A lot of people consider it convenient to rent and list a host of reasons for preferring this option, for example, uncertain economic circumstances, erratic property values and the financial commitment involved in buying a home.

* Image Credit: Supplied picture * In this Dubai Marina tower, there are 100 apartments operating on a rent-to-own basis.

But, given how property prices have adjusted, does it makes sense to continue renting?

Consider this — what if you could rent an apartment for, say, three years and then convert the paid rent into equity towards the sale price? Your rent — generally seen as a ‘dead investment’ — could then double up as the large down payment payable to the mortgage lender.

Popularly known as a ‘rent-to-own scheme’, this arrangement gives you the flexibility to exit the contract at the end of its tenure if you haven’t made up your mind whether to buy the home — and this with no penalty.

Try before you buy

In addition to helping you sort out your finances before committing to a mortgage, a rent-to-own scheme allows you to get a taste of the community so you will know exactly what to expect before climbing on to the property ladder. This means you can see for yourself if the apartment matches your lifestyle aspirations and whether it is well-maintained or not. You also get to know what the owners’ association set-up is, and the cost of service fees and utility charges, among other things.

There are several matters to look into before entering into a rent-to-own arrangement. Be careful of the fine print and review contract clauses before opting for a rent-to-own scheme. In particular, check you are not paying a premium on the current market rent and ensure that the sale price is predetermined before signing the contract. This will help protect you from volatile market prices. Also, pay attention to details such as exit clauses, availability of mortgage options, hidden charges and so on.

I caught up with the managing director of Harbor Real Estate, Mohanad Al Wadiya, whose firmhas structured the rent-to-own scheme in two Dubai projects — Skycourts in Dubailand and Sulafa Tower in Dubai Marina. While 700 apartments operate on a rent-to own basis in Skycourts, there are 100 in Sulafa Tower.

Twelve cheques

Mohanad tells me how the scheme works: “Your entire rent is converted into equity and the sale price is agreed from day one of the contract. We don’t charge a premium over current market rates. There are no penalties to exit the contract; you can walk out of the apartment whenever you want.”

While the rent remains constant for the first two years, it incrases by5 per cent in the third year, depending on the rental index and the Ruler’s Decree issued that year.

To sweeten the deal, a 12-cheque payment plan has been thrown in. Even before you realise it, three years’ worth of rent will go into the predetermined sale price.

In Abu Dhabi, Elysian Real Estate is offering a similar scheme in Amaya Towers on Reem Island. Rent-to-own apartments in these two residential towers in Shams Abu Dhabi (scheduled to be delivered by the year end) are also linked to mortgages from Abu Dhabi Finance. “It’s proving difficult to clinch transactions via the conventional way. So, we’re looking at new ways to sell property,” says Paul Preston, CEO of Elysian.

One-month rent free
Second year rent Dh48,000
Third year rent plus 5% rental increase = Dh50,400

More info

Turkish contractors have steadily grown their profile in the Middle East in recent years.

They have bagged contracts worth billions of dollars after moving into the region more than a decade ago.

The Turkish government has also set them a target of landing up to US$50 billion (Dh183.65bn) worth of business in the region by 2015.

One of the centres of growth has been the Emirates.

Last year Turkish contractors were involved in about 26 projects in the UAE, including the Dubai Metro.

Charging less than their foreign rivals and with a growing reputation for expertise, they began entering the local market when the building boom took off six years ago.

The biggest job went to Yapi Merkezi in 2005 when it was awarded a contract to build the Dubai Metro as part of a consortium led by Japan’s Mitsubishi. Nurol Construction grabbed a slice of the action in Abu Dhabi, gaining a $60.7 million contract in 2007 to build a number of bridges for Shams Abu Dhabi.

But when the slowdown stalled projects in the Emirates in 2009, Turkish contractors began expanding their horizons in the region.

Owning about 40 per cent of Africa’s oil and with $60bn worth of projects in the pipeline, Muammar Qaddafi’s Libyan regime offered plenty of opportunities.

