CONTENTS:

President’s message 3

EUROPE

Time to invest in Barcelona 4-5

Investing in UK Property 6-7

Spotlight on distributions in Germany 8

French tax update 9

What a difference a day makes 10

New acquisition vehicle in Luxembourg 11

Global network news July 2014

ASIA & MIDDLE EAST

Foreign ownership of residential

property in Singapore 12-13

The year of Malaysia 14-15

Japan – market watch 16-17

Dubai: Gateway to the Orient 18-19

i2an real estate seminar 20

SPECIAL EDITION INTERNATIONAL REAL

ESTATE INVESTMENT

To subscribe to the i2an newsletter please contact catherine.pages@i2an.com

President’s welcome

Mark Bathgate, President of i2an (mark.bathgate@i2an.com)

acquisitions in markets such as Spain which is currently the focus of the attention (see our article on page 3).

While Investing abroad brings opportunity it is not without risk. Identifying the right location, understanding the local economy and rules & regulations can be a challenge. Structuring and financing cross border asset acquisitions in the most tax efficient manner takes careful planning in several jurisdictions.

Getting the tax planning wrong or not executing the appropriate tax planning measures can have a direct impact on anticipated investment yields and complicate the repatriation of funds.

The fiscal environment across the globe is in constant evolution with tighter thin capitalization rules, restrictions in offshoring arrangements and cross border profit shifting under intense scrutiny. Iit is becoming increasingly difficult for investors to stay ahead of the game.

Within i2an we have created an international network of real estate experts providing local insight to clients who have a global investment outlook.

Dear members, clients and friends,

Welcome to this special edition of the i2an newsletter focusing on real estate investment.

Whilst we may not be currently seeing the heady pre-2007 levels of transaction activity, real estate remains a sought after asset class by institutional investors and private individuals alike.

Whilst historically considered as an inflation proof asset class, there has been increased activity recently in the real estate sector as investors seek better yields that what is currently on offer in the corporate bond markets . This increased investor appetite has created property bubbles in certain parts of the world including London and South East Asia which are particularly hot markets.

The real estate sector is now a global market for institutional and private individual investors alike. Institutional real estate investors seek to spread the risk of their investments with pan European or global investment funds. These funds along with private individuals seek opportunistic

Real Estate Seminar London, 25 September 2014

In this special issue we have pulled together some of the latest developments and insight from the local markets of our i2an members which I hope you will enjoy.

Don’t forget to save the date for this year’s i2an real estate seminar & cocktail to be held in London on Thursday 25th of September at the Kings fund in Cavendish Square.

Our guest speakers will cover the latest developments for real estate investors in the UK and Europe, sharing with us their industry & market insight. This event is a great opportunity to connect, network and share your views on the current hot topics in real estate.

Details of this event and how to register are presented on the back of this newsletter. On behalf of the i2an real estate team, we look forward to meeting you in London in September.

Mark Bathgate

President i2an

Details on the last page of this newsletter

Save the date

3.

1. PRICES CLOSED TO 1998 LEVELS

The Spanish Real Estate Market is becoming very active again. There are many investment opportunities and investor’s appetite has returned.

The Spanish real estate market has been one of the hardest hit since the start of the financial crisis. Prices have been constantly decreasing since 2008. The Spanish Real Estate Market is currently at prices close to 1998´s level, as shown in Figure 1.

Moreover, Spanish banks now own a large number of Real Estate and are willing to get rid of it as well. Indeed, Spanish banks are not only are selling real estate at very good prices, but also are offering, in some cases, attractive financing to those individuals who want to purchase those real estate assets owned by the same bank.

Note that, as a result of the bank restructuring process, Spanish financial institutions have contributed a large part of their contaminated property-related assets (e.g. mortgage loans and associated real estate) to the asset management company SAREB, who in turn is currently offering very attractive deals.

On the other hand, it is important to remark that recently the falling rhythm of the average Real Estate prices has not only sensibly decreased but starts to show a prompt recovery, (-9,46% in Q3 2013 compared to 14,54% in Q3 2012, but only -1,65% compared to the previous quarter).

The aforesaid scenario of low prices and excellent Real Estate opportunities is only one of the reasons that explain the current boom of foreign investment in Real Estate in Barcelona.

Certainly, it is not only a matter of good deals because of low prices. Barcelona (and Spain itself) has a bunch of attractions that places it as one of the main business centers, a strategic location and touristic destination in the world.

2. ECONOMIC OVERVIEW

After 5 years of severe economic crisis, the Spanish economy is showing signs of recovery. The Spanish Government indeed announced in March the end of the crisis.

