2018 ‘year of change’ for Dubai’s real estate market
Leading industry experts said 2018 will be a year of change for Dubai’s real estate market, from the introduction of Value Added Tax (VAT) to the adoption of disruptive technologies such as 3D printing.
Dubai will begin the journey in 2018 to become a world leader in certain disruptive technologies, they staated.
According to them, 3D printing will become more mainstream in the real estate sector, as Dubai starts to deliver its 3D printing strategy and works towards the target that 25 per cent of new buildings are 3D printed by 2025.
In addition, Dubai will catch-up with other mature markets in the adoption of online retail in 2018, as Amazon and Noon gain traction, they stated.
Deloitte, a leading business advisory firm, said the introduction of VAT will represent one of the biggest challenges for Dubai’s real estate market as stakeholders embed revised accounting systems and processes.
In addition, the introduction of VAT on construction materials and professional services may cause cash flow and working capital pressures for some developers, stated Deloitte in its fourth annual “Middle East Real Estate Predictions, Dubai,” report.
The report examines the performance of Dubai’s real estate market in 2017, covering the hospitality, residential, retail, office and industrial segments and explores how four key themes will shape the emirate’s real estate market in 2018.
Martin Cooper, the head of development strategy and investment in Deloitte’s Real Estate and Construction team, said: “The theme for Dubai’s real estate market in 2018 is change. Developers, operators and investors will need to navigate their way through increasing geopolitical uncertainty, the adoption of disruptive technologies and the introduction of VAT.”
“How well they do so will determine their performance in 2018 and beyond,” he added.
Bruce Hamilton, a partner in Deloitte’s Indirect Tax team, said: “The interaction of any new law with existing commercial practice always creates some challenges. The introduction of VAT not only forces the Real Estate sector to relook at their own practices and procedures, but those of businesses in the value chain with whom they interact.”
“VAT impacts throughout the business from procurement to marketing of sales and supplies. How well the real estate market, of whom developers are a crucial sector, come to grips with these changes could impact on the sector in 2018 and for years to come,” he noted.
Despite a challenging 2017, development finance for real estate projects is likely to remain available in Dubai in 2018. However, to access development finance, qualifying investors will need a track record of delivery, a well configured project and alternative sources of free cash to service project debt, said Hamilton.
Deloitted pointed out that Dubai will leverage its world-class infrastructure and business friendly legal and regulatory environment to remain well connected to the global economy in 2018.
Although this will present a number of opportunities for Dubai, there are risks to the global economy that will need to be managed. These risks include increasing economic protectionism and geopolitical uncertainty, it added.