Turkish contractors were last year involved in 36 projects there, including a number of shopping malls and entertainment centres in Tripoli.

As a carrot to attract foreign companies, Libya’s government offered tax incentives on materials imported and the Turkish government signed a bilateral agreement with Libya to waive entry visas, making travel and trade easier.

With Col Qaddafi now deposed, many Turkish contractors are keen to resume stalled projects.

Across the region, infrastructure work such as airport building is an area many Turkish contractors are focusing on.

TAV Group is one of the shortlisted companies for the Midfield Terminal building project at Abu Dhabi International Airport.

It is already building the foundations for the project and has been involved in the construction of Doha International Airport’s new terminal.

The firm has also been involved in infrastructure work at Muscat International Airport.

tarnold@thenational.ae

Guests checking into inferior hotels in Abu Dhabi a couple of years ago would have had few affordable alternatives if they suddenly discovered they were sharing their accommodation with bed bugs, or if noise from a nearby construction site gave them sleepless nights.

Rooms were hard to come by and operators could charge top dollar, even for a room of poor quality.

That has all changed. As new hotels have been built in the capital, international operators have poured into the market, and with more hotels to come, many older properties will have to raise their game to survive, industry insiders say.

Within the next year, an array of luxury properties including the Jumeirah Etihad Towers, Park Hyatt and the Rocco Forte hotels, and budget chains including Ibis, Centro by Rotana, and Premier Inn will open hotels in the capital. These modern, low-cost branded properties – hotels managed by a major operator under a well-known brand – are likely to present stiff competition for ageing, unbranded lodgings.

“They have to make a decision,” says Christophe Landais, the managing director of Accor Middle East, which has brands including Ibis and Novotel.

“Either they refurbish and they upgrade, if they can, or they just go. What we see in some countries sometimes when the hotels really have no standards is they just disappear.”

Analysts say the cost of refurbishment varies widely depending on the scope of the work, but could typically be about US$50,000 (Dh183,650) per room.

The growth in the number of hotel rooms is outpacing the increase in the number of tourists coming into the emirate, putting pressure on lower-quality properties in the market.

“At the moment the inventory is a bit unbalanced, especially for Abu Dhabi,” Mr Landais says. “It seems that we have much more supply and there is more to come as well, compared to the demand. I think that will take some years before it stabilises and we find the equilibrium between demand and supply.”

He says older five-star properties will also have to make changes to keep up with the new players.

“They will have to invest to bring their standards to the same levels, or at least to get closer.”

Abu Dhabi is keen to raise the standards of the accommodation as it aims to attract 2.3 million hotel guests next year, up from 1.81 million last year. Its strategy is to target the business traveller and high-spending tourist with attractions such as golf, sailing and museums.

In 2009, the Abu Dhabi Tourism Authority (ADTA) launched a strict new classification system to force hotels to raise their standards if they wanted to achieve a high star rating. That forced a couple of small properties out of the market.

“Changes in Abu Dhabi’s accommodation portfolio will be ongoing, and it is common in most mature and maturing destinations that new properties increase competition for existing stock,” says Lawrence Franklin, the director of strategy and policy at ADTA.

“This is especially the case if the new stock is seen by the consumer to be more glamorous, has brand cachet, is better equipped, better located or delivers better value. Not everyone is impacted in the same way, however, as many existing properties will maintain their distinctive competitive advantages. These can include an established reputation in the market, historically preferential locations, a loyal customer base, marketing expertise, knowledge of local networks and so on.”

The City Seasons Al HamraHotel in Abu Dhabi is being refurbished because it would have been only a two-star hotel under the ADTA’s classification system. It closed last month so restaurants and extensions could be added as part of a Dh90 million programme that will make it a four-star hotel.

But not all owners can afford to upgrade their properties.

“What to do with an ageing hotel is always a dilemma for an investor,” says Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels Middle East and Africa.