According to the Spanish Government, the main reforms have already been put in place. After a severe labour reform, the Spanish economy productivity has increased. Although domestic demand has remained low, exports have rocketed and tourism remains highly competitive. With the restructuring of its banks now in place, the financial system should help to accelerate domestic demand as well.

Barcelona is nowadays a reference in terms of design, fashion, genetics, research and development, and other activities, and therefore is attracting this kind of businesses, that want to be located in Barcelona. As a result demand for rental offices and business premises is growing as well.

Additionally, the market of rental housing has increased. At the beginning of the crisis, the composition of the Real Estate Market in Spain was 12% rental and 88% ownership.

Nowadays, rentals are about 18%, and certain analysts foresee that in 4 or 5 years rental will continue rising up to 25% (source www.expansion.com 15 April 2014).

And more importantly, Barcelona is one of the major cities in the world in terms of International Congress and International Business Conventions, and also one of the top touristic cities in Europe and in the world. All this activity translates in a heavy and increasing demand of hotels and short term rental housing for touristic purpose.

In addition to a brighter economic outlook, the Spanish Government has introduced several measures to enhance and promote the foreign investment in Spain. In this regard, Spain is granting Spanish Residence Permits to non-EU citizens subject to Real Estate investments in Spain of at least 500.000 € (multiple properties and co-ownership allowed). Among other advantages, holders of a Spanish Residence Permit will not require a visa to enter the Europe Schengen area. They will be able to transit and enjoy free movement in the Schengen area for a maximum period of three months (90 days) per half-year from the date of first entry.

Is it now time to invest in real estate in Barcelona?

Ivan Pons Lafuente, Head of International Affairs of Planartus (ipons@planartus.com)

Ivan Pons Lafuente, Head of International Affairs of Planartus in Barcelona presents an interesting case to suggest that the timing is right.

Figure 1 : Housing price evolution in Spain – Sq meter average price in €

4. Europe

3. SPECIAL TAX REGIME: SOCIMI,

a true REIT

The Spanish government has also introduced

tax advantages to promote foreign investment

in Real Estate in Spain, such as the SOCIMI’s

special tax regime.

Effective as of 1 January 2013, Spain

has a true Real Estate Investment Trust

(REIT) regime, called SOCIMI (“Sociedades

Cotizadas de Inversión en el Mercado

Inmobiliario”). We remark the following

characteristics:

(i) The SOCIMI must have a minimum share

capital of 5 million euro, and at least 50

shareholders.

(ii) The SOCIMI must be listed in Spanish

or any other EU country’s stock

exchange. Any stock exchange of any

foreign country which has in force a

sharing information agreement with

Spain shall be eligible as well. In this

regard, note that the SOCIMI can be listed

in a multilateral negotiation system (i.e.

the Spanish MAB -“Mercado Alternativo

Bursátil”-), usually less complex and

cheaper than being listed on the regular

stock exchange. This flexibility in the listing

requirement may be relevant, since it can

make the SOCIMI regime attractive for

those family offices and medium-sized

investment groups with large real estate

portfolios.

(iii) The SOCIMI is taxed at a corporate income tax rate of 0%, provided that the shareholders owning at least 5% of the SOCIMI are taxed on the dividends received at a minimum rate of 10%.

(iv) Otherwise, if the investors in the SOCIMI do not meet the above requirement, a reduced corporate tax rate of 19% shall apply on the portion of the distributed profits corresponding to those investors. Note that the said 19% is a special corporate tax, not a withholding tax on the dividends distributed.

(v) The SOCIMI must invest at least 80% of its assets in urban real estate for rent.

(vi) The SOCIMI must distribute at least 80% of its profits annually, as well as 50% of the capital gains, provided that the remaining 50% is reinvested within a three-year period.

(vii) The property shall remain in the SOCIMI at least 3 years.

As for the tax treatment of the investors, it will depend on the nature and tax residence of the investor:

- Spanish resident individuals will be taxed on dividend income and on capital gains just as they are on dividends and capital gains from investments in other companies, i.e. at 21%, 25% or 27%, based on a progressive scale. This means a tax saving of approximately 25% on average on rental income if compared with the taxation of income derived from real estate owned by the individual directly.

- Spanish resident corporations will normally

be taxed between 25% and 30%. Thus, the

main tax advantage for Spanish corporations

could be the deferral of taxes on the

undistributed profits of the SOCIMI.

- Non-resident investors would be subject to

the regular withholding tax rates on dividends

established in the applicable tax treaties and, if

eligible, could enjoy the EU Parent-Subsidiary

dividend withholding tax exemption. This

means that non-residents could be taxed in

Spain at between 0% and 21%, depending

on their shareholding and on their country

of residence. This is relevant since, in many

cases, Spain levies no tax on income derived

by SOCIMI from real estate located in Spanish

territory.

