A number of proposals have been floating around in the media about what Dubai’s Higher Committee on Real Estate should be implementing. Ranging from a complete clampdown on new launches to government developers switching to a “lease only” model, most of these appear to be catering to specific, rather than community, interests.
Personally speaking, I think most of these are unrealistic. Instead, a more nuanced approach would perhaps be the need of the hour.
Given the current proliferation of Airbnb and short-term rentals as a way to enhance investor yields, hotels have come under immense pressure as their return on equity models have been challenged by the rise of short-term lets. Furthermore, from a community standpoint, hotels exert far greater pressure on the city traffic network than a residential or commercial building does.
Accordingly, it would be prudent if hotel permits were granted on a more restricted basis (similar to the proposals that were floated in New York recently). This would allow for the Higher Committee to assess the demand/supply dynamics, as well as the impact that it would have on the city roads.
Such oversight would allow for a balance of weighing developer interests with that of investors and the community such that a fair decision is arrived at for all.
Rezoning
The same would apply for malls. Much of the rise behind online retail has explained why malls have experienced a lower rental yield. A wholesale rezoning of the plot would allow for schools, offices, hotels and even libraries, to function in these areas. The same would enable absorption of existing spaces, thus enriching the community experience as well as allowing for increased vibrancy of choice and diversity for the consumer.
Much of the focus is based on the current zoning of plots in the master-communities. In some cases, there have already been changes as developers were allowed to submit special permits changing the zoning from commercial to residential, for example.
But such zoning changes may have to go deeper, allowing in certain cases for the BUA (built-up area) to be increased, changing the mix of residential/retail/commercial mix percentages, as well as allowing for public services — such as libraries — to be allowed in residential buildings.
The creativity would undoubtedly come from the private sector. From a regulatory perspective, this would fall under the ambit of “special permits”, which would allow the Higher Committee to gauge the “value add” of the proposed new build, before deciding whether it would be approved.
A counter argument
Critics would normally counter by saying that such special permits would make the entire process of development more cumbersome. This is a straw man fallacy, as Dubai has always been known for its speed of regulatory approval process, and there is nothing to suggest that any of these suggestions would be any different.
What needs to be taken into cognisance is that the entire structure of the real estate industry has undergone a tectonic shift, and zoning regulations have to adapt for the needs of the next decade. This by its very nature necessitates a review of some of the masterplans that were put into place in the early part of the freehold phenomenon. And some laxity may be needed to change the “community mix” in light of changes in technology and customer preference.
The private sector in Dubai has been known for its creativity and ingenuity, and the upcoming Expo 2020 Dubai is another platform where this will be highlighted, in fact amplified, as global firms participate to claim their share of the city’s upcoming growth for the next decade. Accordingly, the optimal course of action for the Higher Committee would be to incorporate the more constructive suggestions from the private sector that instills flexibility in the industry going forward.
Zoning laws form the epicentre of that discourse.
Nasser Malalla Ghanem is Senior Partner at the law firm of NM Associates, which has a joint venture with GCP.