“In general rule, hotels have to undergo significant refurbishment after about 10 years of operations,” Mr ben Mahmoud says. “This figure is highly variable, depending on the competitive environment, the design and initial equipment of the hotel, the overall prevailing trends in terms of design and technology.

“For hotels under management of international operators, property improvement plans are the subject of important assessment, negotiation and discussion. They are sometimes an opportunity of repositioning or rebranding.”

rbundhun@thenational.ae

Sorouh Real Estate Company PJSC ‘the Company’ or ‘Sorouh’), the Abu Dhabi-based real estate developer today announces that the Austrian Embassy in Abu Dhabi has signed a 10-year lease for commercial office space in Sky Tower, part of Sorouh’s Shams Gate District on Al Reem Island.

“We are absolutely delighted with our new office space,” said His Excellency Dr. Julius Lauritch, the Austrian Ambassador to the UAE. “Shams Abu Dhabi is a fantastic location for our new embassy, due to its proximity to central Abu Dhabi and the up-and-coming central business district. It was very clear to us that Shams Abu Dhabi will be the location of choice in the capital. Sky Tower itself has been completed to an excellent standard and offers a good amount of parking space for our staff and visitors.”

Abubaker Seddiq Al Khouri, Managing Director of Sorouh, commented, “Sun and Sky towers are landmark projects both for Sorouh and for the city, as they are also the first ‘Grade A’ buildings in Abu Dhabi’s new investment zone on Al Reem Island. Despite challenging market conditions, today’s announcement is testament to the fact there is still a significant demand for high quality real estate in desirable locations in Abu Dhabi.

Sorouh strives to remain competitive in terms of price, and also offers flexible terms to its customers as well as the opportunity for tenants to offset their rentals against the purchase price for office space in Sky Tower. It is a pleasure and honour for us to have signed such a prestigious tenant as the Austrian Embassy and we are also in discussions with a number of other high-profile potential tenants, including governmental departments as well as other diplomatic missions.”

The 74-storey Sky Tower and 65-Storey Sun Tower are the two tallest buildings in the Shams Gate District, a cluster of eight towers located at the entrance of Shams Abu Dhabi on Al Reem Island, and the highest completed buildings in Abu Dhabi. The two towers represent a new style of living in the capital, and comprise a mixture of commercial and residential space, creating the perfect mix for people living and working in the towers.

Sorouh Real Estate Company, the Abu Dhabi-based real estate developer, has started a phased handover to owners of their new homes in Sun and Sky towers, part of Sorouh’s Shams Gate District on Al Reem Island.

Sorouh’s Customer Service team has informed a number of customers that their homes are ready for possession, pending final settlement of the outstanding portion on their overall payment. Once they have finalised payment, they will be handed the keys to their units as well as a detailed information pack on the development.

As Sorouh hands over units it will start recognising revenue on the project. Once all units have been handed over, Sorouh will have recognised in the region of Dhs2.3bn in revenue.

The Sun and Sky towers are Abu Dhabi’s first Strata-compliant structures, and Sorouh has already started the process of educating owners about their rights and responsibilities under Strata via seminars and information on its website.

In a first for Abu Dhabi, Sorouh has also signed leading upmarket supermarket chain, Waitrose, to be the anchor tenant of the retail podium, BOUTIK, which is rapidly moving towards completion, on track for opening in the second half of this year. The Waitrose deal represents the first move into Abu Dhabi for the upmarket retailer. Some 70% of the tenant agreements for BOUTIK have already been signed.

Sun and Sky towers are landmark projects both for Sorouh and for the city, as they are also the first ‘Grade A’ buildings to be delivered in Abu Dhabi’s new investment zone on Al Reem Island. The 74-storey Sky Tower and 65-Storey Sun Tower are the two tallest buildings in the Shams Gate District, a cluster of eight towers located at the entrance of Shams Abu Dhabi on Al Reem Island, and the highest completed buildings in Abu Dhabi. The two towers represent a new style of living in the capital, and comprise a mixture of commercial and residential space, creating the perfect mix for people living and working in the towers.

