Dubai property should revive 2011 and UAE to grow at 4.7% - Credit Suisse

Dubai’s real estate market is gradually stabilising and should begin to gain traction next year and thereafter on the back of improving domestic economic and financial conditions, according to a Credit Suisse study.

Dubai's troubles with its slumping property market and cash-strapped state-owned firms mean a longer road back to health, which is holding back overall GDP growth in 2010. Key sectors such as construction and real estate have in fact continued to undergo protracted adjustments. Demand for purchasing new homes remains weak as credit conditions are tight and rental prices are still falling, the bank said in its report ‘United Arab Emirates: 2011, the year of recovery’ as part of its latest Emerging Markets Quarterly, Q1, 2011.

That said, the real estate market is gradually stabilising and should begin to gain traction in 2011-2012 thanks to improving domestic economic and financial conditions. Meanwhile, exports have rebounded, providing a much-needed lift to growth this year, the report added.

Headway on debt restructuring and higher oil prices have been a boon for confidence. Dubai World struck a debt-restructuring deal with its creditors in September. The accord has helped to ease concerns over Dubai's debt crisis, boosting investor confidence, it noted.

The eventual resolution of the Dubai World saga should lead to greater improvements in banking and financial conditions by the end of 2010 and into 2011. As domestic conditions further stabilise and strengthen, we expect the economy to steadily build momentum. Indeed, activity in the private sector, which has lagged behind this year, should see greater gains in 2011 as deleveraging by businesses and households winds down, the report noted.

Additionally, it said strong public spending and investment, mainly financed by the oil-rich emirate of Abu Dhabi, would also continue to drive non-oil economic activity.

Abu Dhabi has launched its own industrial development with a port complex, the landmark Khalifa Industrial Zone Abu Dhabi (Kizad), which is a step forward in its longer-term objective of economic diversification. As such, we expect strengthening domestic conditions in 2011 to take up slack from a still soft external environment, driving an acceleration in non-oil GDP growth to 4.8 per cent from 2.4 per cent in 2010, it said.

The recovery in the UAE economy has proceeded slowly in 2010, with GDP growth rising just 2.3 per cent on the year, the report said while adding: “We see the UAE economy steadily building momentum in 2011, with GDP growth rising to 4.7 per cent.”

After a modest, albeit positive, contribution to overall economic growth in 2010, we expect growth in the oil sector to gradually pick up over the course of 2011, the report also noted.

Crude oil production has held relatively steady at around 2.3mn barrels per day during the first ten months of 2010, up 1.6% yoy. OPEC has kept a firm grip on production levels to support prices, but we expect output to rise as global demand again picks up by the end of next year. This underpins our projection for oil GDP to expand 4.5 per cent in 2011 after rising 2 per cent in 2010, it added.

Further, it said, the combination of rebounding oil and non-oil exports as well as relatively moderate import growth should boost external balances in 2010, in our view, and we expect additional gains in 2011.Strengthening external demand and higher oil prices have reignited export growth, which should raise the foreign trade surplus to 28.3 per cent of GDP in 2010. Accordingly, we expect the current account surplus to rise to 11.8 per cent of GDP this year, the report said.

The bank also expects UAE’s fiscal performance to continue to improve in 2011, as revenue collection benefits from higher oil prices and output and strengthening domestic economic activity.

We estimate that the fiscal balance turned positive in 2010, moving to a surplus of 2.2 per cent of GDP. We project a rise in the fiscal surplus to 4.4 per cent of GDP in 2011 under our baseline oil price assumption of $85/bbl. We expect government revenues to grow 16 per cent yoy in 2011, powered by both oil and non-oil revenues, the study said.

Further, it said although credit remains tight, the eventual resolution of the Dubai World saga should lead to greater improvements in lending conditions by 2011.

