Impact of Dubai Land Department Online System on Property Brokers in 2020

Dubai Land Department Online System
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Soon, the Dubai Land Department might create a ledgering system for direct business transaction between a buyer and seller or a landlord and their tenant without involving brokers in the engagement. And the system is expected to work well, regardless of the location of the parties involved. For a start, many people will be able to go to LuxuryProperty.com and try for free.

However, this is not yet the time to let this move overwhelm you yet. It may take time before the ledgering system takes into effect, something the department might be able to achieve by 2020.

But after achieving such a dream, are brokers going to become jobless?

According to the managing director of Global Capital Partners, Sameer Lakhani, whenever more transparency enters a system, brokers are the ones who heavily feel the pressure.

As this dream comes true, we expect to have further consolidation in the brokerage sector because the brokerage model has responded by exchanging margins with volume. On the other hand, intermediaries’ commissions across all industries have experienced pressure on margin, and this move is likely going to head the same direction.

Some years back, a similar scenario occurred in Dubai’s stock exchange market. Most brokers had their commissions fall from 1% to an eighth of that and this was because the stock market had transformed from a physical way of handling shares to an electronic way of handling shares. So, if the Land Department platform opens up, a similar pressure on commission rates is likely to be felt by brokers.

As per today, a brokers’ commission on any property sold or leased averages to 2 percent and if he or she is called to carry on with property management, the commissions will increase with a range of 5 percent or even more.

The implementation of the ledgering system could be one of those innovations that will really hurt the Land Department’s Real Estate Self Transaction if commissioned. A statement released recently shows that a property owner can pay utility bills remotely without the need of consulting property management and service agents.

It’s already obvious that real estate brokerage has gone through a wholesale change. Back in 2014, a turndown caught many unaware, resulting to huge losses for property investors, and their operations were also shuttered. Even then, the local courts found a brokerage house that was once prominent to be at fault for not delivering on the Sales and Purchases Agreement terms they had with property buyers.

Since then, some brokerage businesses have joined hands with an aim of combining their operations, but this step hasn’t bore any fruit. Worst of all is that some ventures have been doomed in the process as partners encounter spectacular losses.

Dubai developers have tried to sell directly to their customers via in-house sales teams. But why have they opted for this? Their primary goal is to reduce the roles played by brokers. Additionally, they have tried to employ agencies to help them handle their project launches and this means that only handful dealings are left for brokers in the city.

Here is the big question, though:

Is the Land Department’s Real Estate really going to stimulate the shakeout that is among Dubai’s brokerage businesses? Matthew Bat, the CEO of Engel and Völkers’s Dubai operations says that he doesn’t think this will take the agents roles away. In other words, he meant that estate agent might play a much different role.

According to Matthew, Dubai is going to be at the forefront in the estate digitization when the process comes out more clearly. And he is 100% sure that this is a dream come true. And that is why Dubai should really prepare itself for it.

Simon Townsend, a senior director, on the other hand believes that taking marketing advises is very important especially in a landscape that is very much competitive. Ideally, Dubai has many transaction differences namely guaranteed return, cash back and deposit substitution. More often than not, brokers might be handy here. That’s because they are seen more as advisers and assistant investors who have independent market experiences. Therefore, transitioning brokers to advisers is the key thing.

In case there is any pressure on broker commissions, the portals are the ones to feel the pinch. This means they will have to cut on their asking rates.

 

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