Both towers feature one, two, three and four bedroom apartments and penthouses with panoramic views of the Arabian Gulf and Abu Dhabi skyline. Sky Tower has 474 residential units and 800,000 square feet of commercial office space. Sun Tower will accommodate 680 residential units. There are 10 penthouses between the two properties, bringing the total number of units to 1,154.

The towers offer a range of quality amenities. They are joined by the Podium, which houses a shopping mall, three gymnasia, including a Ladies-Only facility, cafés and restaurants. The open-air leisure deck above the podium offers three swimming pools, a Jacuzzi, tennis courts, a yoga lawn and children’s playing areas.

HE Saeed Eid Al Ghafli, Chairman, Sorouh, said:

“This is a very important moment for Abu Dhabi as it marks the first delivery to customers of their homes on Al Reem Island. For Sorouh, it represents an important milestone in the Company’s five year history. Sun and Sky represent Sorouh’s commitment to execute and deliver successful projects. We are confident that our customers will be pleased with the quality of the development.

“In 2011, we will deliver a number of projects that will generate significant cash for the business and profits for shareholders.

“We would like to thank our customers for their continued support. I would also like to reiterate the commitment of Sorouh to delivering our projects under development and those currently in planning in Abu Dhabi, as we work towards the fulfilment of Plan Abu Dhabi 2030 and the greater economic vision of the Emirate.”

Abu Dhabi is on the verge of launching the Middle East’s longest traffic tunnel which will allow motorists heading into the city from the eastern entrance to emerge from underground at its western edge without having to make any stop.

Abu Dhabi is on the verge of launching the Middle East’s longest traffic tunnel which will allow motorists heading into the city from the eastern entrance to emerge from underground at its western edge without having to make any stop. (FILE)

Nearly three years after work began, Alsalam tunnel is nearing completion and could be inaugurated late this year to coincide with the forthcoming summit in the Capital of the heads of state of the six-nation Gulf Cooperation Council (GCC).

South Korea’s Samsung Construction is carrying out the Dhfive-billion project, which will also link the mainland to the nearby Reem Island, where at least 150,000 inhabitants will live. The causeway to the island has been completed and could be opened to traffic in the next few weeks.

More than 2,000 workers have been involved in the construction of the three-km tunnel, which starts from the eastern entrance of Abu Dhabi city and runs under Alsalam street towards Port Zayed on the western tip of the capital.

“Work is in its final stages….it now involves the construction of water and electricity networks, sewage pipelines and rain drainage systems inside the tunnel…work also includes the installation of a massive ventilation system as well as advanced systems for measuring gas emissions,” said the Abu Dhabi Municipality, which is overseeing the tunnel project.

Around two kilometres of the tunnel would be embedded nearly 15 metres underground while the rest would be open.

“The project will largely ease traffic congestion as it will allow cars to travel non-stop from the eastern edge to the western part of the city,” the Municipality said. “It will also ease traffic movement for surrounding areas and to the city centre from the Tourist Club area…this will lead to a reduction in emissions from car exhausts and contribute cleaner and safer environment.”

The project has severely disrupted traffic and caused massive road bottlenecks on Salam Street and the Tourist Club area in the Western part of the Capital but officials say such problems would be a matter of the past once the tunnel and accompanying flyovers are completed.

Hundreds of cars and trucks are seen queuing the roads on Salam and the adjoining Tourist Club area most of the time and many of them end up losing their way or taking longer routes to avert the noisy jam and impatient drivers.

“This is only a temporary problem…after the project is completed and all roads are open, you will see the benefits of this work…this project is going to alter the face of the western part of the city,” Shamsi said.

“It will largely expand road capacity in those areas and resolve traffic bottlenecks in many roads, mainly for those who come into Abu Dhabi from outside.”

After it is launched, apartment owners will start moving into the 900-hectare Reem Island, just around 300 metres off the coast of Abu Dhabi.