Private sector credit has continued to decline on a year-on-year basis, falling 2.4 per cent in August, but the pace of decline has eased in the past two months. Credit to the private sector certainly remains tight as banks have had to tighten lending criteria and boost provisions for non-performing loans (NPLs) to cover their exposure to cash-strapped local and regional firms like Dubai World. In addition, rising provisions for NPLs have continued to hold back lending growth. Nevertheless, the outlook has brightened thanks to the recent progress on Dubai World's debt restructuring. We think credit growth should accelerate to 9.4 per cent in 2011, the report said.

Consumer prices will likely continue to accelerate on a year-on-year basis through the end of 2010 and into 2011 in the UAE, as the pace of the recovery picks up, but inflation should remain moderate, the report added, while maintaining that there is no significant risk to the dirham's dollar peg at present.

It said although housing prices have already undergone their worst declines, soft demand and new supplies of both commercial office space and residential housing are contributing to continued weakness. We see inflation rising 4.5 per cent on an average annual basis in 2011 after edging up just 1 per cent on average in 2010

Private sector in UAE likely to see further pay cuts in 2011

The New Year may not be so happy or prosperous for those working in the country's private sector, recruitment experts have warned. Instead of pay freezes being thawed, employees working for private companies are likely to see further salary cuts, lower bonuses and less perks, they say.

The market, they claim, remains oversupplied with talent which can be hired cheaply compared with the heydays of 2007/08. Matthew Carter, Managing Director at McArthur Murray, sees the downward trend continuing to the next year as well. “I can only see the private sector reducing salaries as they believe that they can still hire people cheaply and that there is no problem in the supply of people,”  Emirates 24/7 report

“Existing staff still employed can expect a reduction in salary to be discussed in 2011 along with a reduction in quality of benefits, such as cheaper healthcare, cheaper flights etc. We expect bonus levels to drop as well,” he said adding that “the private sector is generally struggling still irrespective of the PR in the market. I can’t see the employers offering increases in 2011 to existing staff. Only in some very niche markets such as renewable, nuclear and possibly oil and gas can we see the trends being different.”

Commenting on the senior layer of employees, Konstantina Sakellariou, Partner, Marketing & Operations Director at Stanton Chase, said: "I would say that increases in remuneration are subject to overall performance of the company and not to general trends.

“If a company feels comfortable with revenues and their sustainability, then senior executives are going to receive an increase, either in the basic salary or in some of the allowances offered. Senior executives know from the beginning that they are not simple employees, waiting for a salary increase, but they contribute in making this happen,” she told this website.

But considering the current global economic scenario, hikes may not be expected, she added. “The international markets are not solid yet, so all companies are very cautious as per the increase of their expenses (including expenses in human capital). Companies will be making rational decisions for their expenses and will avoid the huge remunerations of the past that were not really paying back in productivity and profitability. This is indeed a way that most companies will choose for their operations in the next year(s),” she said.Of those who seem hopeful about any pay hikes, say things have mellowed down a lot and only rationality will prevail.

As per Lama Ataya, Chief Marketing Officer at Bayt.com, an online job search portal, employee satisfaction in the UAE is in the satisfactory range. “[We] gauge employee opinion and satisfaction levels vis-à-vis the salaries they receive, and how these have kept pace with the cost of living: 58 per cent of professionals in the UAE are ‘satisfied’ to ‘very satisfied’ with their current income.

"However, the total percentage of raise which professionals in the UAE stated they have earned in the past 12 months was 6.3 per cent compared to 10.6 per cent the year before. Hopes are high still vis-à-vis salary raise in the year to come with the average salary raise expected for year-ending 2010 being 11.6 per cent (indicating expectation that the effects of the financial crisis are finally waning). Moreover, as another barometer of consumer sentiment, 47 per cent of the UAE’s professionals surveyed expect their financial situation to be better in a year's time.”

Michael Al-Nassir, Partner and Head of Middle East, Africa and India at Pedersen and Partners, said: “The private sector is (and has to be) optimistic as is it driven by return on investment, and the shareholders and boards would like to see in 2011 a significant pick-up.”

Pregnancy tests for women workers under revised set of medical fitness rules in UAE

Pregnancy tests for women workers for some categories will be required under a revised set of medical fitness rules for granting work and residency permits to expatriates in the country, health officials announced.

