The Sunday Mail
Simbarashe Mupfekeri
Own Correspondent
The Covid-19 pandemic being faced globally has brought about a unique perspective in our lives where many of us are having to adjust to a new normal.
The real estate sector has not been spared.
Given its steady and less volatile nature, real estate will always be the last impacted class compared to other asset groups.
The recovery of any real estate market, be it Zimbabwe or Dubai, will be determined by how all the various stakeholders will respond to the pandemic.
Contrary to certain misconceptions, owning a property in Dubai is not as far-fetched as people would make you think.
We will explore some of the market dynamics between Zimbabwe and Dubai real estate space.
Dubai is very attractive investment destination because of its location and ease of access to all hubs in the Middle East, Asia, Africa and Europe.
The Dubai economy is driven by tourism, real estate and financial services, and not oil as most people believe.
It’s mind boggling to think that 30 years ago Dubai was just a desert but today it has the fourth highest number of skyscrapers globally.
Currently, Dubai offers one of the highest rental yields globally of between 6-10 percent per annum, which is higher than most comparable destinations like London, New York, Sydney and Tokyo.
Some projects offer guaranteed returns to investors for a period of three to five years.
Any investor looks to either make a good return on investment, capital appreciation, or both, and Dubai offers all these options.
Juxtapose with the economic situation we have witnessed in Zimbabwe over the last 20 years, where returns on property investments erode heavily.
But, on the contrary, property prices have remained high.
The reason for high prices can be attributed to a combination of demand and supply. Zimbabwe’s supply side of properties is low. Construction costs are high and there is also lack of maturity of the market, especially new property developments.
Further, there are high associated fees from banks, municipalities, agents and conveyancing fees, including inflation and exchange rate risk. The current pandemic has shown that organisations that are technology and data driven have handled the situation better than those which are not.
The Dubai real estate sector is one of the most technologically advanced spaces in the world, with both government and private sector working hand in hand to achieve this.
A case in point, the Dubai Land Department launched a new registration system for real estate transactions, which allows real estate owners to complete sales transactions for their properties remotely from anywhere in the world. The new system allows them to complete procedures and transactions without being physically present in Dubai or delegating it to someone else.
Integration of all related services into one mobile application has meant that up-to-the-minute real estate transaction details can be viewed, title deeds can be verified, construction project updates can be viewed, brokers can be verified, rental indexes calculated, among a host of other services.
There is a lot of scope for improvement and integration of services in Zimbabwe to make the process of buying property more efficient.
The Deeds Office, Zimra and municipalities will need to streamline services to ensure a smooth process for buyers and sellers.
Virtual viewings have become the norm and property portals are at the forefront of bringing these digital tool benefits to the market.
The first movers have enjoyed huge benefits.
Through proptech, disruptive solutions are steadily transforming the way in which transactions are handled, as well as how estate agents conduct business.
Great opportunities can be explored in this space in Zimbabwe. The Dubai real estate sector is heavily regulated by the government to ensure investors are protected.
All developers have to register with Dubai Land Department, which oversees affairs related to lands and private properties.
Developers have to wholly own the land on which they intend to develop.
The developer needs to have at least 50 percent of required capital to develop the project in order for construction to commence.
All payments made by purchasers are deposited in government-controlled escrow accounts and funds are only released to the developer on achieving certain certified development progress/milestones.
If the property is ready for handover, then RERA (Real Estate Regulatory Authority) issues a title deed of the property.
However, when the property is off-plan or under construction, an Oqood certificate (registration title for off-plan projects) is issued by RERA under the buyer’s name.
In Zimbabwe, such measures and enforceability will help to bring sanity to the market.
A lot of people have been duped of their hard-earned money by unscrupulous developers and land barons.
Registered projects and registration of buyers in a government system will help to protect members of the public.
The buoyancy and growth of the market is dependent on successful implementation of the requisite requirements and laws.
There are various types of investment properties available in Dubai, ranging from villas, town-houses, apartments and hotel/serviced apartments.
A large number of the property developers offer very flexible payment terms with low down payments of about 10-20 percent and the balance paid post-handover in five to 10 years depending on the project.
Mortgage financing is available up to 80 percent for residents and 55 percent for non-residents and is payable over a period of between 10 and 25 years.
Interest rates are between 2,7 and 2,9 percent per annum.
Recently waivers have been introduced on application and processing fees for mortgages.
Looking at the Zimbabwe market, investors usually pay cash for purchases as there are very limited mortgage facilities in the market.
Banks are taking a cautious approach to lending; thus, the low number of mortgage loans issued out.
Government has put in place some measures to make financing cheaper but the benefit it yet to be realised.
There is a recent interesting case in point.
Takura (29), had a piece of land in Westgate, where he wanted to construct an investment property. The project was going to set him back between US$110 000 and US$130 000 taking into account land acquisition, associated costs and construction costs. We made some recommendations for him to consider investing in the Dubai real estate market.
Takura resultantly sold his stand for US$50 000. We used the proceeds as a 30 percent down-payment on a US$140 000 apartment with a flexible post-handover payment plan of five years on the balance.
We secured a tenant within two weeks of handover of the project.
The net annual rental income is US$9 800, which is 7 percent of the purchase price.
Rent is paid yearly in advance in Dubai.
Takura is enjoying the benefits of owning the property and receiving income after only paying 30 percent.
The rental income will help him cover the 70 percent still due to the developer.
Once payments made to the developer are above 45 percent, Takura can apply for a non-resident mortgage should he wish to do so.
This pandemic will have a major impact on economies, including major job layoffs.
Demand for products and services will naturally drop, given an intrinsic drop in purchasing power as a result of lower incomes.
High job losses and closure of certain business will mean that rent defaults will rise, leading to defaults on mortgages from landlords.
The speed and magnitude of economic recovery will tell the full story.
For those looking to invest in a safer and steadier market, here are some of the benefits of owning property in Dubai:
Tax-free rental income.
Tax-free capital appreciation, as there is no capital gains tax on your profit.
Low mortgage interest rates. One of the highest rental returns of six to 10 percent net, short-term rentals can offer up to 15 percent return.
Regulated industry with RERA (Real Estate Regulatory Authority) and DLD (Dubai Land Department) Laws to protect investors.
Freehold property ownership. Investor visa are available for property investors. There are one, two, five and 10-year options available based on the level of investment.
Simbarashe Mupfekeri is a certified and experienced real estate investment advisor with a strong passion for real estate. He is currently with Driven Properties LLC, one of the largest brokerages in Dubai with presence in U.A.E, Saudi Arabia, China and Canada. His areas of expertise include sales consultancy, business development, off-plan selling, property management and property development. He can be contacted on [email protected]
