The UAE economy was performing fairly each year until its growth was interrupted by the Coronavirus disease. As widely reported, a survey conducted by the Dubai Chamber of Commerce, COVID-19 will lead to the closure of almost 70% of the UAE-based businesses. However, despite all odds, UAE’s economy is amongst the least affected by Covid 19 compared to the world’s biggest economies such as the U.S.A, U.K, E.U., and the BRICS nations, a special thanks to the timely and effective measures taken by the government to soften the blow of the pandemic on the economy as well as on human lives.
The UAE economy is expected to resume recovery to pre-COVID-19 levels in 2021. This is indeed great news for the region’s property management sector as it will be hugely benefited from the trend of robust economic growth which is expected to continue until 2024 as per the evaluation of IMF and HSBC.
Owner’s Association: Meaning, Role, & Significance
As per the Jointly Owned Property Law, or the Strata Law, “Owner’s Association is a non-profit establishment and a separate legal entity which consists of all the owners of the units in a jointly owned property,”.
The Owner’s Association is primarily responsible for the management, maintenance, and operation of common areas within the jointly owned property with each unit owner being a member of the OA. All individual owners in the community become members of the OA as soon as they purchase a flat or house in that particular building or community and start making the payment towards the annual service charge for the maintenance and upkeep of the common areas of the building or community.
The Owner Associations are governed by a board of elected unit owners and headed by an OA manager, who may be an owner acting in a voluntary capacity. There is also a rising culture of appointing OA managers from a specialist company licensed and registered by RERA.
The owner’s association plays a decisive role in the enforcement of statutory regulations, the formation of the rules & regulations, and ensuring the highest standards of security of the building. OAs also devotes a considerable period of time towards strategic financial management with a core objective to improve the life cycle of the building.
The Adverse Impact of Covid 19 on UAE Economy:
According to Oxford Economics, the United Arab Emirates could lose 900,000 jobs which are eye-watering for a country of 9.6 million. The region is also likely to witness 10% of its residents uproot. This havoc will minimize the number of tenants in the apartments and will also hamper the demand for new properties. Within the two months of the spread of the pandemic in UAE, more than 150,000 Indian nationals and 40,000 Pakistani nationals left or registered to leave the UAE by early May 2020. Around one million expats are expected to leave UAE in the next 4-6 months. This is indeed very bad news for the UAE’s real estate and property management sector.
The UAE property market was in a bad shape before the spread of the global pandemic. Coronavirus further added to the miseries for the sector and aggravated the situation. Within the first three months of the spread of the virus, the residential property prices fell by 30% due to weak demand.
Top Challenges Ahead of OA Firms:
Covid 19 has severely hit the financial capacity of the owners association firms. There has been a huge decline in the rental rates of the properties due to the slow demand and migration of tenants from the buildings. This has adversely impacted the budget of the property to be spent on the maintenance of the building resulting in inefficient building operations, higher utility costs, and a surge in energy consumption. Another daunting challenge for the owner’s association firms to address is the collection of service charges. Due to Covid 19, a list of affluent tenants moved outside the UAE to much safer places which reported almost negligible cases of Covid 19. These tenants were not aware of their commitment to the association. The UAE government is yet to indisputably enforce legislation on owners’ service charge obligations.
The key growth drivers for the UAE’s Owners association sector will be the continued financial stimulus from the government, easing of the lockdown, and the upcoming Expo in 2021, etc. The UAE government has laid major emphasis on curbing the growth of the virus and normalizing the economy which has worked wonders for the property management and the OA sector. Dubai was recently awarded a “Safe Travel Certification” from the World Travel and Tourism Council, while the UAE ranks third in Covid-19 testing per one million of the population. These factors will have a favorable impact on the occupancy rates at the properties which will positively impact the business of OA firms.
How Can OA Firms Overcome the Effects of Covid 19?
Owner’s association firms must draft a well-thought emergency response and a business continuity plan to address tenants’ health incidents. Following the process can provide a solid foundation for a sustainable response program.
Owner’s association firms must conduct a risk assessment and based on the results should decide whether to expand its current plan to address threats to tenants’ health. They must implement guidance released by the public health officials, counsel, and industry resources to make changes and must circulate the emergency plan with staff and tenants.
To attract the tenants in these difficult times, OA firms must keep service charges lower. Although lesser service charges will create a revenue deficit, OA firms will earn a fair share from the increased occupancy rate.
OA firms should hold training sessions to educate their managers, tenants, and board members on the industry procedures and government laws on Covid 19 to make each party involved in their rights and obligations. This will ensure clear communication among the industry stakeholders and will also have a favorable impact on tenancy rates. Owners Association firms must circulate their plans to combat Covid 19 with the tenants and key staff members. They can also consider hosting a teleconference to explain their plan and implement it.
It is also of paramount importance for the OA firms to maintain clear and transparent communication with the tenants on the spread of the virus, maintaining the data of the number of tenants falling victim to it, and releasing advisory on all tenants who are diagnosed with Covid 19 to ensure other tenants maintain distance from them which is very important to curb the growth of the virus.
Maintaining sufficient funds is another key aspect OA firms must focus on. They must maintain robust capital reserve funds to deal with any fund crisis situation. Furthermore, it will be wise to go for insurance policies to protect their assets and to have the right cover by professionals.