COVID-19 and its impact on the Real Estate sector in the Middle East
These are turbulent times and things are rapidly evolving within the real estate sector throughout the region. However, we are seeing some recurring issues which we will be exploring in more detail through a number of updates over the next week or so. These can essentially be grouped into the following key areas:
- The impact of COVID-19 on Leases (both residential and commercial) particularly around the payment of rent and the ability to use the premises;
- The impact of COVID-19 in relation to off-plan sale contracts particularly around payment plans and development obligations / milestones; and
- The impact of COVID-19 in in relation to key provisions within hotel management agreements such as operator performance and the payment of management fees.
The above reflects the majority of enquiries that we are seeing from our clients and contracts and we hope to provide a degree of clarity in these uncertain times. As part of this, we will also be circulating our COVID-19 Rapid Response Flyer where we will be offering support to our clients and contacts within the real estate sector by providing access to our industry experts to talk through any critical issues they may be experiencing.
In the meantime, regional governments have moved quickly to help and support the real estate sector through economic stimulus measures. Additional measures may be required depending on the length and severity of the impact of COVID-19 on the real estate sector but it's clear that regional governments recognise the need to act swiftly to support individuals and businesses during this challenging period.
We have identified below some of the key measures relevant to the real estate sector which have been introduced around the region.
Kingdom of Bahrain
- USD 11.4bn (BHD4.3bn) stimulus package to support citizens and the private sector.
- Deferment of mortgage instalments for a period of up to 6 months and waiving profit and interest accrued during this period for those economically impacted by COVID-19.
- Government real estate companies such as Edamah are offering relief from rental payments across certain sectors.
- Exemption of all businesses from industrial land rental fees for three months.
- Exemption of certain fees including municipal fees and tourism levies for three months.
Kingdom of Saudi Arabia
- USD 32 billion stimulus package.
- Postponing the payment of VAT, excise duty and the submission of Zakat declarations (and the payment of any dues therefrom) for 3 months.
- USD 23 billion stimulus package.
- Rent relief for industrial facilities for 6 months.
- Exemption of duties for key products and services for 6 months.
United Arab Emirates
- AED 100 billion 'targeted economic support scheme' launched.
- Some local banks have increased the Loan To Value (LTV) for first-time buyers by 5%.
- Abu Dhabi has introduced a waiver on real estate registration fees.
- Dubai has reduced municipality fees in relation to hotels from 7% to 3%.
- Government real estate companies and large privately owned real estate companies are offering relief from rental payments across a number of sectors.
- A second round of stimulus measures was introduced over this weekend aimed specifically at the Free Zones in Dubai and includes a postponement of rent payments for up to 6 months.