- It is possible for Spanish subsidiaries

that are wholly owned by foreign REITs

to enjoy the special tax regime described

above. The minimum 10% tax requirement

would refer in this case to the investors

in the REIT. Thus, a foreign REIT with

investments in Spain that is currently

taxed at 30% could opt, through certain

restructuring, to apply the 0% tax. This

could be a final tax if, for instance, the foreign

REIT can identify its shareholders and none of

them own at least 5% of the foreign REIT. This

should also be appealing to foreign REITs that

have not yet invested in Spanish real estate.

Europe 5.

Investing in UK property – A tax guide for overseas investors

Richard Kleiner, Managing Partner, Gerald Edelman Chartered Accountants (rkleiner@GeraldEdelman.com)

Financially, the UK property market is a highly attractive investment for overseas investors. The UK’s political stability, safety and prosperity make the UK a highly attractive place in which to live.

London has overtaken New York as the number one city for foreign property investors, according to a survey by the Association of Foreign Investors in Real Estate (AFIRE).

Foreign investment in London’s property market has driven up residential house prices in the British capital even as they fell sharply elsewhere in the UK after the financial crisis. Prime property in London is seen as an asset class in its own right, providing recession-proof returns.

Leading estate agency, Savills, said the total foreign direct investment into London’s property market was £7bn (€8.4bn, $11.5bn) during 2013 alone. Savills estimates that since 2012 as much as 70% of newly built properties in central London are bought by foreign investors.

The main tax considerations when buying a property in the UK

Structure

It is important to decide on a suitable structure to hold UK property and the implications it may have on UK taxation as well as any overseas tax issues. The main property holding structures in the UK are as follows:

a. Property held personally in own name either individually or jointly

b. UK or offshore Limited Company

c. UK or offshore partnerships, Limited Liability Partnerships

d. UK Trusts or offshore trusts

e. Funds

Income tax

Income tax is payable on rental profits. Overseas companies and other corporate-style entities pay income tax at 20% and individuals can pay up to 45%. Tax returns

London based Partners at Gerald Edelman, Richard Kleiner and Amal Shah provide a useful guide for foreign investors on the tax implications of property investment in the UK

will be required to be completed for each tax year and an application under the Non-resident landlords scheme, to receive rents gross is required to prevent 20% tax being deducted automatically by your tenant/agent.

Inheritance Tax – (IHT)

Non resident individuals may be subject to IHT on the market value of their property at death less any loans taken out against the property. Each individual is entitled to a tax-free “nil rate band” which is currently £325,000 and IHT is calculated at 40% on any amounts exceeding the nil rate band.

IHT can be avoided by if the UK property is owned by the individual through an offshore company. CGT and SDLT implications will need to be considered if using an offshore structure.

Capital Gains Tax – (CGT)

The government announced from April 2015 overseas investors will be subject to CGT on any disposals of UK property. The new CGT charge will be charged on gains accruing on or after April 2015, and whilst the annual exemption of approximately £11,000, will be available, the net gain will be will be charged at the current CGT rates (28%).

Offshore companies with residential properties valued over £2million have been subject to CGT since 6 April 2013 at a rate of 28% on gains accruing after 5 April 2013. The government reduced the CGT threshold in line with the Annual Tax on Enveloped Dwellings (ATED) changes so from 6 April 2015 and 6 April 2016 properties over £1million and £500,000 will be subject to CGT respectively.

6. Europe

Stamp Duty Land Tax – (SDLT)

SDLT rates for non resident individuals remain the same as UK individuals, which are summarised below:

Purchase price/lease premium or transfer value

SDLT rate

Up to £125,000 Zero

Over £125,000 to £250,000 1%

Over £250,000 to £500,000 3%

Over £500,000 to £1 million 4%

Over £1 million to £2 million 5%

Over £2 million from 22 March 2012

7%

The top SDLT rate of 15% applies to the acquisition of a residential property by a non-natural person (e.g. companies) for properties valued more than £2 million. Properties valued over £500,000 have also been brought into this charge from 20 March 2014. There are business exemptions available which will reduce the SDLT payable, which are similar to the ATED exemptions.

Annual Tax on Enveloped Dwellings – (ATED)

ATED was introduced on 1 April 2013 for properties with a value over £2million owned by non-natural persons whether resident in either UK or offshore. The government is reducing the threshold to £1million and then to £500,000 on 6 April 2015 and 6 April 2016 respectively.

The table below summarises when the charge applies and what level of charge will be applied.