Sorouh (Shams Abu Dhabi), Reem Investments and other real estate firms are developing Reem, which is expected to be one of the largest and most impressive tourist developments in the world.

The project on the Island include residential, commercial and recreational centres. It will also house hotels, restaurants, gardens, museums, an aquarium, amusement parks for children and a wildlife reserve.

“This mega tunnel project is part of the municipality’s strategic aim to meet the requirements of a developing city, as well as respond to the needs of the growing population. Furthermore, the municipality’s efforts are directed towards securing an advanced network of infrastructure and transportation facilities to achieve the highest level of road system efficiency in Abu Dhabi,” the Municipality said.

Officials said the tunnel is part of a long-term blueprint by Abu Dhabi to expand its inhabited areas and road networks to cope with a sharp rise in the population, which officials expect to nearly triple in the next 20 years.

“The project is vital for the Capital’s development plans in the long term as it is intended to cope with the expected large increase in the population and traffic,” said Jumma Al Junaibi, the Municipality’s Director General.

Facts about the tunnel project

Project parts:

Part 1  (Contract 1) – Running from the intersection of Hazza Bin Zayed Street up to the Mina at the Abu Dhabi Islamic Bank. Consists of a 3.1 km long tunnel where 2 kms of the tunnel will be covered and 1 km will be open. About 2,000 people are working on this contract.

Part 2  (Contract 2) – Stretching from Maqtaa Bridge up to the intersection with Street No. 31 in the Eastern Ring Road. Consists of two tunnels, the length of each is 850 meters. About 1,000 people are working on this contract.

Part 3  (Contract 3) – Stretching from the intersection of Al Saada Street up to the intersection with Hazza Bin Zayed Road. Consists of a 850m tunnel, and a bridge leading to Al Reem Island. About 1,200 people are working on this contract.

Part 4  (Contract 4) - Stretching from the intersection with Street No. 31 up to the intersection with Street No. 19 (Al Saada Street), which is an expansion of this part of the street. About 150 people are working on this contract.

-Project total value: Around Dh five billion

The New City in Abu Dhabi. Video

Source:  www.youtube.com

Fluor has won the contract from the Abu Dhabi, UAE Department of Transport to programme manage construction of the emirate’s new Integrated Public Transportation Network.

The mass transit system is being created in response to Abu Dhabi’s expected growth over the next two decades, and is part of a wider project called Plan Abu Dhabi 2030. This will see public transport integrated with surrounding residential and commercial developments, in a bid to increase the use of public transport over cars.

Fluor will provide a variety of consulting services to the Department of Transport, including transportation modelling, system integration ,design, procurement, construction, commercial development and funding analysis.

Patrick Flaherty, head of Fluor’s Infrastructure business line said, “We are extremely proud to secure this strategic award in competition with such an extensive field of world-class transportation consultants. We commend the Abu Dhabi Department of Transportation on the transparency and quality of its procurement process and we are honoured by the confidence they have shown in Fluor’s technical strength and local knowledge to award us this very important programme.”

The Yas Hotel has announced that its state-of-the-art ESPA  spa will open on 1st September.

Created by renowned New York design firm Richardson Sadeki, ESPA at The Yas Hotel has been conceived as a luxurious contemporary reinterpretation of a traditional Islamic hammam.

In addition to 10 treatment rooms, ESPA at The Yas Hotel features a rotunda – a cylindrical space comprising a serene sculpture garden wrapped around a central column that reveals a refrigerated inner core providing a cool sanctuary from the heat of the hammam. An illuminated nightscape ceiling and an amorphous sculpted stone lounge complete the uniquely serene yet exhilarating space.

Treatments have been created specifically by ESPA, and combine the best of ancient and modern therapies with the finest quality ingredients and skin care, harnessing the natural healing elements of aromatherapy.

Signature treatments include the two-hour Yas Detox  (AED 725), and the two-hour Sun Escape (AED 725).

Nearly two years after the start of the financial crisis and property slowdown, the vast majority of the UAE’s residents do not own homes here, according to a survey of attitudes about the UAE’s economy.

