If you were beginning to believe the press releases stating that Dubai is immune from the financial crisis, the latest report from Gulf news should disabuse you of that notion. Employees fired by Damac last month due to the financial crisis are not being paid their full settlement. According to former employees of Damac Properties, the management calculated their three-month notice amount on their basic salaries, in contravention of the law.

Ahmad (name changed upon request), a civil engineer, who worked for the company for 18 months, said his contract was terminated on November 10 and that he had to chase the management for four weeks before receiving his final settlement, in which the notice pay was calculated on the total salary.

“When I went to collect the cheque, I was surprised to find out that they had issued a second settlement calculated on the basic salary, and I was told that the changes were based on adjustments in labour regulations,” said Ahmad, who will lose Dh20,000 of his end-of-service benefits if he agrees to the modified settlement.

According to the labour law, if the employer breaks a limited contract he or she has to compensate the employee for any prejudice the latter sustained for a period of no more than three months of the total salary.

An official source at the Ministry of Labour told Gulf News: “The law is clear on this issue. If an employer breaks a limited contract without a legitimate reason, he has to pay three months of the total salary. Any worker who is in dispute with his or her employer can file a complaint at the Ministry of Labour, and if an amlicable settlement is not reached the case will be referred to court.”

Precedent

Advocate Mohammad Ebrahim Al Shaiba of Al Bahar Advocates and Legal Consultants told Gulf News that the precedent set by the cassation courts carries more weight than the text of the law and previous rulings have forced employers in such cases to pay three months of total salary.

A statement sent to Gulf News bysaid that the company “follow all the guidelines as per the UAE Labour Law in its entirety,”.

“During these trying times our endeavour is to ensure that the exit for our employees is smooth. We are providing them with NOC (no-objection certificates) and assisting them with any help that they may require during this transfer process,” the statement said.

However, Damac Properties declined to comment on Gulf News’ questions on whether they had calculated the three-month notice on the total salary or the basic and on what provisions of the labour law did they base their decision.

The employees provided Gulf News of both the first proposed settlement and the modified one with the smaller amount.

Ahmad and many of his ex-colleagues refused to sign the final settlement papers and have asked for legal advice at the Ministry of Labour. But they fear that the company, in a retaliatory measure, would not give them NOCs, which is required for avoiding the six-month ban when changing jobs if they file a formal complaint.

Fahed, (name changed upon request), an engineer who came to Dubai last January to work for Damac, said that this settlement was not fair especially now that he had lost his jobs

“I really cannot afford to lose as much as Dh20,000, especially now that I am unemployed and have large of amount of debts. But at the same time I cannot afford to take this to court and wait for several months for the court verdict as I cannot support myself in the UAE for such a long time without a job,” said Fahed adding that he just wanted his rights as per the law.

The Free BMWs failed to materialize in Dubai

As Dubai’s property market crashes, more and more isues are being raised about the quality of existing developments, with owners finding broken promises by developers causing more than just financial hardships. The latest complaints are regarding Emaar’s treatment of investors and unresolved maintenance. Homeowners of serviced apartments in The Address in Downtown Burj Dubai say they have complained about nearly 100 problems but none have been dealt with yet.

“I was charged fees from December 21 and I went to stay there on December 26. The apartment was open and it was filthy. We called security and housekeeping but [were told] ’sorry’ and nothing more,” one apartment owner said in an e-mail to Gulf News.

One owner also said there has been a 300 per cent increase in management service fees.

Emaar, which was recently downgraded by Standard and Poor, say the apartments are furnished and meet international standards. “Emaar’s Quality Assurance team is working with contractors to rectify any concerns,” a spokesperson said.

There has also been some confusion regarding developer Damac. Buyers of one-bed apartments in the company’s Lakeside project were offered a BMW 3-series as part of a promotional deal in February.

The cars were supposed to be delivered to buyers in the third quarter of 2008, but around 130 people are still waiting for their cars, said one investor.

Damac was quick to respond and requested that unhappy investors contact them directly, but there have been complaints from investors about lack of responses from direct complaints.

The government is scrambling to fix numerous issues regarding transparency in the Dubai property market and more confusion has arisen with the introduction of new laws before old laws have been properly implemented. This confusion applies to both buyers and renters.Tenants in Dubai are concerned that this year’s rent cap has not yet been announced, despite the current one due to expire as we enter 2009.

Tenants are also worried that the Real Estate Regulatory Agency (Rera) will announce the new cap once rents have already been paid for next year.

“I have not seen any news on a rent cap for 2009. Is there one? Or will landlords be able to increase [rents] as they see fit?” said one tenant.

Another tenant, whose rent was increased by 17 per cent, said he prefers to keep quiet.

“My rent is still below the market price. So it’s okay. Besides, the last thing I want is a hassle with the landlord,” said a long-time Dubai resident, requesting anonymity. ‘

The rent cap in Dubai currently stands at five per cent, but some landlords have been ignoring this and happily jacking up their rents, angering tenants.

However, rent caps may not be necessary from now on as average rental rates will be decided for specified areas once Rera has finalised its rental index, which will be done when 60 per cent of tenancy contracts have been registered.

But some analysts have said that it is too premature to remove the rent cap as with the lack of mortgage facilities, rents are actually going up, not down.