The company can claim business exemptions from the charge with the main reliefs being:

• Let to a third party on a commercial basis and is not, at any time, occupied (or available for occupation) by anyone connected with the owner

• Part of a property developers trade where the dwelling is acquired as part of a property development business the property was purchased with the intention to re-develop and sell it on and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner

• Residential property held for employee accommodation.

• Residential properties open to the public for at least 28 days a year or on a commercial basis.

The above is a concise summary of some of the main taxation issues that need to be considered by any investor looking to acquire UK real estate assets. However, it is strongly advised that specific advice be taken on individual transactions and circumstances as inevitably there are many planning opportunities to mitigate UK tax liabilities.

Property value ATED Charge

2013/14 2014/15 2015/16 2016/17

Less than £500,000 0 0 0 0

£500,000 - £1 million

0 0 0 £3,500

£1 million - £2 million

0 0 £7,000 + CPI

£2 million - £5 million

£15,000 £15,400 £15,400 + CPI £15,400 + CPI

£5 million - £10 million

£35,000 £35,900 £35,900 + CPI £35,900 + CPI

£10 million - £20 million

£70,000 £71,850 £71,850 + CPI £71,850 + CPI

More than £20 million

£140,000 £143,750 £143,750 + CPI £143,750 + CPI

CPI = Consumer Price Index

Europe 7.

corporate income tax as a general rule, the exemption does not apply to the fund’s income from dividends contained in the capital gain and received after February 28, 2013 that have not yet been distributed or deemed distributed to the investor. Natural persons holding interests in investment funds are not affected by this variation. The tax treatment of their income remains unchanged.

Note: In order to safeguard the tax treatment of corporation’s capital gains, retail investment funds have been obliged since March 1, 2013 to disclose separately for natural persons on the one hand, and corporations on the other, the percentage of the fund’s gains from shares (equity gain) as of each valuation date.

Specialised investment funds (Spezialfonds)

Dividend income of a domestic or foreign specialised investment fund that is attributable to a corporation investing in the fund can remain 95 % exempt from corporate income tax (Art. 8b (1) KStG) if the following conditions are met collectively:

The investment fund’s interest is at least 10 % of the share capital or capital stock, assets, or sum of capital shares (Geschäftsguthaben).

The amount of the share in the investment fund’s assets attributable to the individual investor is so high that the interest in the distributing corporation, association of persons or assets apportionable to same is at least 10 % of the share capital or capital stock, assets, or sum of capital shares (Art. 15 (1a) InvStG).

Note: If a corporation already holds a direct interest of at least 10 % in the distributing corporation, association of

Spotlight on distributions – Taxation of free float dividends received via investment funds

Understanding the tax leakage from distributions is critical for evaluating after tax yields on real estate investments. Our German partner Henning Schuchardt looks at the issue of taxation of free float dividends received via investment funds.

Henning Schuchardt, Managing Partner, HauckSchuchardt (H.schuchardt@hauckschuchardt.com)

In Germany, dividends received since March 1, 2013 by a company limited by shares (corporation) holding an interest of less than 10 % in the share capital or capital stock of another corporation (free float investment) are subject to corporate income tax in the full amount (Art. 8b (4) KStG (Corporate Income Tax Act). Dividends received by a natural person, in contrast, remain subject to income tax levied by the part income procedure (Teileinkünfteverfahren), provided that the shares of the distributing corporation belong to its operating assets. If the shares are held as private assets, the dividends are subject to definitive withholding tax (Abgeltungsteuer). The revised regulations concerning the tax treatment of free float dividends apply not only to direct investments, however, but also to investments held via retail and specialised investment funds.

Retail investment funds (Publikumsfonds)

Distributed dividend income and deemed dividend income received by a corporation holding shares in a retail investment fund have been subject to corporate income tax in the full amount since March 1, 2013. This applies irrespective of the amount of the interest in the distributing corporation held by the fund or the corporation holding shares in the fund (Art. 2 (2) Sentence 1 InvStG (Investment Tax Act)). The legislature thus assumes as a general rule that retail investment funds contain free float investments. Distributed dividend income and deemed dividend income received by a natural person holding an interest in retail investment funds, however, remains subject to definitive withholding tax levied by the part income procedure. Although the capital gain arising from the sale of fund shares by a corporation remains 95 % exempt from

persons or assets, the dividend income arising from this interest and received indirectly via the fund is also 95 % exempt from corporate income tax, provided that the fund is furnished with evidence of the direct interest. A corporation’s interest held through a partnership or co-entrepreneurship (Mitunternehmerschaft) is deemed to be a direct interest.

Furthermore, the interest threshold cannot be demonstrated by adding together interests held via different specialised investment funds. If a free float investment does not therefore exist, both distributed dividend income and deemed dividend income on the one hand, and capital gains arising from the sale of fund shares on the other, received by a corporation investing in the fund, are 95 % exempt from corporate income tax. If a free float investment exists, however, the variations applicable to retail investment funds apply mutatis mutandis. Income received by natural persons from shares in a specialised investment fund are taxed according to the established tax regulations.

