In a few years from now, The GCC region will play host to some historic events of high magnitude such as the Dubai Expo 2020 and the Soccer World Cup in Qatar in 2022. These are expected to invigorate the real estate market in the Gulf region as a range of new developments by leading developers are likely to be announced.
How upcoming events in the Middle East will drive economic growth
- The Dubai Expo 2020:
Come October 2020, and the world will witness Dubai playing host to the World Expo. The six-month-long event is of great significance for Dubai as it will also become the first ever city within the GCC region to stage a global event of such grand scale. The Expo is likely to give a boost to the UAE economy and forecast to pump almost $40bn into the economy. According to a recent study, “Expo 2020 effect” as it is popularly known, will have a positive impact on Dubai’s real estate with the property prices expected to rise in almost three years. Various sectors, including the construction segment to retail, are expected to benefit from the mega event.
Expo 2020 has augmented the need for better amenities and sophisticated infrastructure. The Government of Dubai recently, in its 2017 budget, declared a 27% rise in expenditure for infrastructure. By the end of the year, Dubai Expo 2020 is expected to give away more than 1,200 construction contracts, to the tune of more than AED12 billion. The additional expenditure is projected to create 300,000 jobs out of which 30% will be in the property market. These top-notch events are also expected to bring a plenty of qualified Indians to GCC, thereby opening more opportunities for Square Yards.
Furthermore, the “Expo 2020 effect” dovetails with the introduction of a country-wide tax system, to come into effect from Jan 1, 2018. The new VAT is expected to result in better payment plans for buyers of Dubai real estate.
- FIFA World Cup 2022, Qatar:
The FIFA Soccer World Cup is scheduled to be held in Qatar in 2022. It is expected to drive commercial real estate growth in Qatar. The supply of commercial real estate market in Qatar is forecast to get more than double in the coming years.
- And the New Tax system takes effect….
January 2018 will mark the introduction of a new tax system, i.e., Value Added Tax across the Gulf Cooperation Council. The tax is set to impact all kinds of businesses, and real estate is no different. A standard rate of 5% VAT has been fixed and is agreeable to all the nations within the GCC. Each of the six countries within the GCC framework, i.e. (Kuwait, Bahrain, Qatar, Saudi Arabia, UAE, Oman) have now officially approved the Unified Agreement for VAT. The government of UAE recently issued the Federal VAT Law laying the grounds to apply for VAT in the UAE. According to the law,
- The first sale of new housing developments will be zero-rated for the initial three years of its construction.
- Residential rental and bare land will be exempt from the tax in the UAE.
According to a recent research report released by Deloitte, the VAT’s effect on the construction sector will be dependent on whether a company indulges in supplies, such as leases or sales, of commercial properties (at 5% rate) or residential building (zero-rate for the first supply)