With rents falling and mortgage rates remaining high, ownership is not an attractive option for many. Dan Kitwood / Getty Images

The numbers show the potential for a huge growth in the number of owner-occupiers in the country, especially in the two biggest property markets, Dubai and Abu Dhabi, analysts say. But a lack of confidence in property laws may be holding up the market.

Eighty-nine per cent of respondents in a YouGovSiraj survey commissioned by The National said they did not own homes in this country, while 60 per cent of them said they owned property abroad.

The growing body of property laws in Dubai and a lack of regulations in other emirates appeared to be a major impediment to investment in property. Only 17 per cent of the people surveyed agreed that recent changes in property laws had “increased my confidence in the UAE property market”. Thirty-four per cent said the changes had reduced their confidence; 49 per cent said they did not know what impact the changes had; and 22 per cent agreed that ownership laws “encourage foreigners to invest in the UAE”. A third said the laws did not encourage investment, while a quarter said they were not sure and 19 per cent said they “don’t understand the laws”.

“It shows there is certainly room for growth, with a low number of owner-occupiers,” says Ron Hinchey, a partner at the consultancy Cluttons. “But it also highlights how everything goes back to property laws. Part of those laws is regulating the purchase of a property and a buyer’s rights. Another part is just having the right to live in those properties, meaning visas. Without clear laws, it is difficult for banks to lend to property buyers.”

Dubai became the first Emirate to allow foreigners to own property freehold in 2002, leading to speculative frenzy that ended in 2008 with the onset of the international credit crisis.

The property consultancy CB Richard Ellis says prices have dropped between 40 and 70 per cent since their peak in 2008, depending on the area in Dubai. Prices in Abu Dhabi have dropped by about 50 per cent.

Meanwhile, developers in Dubai are completing dozens of towers. A recent report from Bank of America Merrill Lynch said prices would drop another 15 per cent because of the continuing growth in available space. “Even if all qualifying expatriates from Abu Dhabi and Sharjah relocated to Dubai tomorrow, we estimate that there would still be 44,000 vacant units in 2010,” the report said.

The Dubai Land Department and the Real Estate Regulatory Agency (RERA), a unit of the department, tried to stem the rampant speculation occurring in 2008 with a raft of new laws, but the two entities have since issued many complicated revisions of these initial laws. Some of the changes have changed the original meanings of elements of the laws, lawyers say.

“With such widespread and profound changes taking place over a relatively short period of time, it is inevitable that certain sectors of the community will take time to fully appreciate the laws,” said Sydene Helwick, a partner at Al Tamimi & Company. The law firm has consulted for RERA and the Land Department.

Property developers have focused on convincing UAE residents to buy property. Several developers, including Emaar Properties in Dubai and Sorouh Real Estate in Abu Dhabi, have launched “rent-to-own” schemes in which tenants can opt after a period to apply a portion of their rent payments towards purchases.

This has so far not resulted in a distinct pick-up of property purchases in an industry that has been experiencing a stark lack of sales for a year and a half.

Matthew Green, the head of research at CB Richard Ellis, says that without greater confidence among investors and banks that a recovery will be a long-term affair, a recovery will be a slow process. Loan-to-value rates – save for a few exceptions – average about 65 per cent.

This means that a family that expects to stay here for five years and is considering a Dh2 million (US$545,000) apartment purchase will have to pay about Dh700,000 up front and make mortgage payments at rates that are averaging 8 per cent across the Emirates.

“There is still too much uncertainty, both with the number of laws and generally within the market,” Mr Green says. “There is a lot of growth potential, depending on things like visas for homebuyers, access to finance and more user-friendly laws.”

Nick Clayson, the head of property in the Middle East for Norton Rose, an international legal practice, said buyers in the UK, the US and Australia would be similarly confused. Many buyers in the Emirates often made hasty decisions leading to many poor contracts and a jaundiced view of the law here.

bhope@thenational.ae