Note: If the investors in a specialised investment fund also include natural persons, the fund is likewise obliged to make separate disclosures of its equity gain as of each valuation date. A specialised investment fund must also disclose the equity gain separately for corporations demonstrating a direct minimum interest of 10 % and thus satisfying the no free float investment condition.

8. Europe

France as ever remains an attractive and active market for real estate, with French assets a common feature in most pan European real estate funds.

With an equally active fiscal environment, Mark Bathgate, partner at Denjean & Associés in Paris, discusses some of the recent tax positions which could impact post tax yields

Mark Bathgate, Partner International Business Services at Denjean & Associés in Paris.

(Mark.bathgate@denjeansa.fr)

Tax impact of impairment reserves

In a decision dated 23 December 2013, the French Supreme Court ruled that, unless tax rules provide otherwise, a provision which has been booked in the statutory accounts in accordance with French GAAP must be deducted for French corporate income tax purposes to the extent the conditions required for tax deductibility are met.

As a result of this case law, if a provision is recorded in the accounts, it should be deducted from the taxable result as long as the tax deductibility conditions required by tax law are fulfilled.

For example, in the case of a provision being booked in the accounts of an SPV but treated as non-tax deductible in its tax return, the French tax authorities would not agree with this tax treatment. In the event of a tax audit, they would be entitled to consider that the reversal of the provision is a taxable profit even though the allowance was not deducted for tax purposes when it was booked.

Since the future reversal of a provision may generate a tax leakage due to the rule limiting the use of tax losses to €1m plus 50% of the taxable profit which exceeds €1m, real estate companies should pay careful attention to the future tax impacts of impairments booked in the accounts.

When there is high market value volatility in the real estate sector, it is likely that an impairment recorded at year end may no longer be justified in the short term period, triggering the reversal of all or part of the provision and a potential CIT liability as a result of this reversal.

Anti-hybrid rule

The French tax authorities have recently released their draft guidelines on the new “anti-hybrid rule” resulting from the Finance Bill for 2014. As a reminder, under this new rule, interest paid by French entities on loans granted by French or foreign related parties are not tax deductible if the borrower is unable to show that the interest is subject to tax at the level of the recipient lender company at a rate equal to at least 25% of the tax that would have been due under the standard French tax rules. If the lender is not domiciled or established in France, the taxation of interest must be equal to at least 25% of the corporate income tax liability that would have been due in France in case the company had been domiciled or established in France (i.e. a minimum taxation rate ranging between 8.33 % and 9.5% depending whether additional social contributions are due or not).

The draft guidelines provide various clarifications on how the new rule should be construed in practice. In particular, based

on these draft guidelines, the minimum taxation should be considered in the light of the flow of French source interest income which should be included in the taxable profits of the lender. The fact that interest income is sheltered by interest expenses incurred by the lender, or that the lender has carried-forward tax losses should not affect the tax deductibility of the interest in France. As a result, based on these draft guidelines, except in case of artificial or abusive structures, “back-to-back” financing schemes where the lender is subject to tax on an arm’s length margin at a statutory tax rate higher than 8.33% (or 9.5% depending on the situation) should be out of the scope of the new rules. For the French tax administration, the burden of proof of minimum taxation at the level of the lender, remains with the French borrower.

The rule is applicable retrospectively to interest incurred during the fiscal year ended 25 September 2013, irrespective of the date in which the loan was granted.

The guidelines were subject to public consultation until the end of April. There is still uncertainty when the final version will be released. In the meantime the draft guidelines are binding on the French tax authorities. Specific attention should be paid to the final guidelines once published to assess whether the above principles are confirmed in the final version.

But one thing is sure, the new anti-hybrid rule provides the first concrete evidence of France’s willingness to apply the actions of the OECD base erosion and profit shifting ( BEPS) project and signifies the start of a significant shift in the fiscal landscape within Europe.

French tax update

Europe 9.

should be noted that this is largely due to record high volumes including the sale of Metropolis (Retail Center) in Q1 2013 and quite a large volume of deals that closed at the end of 2013.

According to JLL capitalization, rates have also reacted to the current market where shopping centers and offices have increased by 25bps to 9.25% and 9.0% respectfully. The warehouse segment remains at 11.0%

Investments into offices dominated the market in Q1 2014, accounting for 46% of activity. Retail investments fell to 12% YOY however this is again due to the sale of Metropolis rather than a decline in the retail segment in general.

