According to analysts, new reporting rules for real estate transactions won’t have an influence on the UAE’s supply of residential units but will instead increase the sector’s transparency.
Executives and developers of real estate stated the industry will continue to draw foreign investment and that everything will continue as usual in terms of real estate, dispelling the notion that new regulations may slow down real estate activities.
“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 of Safe Developers, said.
The government strengthened its regulatory framework for anti-money laundering and combatting the funding of terrorism last week by announcing additional reporting requirements for specific real estate transactions.
Law firms were asked to report cash transactions worth Dh55,000 or more to the Financial Intelligence Unit of the UAE by the Ministry of Economy (MoE) and the Ministry of Justice (MoJ), which jointly developed the new standards for real estate transactions with the Financial Intelligence Unit (FIU) of the UAE.
“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.
No impact on supply
According to Mordor Intelligence, the UAE residential real estate sector, which was paralyzed by the Covid-19 outbreak, is expected to expand by a compound annual growth rate of above 8% between 2022 and 2027.
During the first half of 2022, the industry received more than Dh150 billion in investment. It contributes 5.5% of the UAE’s yearly GDP to the total.
“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 claimed that because the buyers can see the rental demand in Dubai, the city has been able to absorb these high levels of supply.
“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.
Risk factor reduced
The additional reporting requirements, according to Zoom Property CEO Ata Shobeiry, have come at a time when the industry is already growing exponentially.
“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.
Check on suspicious deals
The ultimate goal of these measures, according to Ayman Youssef, vice president of Coldwell Banker, is to raise awareness, prevent real estate sector activities from being used to facilitate money laundering and/or the financing of terrorism, and assist the relevant state authorities by informing them of 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.