Dubai to slash fund fees to attract capital

A state-run finance hub is planning a package of fee cuts in a bid to attract REITs and property funds in invest in the emirate. However, property experts warn it might not be enough to warrant the risk.

The Dubai International Financial Centre, the state-run finance hub aimed at attracting capital to the emirate, has indicated it would cut fees for fund managers seeking to raise vehicles to invest locally.
According to a report by the Khaleej Times, DIFC chief economist Nasser Saidi, said the organisation, which offers institutions incentives to invest in Dubai had a “comprehensive package including cuts in registration and listing fees of funds” ready in waiting. The DIFC offers incentives such as 100 percent foreign ownership and no tax on income and profits.

He declined to give exact details but said the DIFC wanted these measures to attract real estate investment trusts and Shariah-compliant funds to the region, as well as funds aimed at other sectors. He told the newspaper the measures would be introduced before the middle of the year.
The move comes amidst a torrid time in Dubai 's real estate market. Commercial real estate valuations have plummeted by as much as 50 percent from their peak, while rents have also tailed off by between 25 percent and 50 percent as a result of falling demand. As a result the emirate's completed assets are 25 percent vacant.
James Lewis, director of investment for the Middle East division of property services firm Knight Frank said Dubai would currently struggle to attract overseas capital. Considering the move by the DIFC, he said: “To attract international capital to invest in Dubai 's real estate assets, they will find it difficult. The commercial market still has further to correct and does not yet offer enough value to warrant the risk.”

Lewis questioned whether investors would have the appetite to take on large, development projects in Dubai. “Appetite for higher risk exposure, in emerging markets has waned considerably though and any entity would be pretty brave to take that on now.”
PERE's Jonathan Brasse currently in the Middle East gauging current market sentiment following the Dubai debt crisis at the end of last year. Read more on our findings in the
February issue of PERE and here on