“What a difference a day makes”Local market insight : Our Russian partner Jonathan Tubb describes the latest state of play for Russian Real Estate in 2014

Jonathan Tubb has been based in Moscow for over 20 years and is a senior partner of

Bellerage Russia. (Jonathan.Tubb@bellerage.ru)

The political and economic uncertainty which took place in Q1 2014, has had a significant negative influence not only on Russian growth forecasts but also the local real estate investment market (According to JLL)

With the economy under pressure and investor sentiment uncertain, JLL analysts have revised down their expectations for investment volumes for 2014 to $3.4bn from $7bn forecast at the start of the year.

“This downgrade for 2014 implies investment levels would be on par with 2009 which reached $3.2bn. But there may be some upside if activity increases by July”

Total investment in Q1 2014 reached $475m which is down 77% year on year, but it

Investor interest remains unchanged with 83% of the volume in Moscow and 5% in St. Petersburg. The market remains evenly balanced between Russian and foreign investors for Q1 at 50% a piece, however JLL expects that due to the current economic climate the foreign investment volumes will drop to between 10% and 20%.

Investors still understand the fundamental dynamics of the Russian market, meaning that there is a major undersupply of stock in all sectors, which are attractive. However investors remain in “Wait and see” mode, which will have a short term impact on investment volumes. (Source JLL)

10. Europe

The SCSp was introduced in Luxembourg last year. Our Luxembourg partner Raphaël Poncelet, discusses the merits of the SCSp as a real estate investment vehicle for fund managers.

Raphaë l Poncelet Partner, Signes (raphael.poncelet@signes.lu)

The Luxembourg law of July 12, 2013 on alternative investment funds managers (the “Law”), has implemented into Luxembourg law the Directive 2011/61/EU of the European Parliament and the Council of 8 June 2011 on alternative investment funds managers.

The Law also creates a new type of commercial company based on the Anglo-Saxon Limited Partnership (mainly the English Limited Partnership): the “société en commandite special” (special limited partnership) (the “SCSp”), which combines the benefits of both the contractual and the corporate regimes.

We have described hereinafter some considerations that fund managers should take into consideration when deciding whether this new SCSp is suitable for upcoming transactions:

Absence of legal personality

The SCSp has no legal personality. However, it will benefit from several characteristics attached to legal personality, for example:

• a legal autonomy, i.e. a legal capacity,

• a specific name which does not need to include the name of the general partner(s) (the “GP”),

• a domicile and central administration, located at its registered office,

• its own assets and/or liabilities (distinct from the ones of the GP and limited partner(s) (the “LP”)).

Dualist system (GP(s) / LP(s)) and full confidentiality for LP(s)

At least one GP and one LP (who/which could be located outside of Luxembourg) enter into partnership agreement(s). They may be established by means of a notary deed or under private seal. An excerpt of the notary deed or the private instrument must be filed

with the Luxembourg Trade and Companies Register and published in the Mémorial. Such excerpt should contain the following information:

• the name, object and registered office of the SCSp,

• the date of commencement and the date of the end (if not incorporated for an unlimited period) of the SCSp.

• the particulars of the GP(s),

• the particulars of the managers, their signatory powers, the date of their nomination and the date of expiration of their mandates.

The particulars, contribution amounts and outstanding commitments (toward de SCSp) of the LP(s) are not compulsorily disclosed, nor published. As a consequence, LP(s) remain fully confidential.

Wide corporate flexibility

Many provisions of the Law are non-mandatory and are only default rules unless the partnership agreement states otherwise. Many items may be freely decided by the partners in the partnership agreement (form and nature of the partnership interests, transfer of the partnership interests, admission of new partners ,profit allocation/loss sharing, repayment of partnership interests, form of contribution, voting rights, partners’ decisions, information to be disclosed to the partners, conditions and procedures for dissolution, …).

Tax transparent vehicle and favorable carried interests tax regime

SCSp are considered as a full tax transparent vehicle for corporate income tax, municipal business tax and net wealth tax according to which the partners are, for tax purposes, considered to carry out individually the activities of the SCSp, provided that:

• the GP(s) (under the form of a Luxembourg company) holds less than 5% of the partnership interests, and

• the SCSp does not carry out a commercial activity.

• Dividends paid by SCSp are not subject to withholding tax.

In addition, the Law introduces a favorable carried interests tax regime according to which, subject to the fulfillment of some conditions, carried interests not represented by units, shares or other securities are taxed as extraordinary income at a quarter of the global tax rate. Please note that there are some exceptions to this favorable regime as described in the Law.

Efficient vehicle for private equity, hedge funds and real estate funds

The SCSp regime is suitable for regulated and unregulated investment structures complying with the new AIFM regime and both SICAR and SIF regimes, which are usual regulated alternative funds in Luxembourg.