The date for its enforcement will be decided in due course while the fee structure remains unchanged, they said.

Under the new federal rules aimed at benefitting public health, all maids, nannies and female drivers will be required to undergo pregnancy tests. In case of a pregnancy, it will be up to the sponsor to allow her to work or not. Only a category of professionals applying for new or renewal of visas will be tested for Hepatitis B and Syphilis. Under this category, those testing positive for Hepatitis, will not be given residency permit while those testing negative will be given mandatory vaccination and issued a certificate. Those with Syphilis will be given treatment locally. Expatriates from all other professions and their dependants applying for a new/renewing visa will only be tested for HIV, pulmonary TB and Leprosy. Those testing positive for these diseases will not be given residency permit.

Only six categories of workers including nannies, housemaids, nursery/kindergarten supervisors, beauty salon and health club workers, private drivers and food handlers in cafeterias and restaurants will be tested for Hepatitis B and Syphilis.

“The latest amendments are designed to eliminate any existing gaps as a result of the increased numbers of foreign labourers to work or reside in the UAE,” said the Minister of Health, Dr Hanif Hassan while announcing the new rules.

There is also a plan to increase the number of medical checkup centers.Rules for tuberculosis remain unchanged making old, new or active cases of pulmonary TB subject to deportation.

“In Dubai Health Authority, we isolate and treat such cases until completely cured before deporting them and providing them with one month’s medicine,” said Maisa Al Bustani, Head of the Medical Fitness Centre, DHA.

New labour rule will not end current Labour card validity

Private sector employees holding a valid three-year labour card will not be compelled to rectify or adjust their status when the recent ministry decision becomes effective, a senior official said.

Humaid bin Deemas, acting Director-General of Ministry of Labour (MoL) told that the recent ministry decision on cutting the labour card validity from three to two years would not affect the actual holders of valid labour cards.“Starting January 2011, only workers with expired cards will be obliged to renew by applying for the two-year labour card. New applicants will also fall under the new decision upon issuance of their labour cards. Actual holders of valid cards will keep them until their expiry. Moreover, from now till January, things will go on as usual as far as applying for the three-year labour card is concerned.”

Benefits of the new rule

The move to reduce the validity of the labour card to two years has come following a thorough study and analysis based on successful labour practices in other countries. “If you look elsewhere, like for example the Gulf countries, you will see that labour cards are usually issued with a validity of a year or two years maximum. The contractual relationship resulting from such a relatively short period has proved to pay off for both parties’ interests,” Humaid said.

The Labour Ministry’s senior official said it is a good and acceptable idea which enhances and regulates the movement and flexibility within the labour market. “In a recent survey we did, we found that about 70 per cent of employers have to cancel labour cards and cut short the employment of workers, who were originally hired for three years. The cancellation would come before a solid two-year period has passed. According to our statistics, employers would save more than Dh600 million annually.”

This would be rewarding to workers too as the new decision will help them feel more free and flexible to change their work if they are not satisfied. They won’t have to wait for three years before moving on to a new job.

Humaid shrugged off the possibility that the new decision would result in a rush of applicants at the service counters of the ministry.

“We have adequate procedures and a mechanism put into place to help implement new policies and decisions taken by the ministry. Discarding the paper work has been one advantage for a smooth processing of transactions. The e-system allows the employer to check on his establishment’s status and other data pertaining to his employees online and fill in applications likewise. Many other services are available online, including the follow-up on fines resulting from violation of the labour law.”

Meanwhile, a spokesman of the Abu Dhabi-based EMKE Group welcomed the decision saying it will streamline the manpower market as well as reduce the financial burden on local companies at a time when the global economies are facing tough times.

The spokesman said: “We also agree with the fact that some employees do not complete the full term of their employment, which is three years. So we have to make new recruitments and apply for new labour cards, visas, health insurances and other relevant paperwork. With this change in the law, the market is ought to streamline further.”

Hassan Mirza, owner of a transport company in Abu Dhabi, also welcomed the new decision to reduce the life of the labour card for all employees in the private sector as, he added, it will result in cost cutting for local companies.

