021. This year is expected to be profitable for the investors targeting the Dubai market. Dubai Expo 2020 will further boost the investment prospects in the real estate market.

The real-estate sector could turn this crisis into an opportunity by focussing on designing people-centric solutions which meet sustainability criteria set out by the UAE Government and becoming increasingly enforced. 2021 will be a year for change like never before and there will be marked uplift across construction as a whole, by Q3 FY 22.