In conclusion, Luxembourg could be seen as a pioneer in allowing, for the globalization of its corporate law regime, to import common law concepts into a civil law environment. As a result, the SCSp now offers fund managers with an alternative European “onshore” location and new and highly efficient structuring solutions for alternative investment funds, complex joint ventures, private wealth structures and special purpose vehicles.

The new Luxembourg “société en commandite special” (special limited partnership). A new opportunity for fund managers?

Europe 11.

in attracting investments in real estate2, alongside Hong Kong, London, Moscow and New York.

Singapore residential property can be broadly dichotomised into two broad categories of private and public property.

Singapore private residential property

Enacted in 1973, the Residential Property Act (“RP Act”) imposes restrictions on foreign ownership of Singapore private residential property.

The RP Act prohibits foreign ownership of vacant land, landed properties and strata titled units in developments less than 6 levels high

Singapore – Foreign ownership of residential properties

Wee Hoon Tan, Director at FIDEN in Singapore, looks at some of the key implications for foreign investors in Singapore and provides her thoughts on the outlook.

Wee Hoon Tan, Director at FIDEN in Singapore (Weehoon.tan@fiden.sg or jinjay.tan@fiden.sg)

One of the most densely populated countries in the world, Singapore has a resident population of 5.4 million1 on approximately 700 square kilometres. Of these, Singapore Citizens, Singapore Permanent Residents and foreigners comprise 3.31 million, 0.53 million and 1.56 million respectively.

In 2013, the Singapore Government released a White Paper which projects the resident population to reach 6.9 million by 2030. Offering steady population growth in a generally free property market, Singapore property presents attractive investment opportunities. Singapore has recently been cited as one of the top 5 global cities

(collectively “Restricted Properties”). However the Singapore Land Authority (“SLA”) may grant approval for foreigners to acquire Restricted Properties under certain qualifying conditions.

Foreigners may buy and sell non Restricted Properties.

With approval from the SLA, foreign companies may acquire land for development of private residential properties for sale.

Singapore public residential property

The public residential property sector comprises Government subsidised leasehold properties. These house approximately 3.15

12. Asia & Middle East

1 - Wong, Wee Kim. “Population Trends 2013”. Singapore Department of Statistics, Ministry of Trade & Industry, Republic of Singapore, September 2013.

2 - Khoo, Lynette. “Singapore in Top List For Rich Property Deals”. Business Times, Monday 5 May 2014

3 - “Release of 1st Quarter 2014 Real Estate Statistics”. http://www.ura.gov.sg/uol/media-room/news/2014/apr/pr14-29.aspx. Urban Renewal Authority. Published 25 April 2014. Accessed 13 May 2014.

“Release of 1st Quarter 2009 Real Estate Statistics”. http://www.ura.gov.sg/uol/media-room/news/2009/apr/pr09-17.aspx. Urban Renewal Authority. Published 24 April 2009. Accessed 13 May 2014.

million of Singapore residents. Ownership of public residential property is restricted to Singapore Citizens.

Property market cooling measures

Fuelled by low interest rates and ample liquidity following the credit crisis in 2008, Singapore residential property prices increased 51%3 from Q1 2009 to Q1 2014. Over the same period, commercial property prices climbed 28%3.

Various measures have been introduced to induce a soft landing of the residential property market including:

1. Imposition of Seller’s Stamp Duty (“SSD”) for disposal within 4 years of ownership;

2. Imposition of Additional Buyer’s Stamp Duty (“ABSD”), which is in addition to buyer’s stamp duty. Higher rates of ABSD apply on transactions by foreigners;

3. Loan To Value limits for purchasers; and

4. Total Debt Servicing Ratios requirements for purchasers.

Property tax

Property tax is a progressive wealth tax levied on property ownership irrespective of whether or not the said property is occupied. Property tax is levied on Annual Value (“AV”) of property. AV is the estimated annual rent of the property if it were to be rented out.

Property tax rates for owner-occupiers range from 0% to 16% of AV and is kept low to encourage home ownership. Non-owner-occupied properties attract higher rates of property tax and range from 10% to 20% of AV.

Income tax

Corporate income tax is levied at 8.5% on the first S$300,000 of chargeable income and at 17% on amounts thereafter. Personal income tax is levied progressively up to top rate of 20% on chargeable income exceeding S$320,000. Income tax is payable on net rent income, being gross rent income less deductible expenses.

