Real estate businesses in the UAE must consider how the five per cent value-added tax (VAT), being implemented from January 1, 2018, will affect them, an expert has said.

Although home renters will escape taxation because residential rentals will be exempt from VAT, landlords may lose out on other expenses they incur with VAT, making rental prices vulnerable to an uptick, said Lukman Hajje, chief commercial officer of Propertyfinder Group.

From a developer’s standpoint, VAT will certainly impact the contract price in construction contracts. And since Dubai developers have been ramping up launches of their off-plan projects in the last six months, it’s imperative that they lock down processes so they are prepared to recoup potential losses under the new taxation system, he said.
 
Hajje pointed out that while 'location' may be one of the top three most important things in real estate, for developers it's all about brand and reputation.
 
He cautioned that paying attention to the uptick in construction costs and the inclusion of VAT may put a strain on margins, but there are ways to maintain long-term success.

“The developers who deliver on time and consistently build and maintain a quality product in the long term enjoy repeat business, attract the best talent and the best margins.” - TradeArabia News Service