Determining factor

And other analysts and tenants say it is not possible to impose an average rent for an area, as it is only the market that dictates rents.

In the meantime, Dubai’s supply of rental accommodation continues to increase, with another estimated 140,000 housing units set to hit the market by 2011.

There has also been some confusion regarding the recently announced online registration site for tenancy contracts, implemented recently by Rera.

Rera unveiled its Ejari website last week, upon which it is now compulsory to register all rental contracts. While the exact cost of this registration hadn’t been finalized, Marwan Bin Galita, chief executive of Rera, said it would be around Dh100 per contract.

Owners, however, say the reality is far different as owners are also obliged to take part in a training day to learn how to use the software - this must be paid for.

“I contacted Rera about the registration. They told me that I must attend the one-day Ejari training programme, which will cost Dh2,000 per person to get an online user account. Only after that can I register my property,” an apartment owner told Gulf News. Rera officials were unavailable for comment on this.

Renting directly to the tenant may prove to be more beneficial as it would remove the necessity of paying an agent.

If the tenant found a property to rent through an agent, then the agent will register the contract online. If there is no agent involved, then the landlord and tenant must both sign the registration form, said Bin Galita.

Standard & Poor’s Rating Services said today that it had revised its outlook on Dubai-based property developer Emaar Properties PJSC (Emaar) to negative from stable.

“The outlook revision reflects a rapid weakening of the real estate markets in Dubai, and our uncertainties about the depth of the downturn and the pace of eventual recovery. A prolonged downturn could negatively impact our view of Emaar’s business risk, and it could also lead to deterioration in Emaar’s currently healthy financial position,” said Standard & Poor’s credit analyst Alf Stenqvist.

The ratings on Emaar continue to reflect the group’s important role and strong position in the Dubai property development market and its close relationship with, and 32% ownership by, the government of Dubai (not rated). The rating includes a two-notch uplift from the stand-alone assessment to reflect implicit support from the government of Dubai. The rating also reflects the group’s current strong cash flows, low debt leverage, and strong asset base. Constraining rating factors include the weakening of the Dubai real estate market, the concentration of the group’s operating cash flows in a relatively small number of large projects, and the group’s aggressive geographic expansion into markets with higher political and economic risk. On Sept. 30, 2008, the group had total interest-bearing debt of about UAE dirham (AED) 9.1 billion ($2.5 billion).

Emaar is one of the largest property developers in Dubai, with sales of AED17.6 billion in 2007. The group focuses on residential communities and has until recently benefited from high demand for properties in Dubai, which has been supported by the rapid economic growth of the emirate.

Emaar’s expansion in the Middle East and North Africa has so far offered only a limited cushion against the downturn in Dubai, and the company’s U.S. operations are loss making. Emaar has, however, recently completed a large shopping mall in Dubai, which should generate quite good and stable rental income in the years ahead.

The negative outlook reflects the weakening of real estate markets in Dubai, which if prolonged and more severe than we currently anticipate, could put pressure on Emaar’s cash flows and financial position, and subsequently could lead to a downgrade in the medium term.

Citigroup Incorporated has arranged more than $8 billion (Dh29.3 billion) finance for various Dubai government entities in recent months, the global banking group said.

“This is in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular,” said Citi’s chairman, Sir Win Bischoff in a statement.

Officials familiar with Citi’s recent deals with Dubai entities said the amount is an aggregate of about half a dozen deals Citi did with Dubai’s public sector entities during the past few months.

“We continue to place the Gulf region among our globally most significant markets, and we certainly see opportunities across all of the UAE’s financial sectors. In the last 2 years, we’ve participated in most major financing transactions across the region including the UAE,” Bischoff said.

Citi’s renewed commitment comes amidst speculation on Dubai’s sovereign debt obligations, and Dubai’s debt to GDP ratio is an unsustainable 148%. Late last month Mohammad Al Abbar, chairman of the Advisory Council of Dubai’s government and chairman of Emaar Properties, stressed that the government was capable of meeting all its obligations, despite the fact that Abu Dhabi had taken over both major lenders in the country, and Dubai has also had to borrow an unspecified amount of capital from her bigger, oil-rich sister.

According to the council’s estimates, the government’s sovereign debt stood at $10 billion, while its assets, excluding key infrastructure installations were more than $90 billion. Although, I find it hard to consider a sewage system as an “asset.”

The total debt of government-affiliated companies is estimated at $70 billion, while assets are valued at $260 billion. Realistically, these assets are all but impossible to value, and the government seems to be pulling figures out of a magician’s hat.

While the government has clarified its ability to meet all its debt obligations, analysts view the renewed support by international financial houses as a strong vote of confidence in Dubai’s financial strength despite the global financial turmoil.

“We are quite positive about the UAE’s prospects and Dubai in particular as one of the world’s fastest growing international financial centers.

“This is evident in our decision to move our headquarters for the region to Dubai, and to strengthen our regional coverage teams through key appointments based at the DIFC,” said Mohammad Al Shroogi, Citi’s UAE chief executive and managing director for the Middle East.

Personally, I think this is a case of good money after bad, and it will be years before Dubai becomes an attractive destination for the smaller investor unless something is done to bring some sort of transparency to the Dubai property market.