He said: “We pay for our workers’ health insurance, labour card and residence permit. We have been paying fees for a period of three years for each worker. There were cases when our employees did not complete even one year with us, and the money for the two years goes in waste. It was a huge financial lose for us. The new law reduces the financial burden on companies that have more than 50 employees

Steep fine for landlords who don't register with Ejari

Tenancy Contract

New tenants are advised to stay clear of landlords or real estate agents who don't register the lease contract with the new Ejari system to avoid problems with utility connections should authorities enforce the new law in full

Registering tenancy contracts with Ejari, Dubai Land Department (DLD)'s new online portal, is a must under Law No 26 of 2007 which is aimed to regulate landlord-tenant relationships.

Under the Ejari system, made mandatory in March 2010, landlords must first secure Rera approval for their property before leasing it to an individual or turning it over to a property management company.

New tenants presenting a simple tenancy contract to Dewa still get a connection, but that could change. Landlords are obliged to pay the Dh160 Ejari registration fee at the end of the process and failure invites a fine of up to Dh50,000.

Landlords must upload the data for each leased property into the system. Once approved, the Ejari system will print out a new contract which will be the tenant's ticket to get utility connections

Online registration must for lease contracts: Rera

The Real Estate Regulatory Agency (Rera) has announced that from now on all rental/lease contracts for Dubai properties must be registered through its new Ejari online portal.

The announcement makes effective the provisions of Law No 26 of 2007 regulating the relationship between tenants and landlords in Dubai and requires all individuals and companies acting as landlords to register tenancy agreements.

Landlords and tenants who fail to comply with the new ruling will find that their tenancy agreements fall outside the protection offered by the law and government agencies and will not be able to enforce the provisions of the agreements they enter into.

The law clearly states: "Judicial bodies and governmental departments and authorities should not consider any claim, case or execution based on a tenancy contract unless the same is registered with the agency."

Announcing the new ruling and the full activation of Ejari, its state-of-the-art online registration system, Rera called on everyone involved in drawing up and entering into such contracts to ensure full compliance and avoid violation.

Registration through Ejari is a simple process requiring little technical knowledge and only the basic details of agreements are entered. These include information such as details of the property, the name of the rental company and terms of the agreement. Once the agreement is entered into the system and registered, it is allocated a unique barcode that acts as its reference throughout the life of the contract.

What is EJARI

EJARI means ‘My Rent’ in Arabic. But technically it means a revolutionary system that shall move Dubai real estate sector to be one of the best regulated rental market in the world.

EJARI is the new initiative of RERA to regulate and facilitate the Rental Market of Dubai. This is a new system that will make provisions of Law No. 26 of 2007 effective that is regulating the relationship between Landlords and Tenants in Dubai. This will require all individuals and companies acting as landlords to register tenancy agreements using EJARI.

RERA has announced that with the effect of 14 March 2010, all rental / lease contracts for Dubai properties must be registered through its new EJARI online portal. The EJARI electronic registration web service is designed to meet the requirements of the law and RERA’s vision and mission to establish a robust regulatory system for the rental market and protect the rights of everyone involved. .

Its state-of-the-art online registration system offers full protection of their rights to all parties with tenancy agreement. It ensures these rights are recognized, upheld, and enforced by all Government agencies. It establishes full transparency between landlord and tenant, fully integrates rental contracts into the legal framework and opens up the possibility of being able to revise these contracts seamlessly in the event of disputes .

The Ejari system provides a full portfolio of services beyond registering the initial lease agreement. Renewals, cancellations, transfers and terminations can all be logged. Ejari will ensure rental agreements are fair and transparent to the parties involved and that their terms and conditions are given full weight .

How it works?

Registration through Ejari is a simple process requiring little technical knowledge and that only the basic details of agreements are entered. These include information such as details of the property, the name of the rental company, and terms of the agreement. Once the agreement is entered into the system and registered it is allocated a unique barcode which acts as its reference throughout the life of the contract. RERA will keep its own record of the agreement and update changes to the register as these occur.