Gains from sale of property may be considered to be capital in nature and not subject to tax as there is no capital gains tax in Singapore. However there are circumstances where gains on disposal are treated by the Singapore Tax Authority as revenue and not capital in nature. The occurrence of properties transactions at close intervals, thin capitalisation, short term high leverage, history of transacting in properties, case law precedents and other factors have been known to result in the Singapore Tax Authority viewing an entity to be trading in properties and levying income tax on such trading gains. There is not always a clear distinction between capital gains and trading gains. Potential foreign investors may be well advised to work with appropriately qualified tax professionals to build a case for gains on properties transactions to be treated

as capital and not subject to income tax in Singapore.

Outlook

We are now more than 4 years into the property cooling measures. The property market appears to be responding as prices have softened slightly from middle of 2013. However it is unclear (i) if the Singapore Government has achieved its objective of moderating property prices; and (ii) when the property cooling measures might be withdrawn.

Anecdotal evidence suggests the market place consensus is that current price levels are still elevated. Many industry experts expect further price moderation in the short to medium term. All of which suggest prices may head further south.

Easy repatriation of tax free dividends from Singapore companies, comprehensive Avoidance of Double Taxation with at least 75 jurisdictions and a generally business friendly environment makes Singapore an attractive place to do business and invest in. Prospective foreign investors might find it interesting to watch this space in the coming 2 to 3 years.

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of lawyer both the buyer and seller need to sign the SPA. Within 14 days from the SPA signed, the buyer is required to pay the balance of 10% (as the deposit) of the purchase price. A legal fee for drawing up the SPA and completion of transfer depends on the property value. The legal fee chargeable is fixed under the Legal Profession Act, 1976 as outlined in Table 2.

STEP 3 – Subsequently, the lawyer completes the Memorandum of Transfer (MOT) or Form 14A (also known as the Stamp Duty). The MOT will be submitted to the Stamp Office for adjudication of stamp duty and valuation by the Valuation Department.

STEP 4 – Stamp duty to be paid to Stamp Office based on the Notice Assessment and the MOT will be stamped. The Inland Revenue Board (IRB) usually gives 30 days from the date of notice to pay. The stamp duty rate is as per the First Schedule of the Stamp Act, 1949 (refer to Table 3).

STEP 5 – Finally, the buyer’s lawyer presents the duly stamped MOT for registration at the

Spotlight on investing in Malaysia

Sahilin Albang is the managing partner of Sahilin advising foreign investors with their acquisition projects(salihinabang@salihin.com.my)

2014 is the year of Visit Malaysia, in this article Salihin Abang explains why Malaysia is an attractive choice for foreign real estate investors and outlines the key steps in the acquisition process.

The Malaysian market

Malaysia is still a place favoured by many foreigners in terms of real estate/property investment in Asia generally and in Southeast Asia specifically. The market outlook for property investment in the country remains positive for years to come. The Economic Transformation Program (ETP), Iskandar Malaysia, Greater Kuala Lumpur (KL) and reasonably positive growth of GDP forecast of 4.5% - 5.5% are among the drivers in attracting foreigners to favour Malaysia.

Iskandar Malaysia in Johor, Klang Valley, Penang, Ipoh and Kuantan are present and future hotspots as they offer a strategically sustainable location for investors. Malaysia has been legislated, so there is no reason for a property bubble. Speculations and prices are pushed up because the number of properties offered is low, as compared to the current actual demand.

Products by reputable developers in prime locations will always have a ready market. Nonetheless, most of the interest tends towards smaller units priced up to about the RM1.5 million, as the market for such units is considerably huge.

With major projects in the pipeline such as the massive redevelopment, the property market is believed to continue to climb upwards in the second quarter – albeit taking off on a more sluggish pace during the first quarter of 2014. This is due to the current sentiment of the market, with most adopting a wait-and-see approach.

Definitely worth noting is the entry of “branded” developments as a new trend that has been readily accepted by the market. Such projects are tie-ups between local developers and premium international hospitality brands in the form of mixed developments where the operator manages the hotel component and lends its name to the service apartment

component of the project. Examples include the St. Regis Kuala Lumpur, Banyan Tree Signatures Pavilion Kuala Lumpur, and the Four Seasons Kuala Lumpur. The emergence of these luxury brands have elevated the market to a whole new level akin to major cities worldwide and heralds Kuala Lumpur’s arrival as a truly global metropolis.

The investment process

In general, there are five (5) main steps will be involved in an acquisition of real estate/property in Malaysia. It is important to note that real estate/property matters in this country are under the States’ jurisdiction/purview, which means individual State have the power to overrule the Federal policies.

The overall purchase procedures until ownership transfer in an average of 4 – 6 months.

STEP 1 – The buyer will select, confirm and book the property. At this point, the buyer needs to engage a lawyer to conduct all the necessary on his/her behalf. Agreed Terms and Conditions (T & C) will be stipulated in the booking documents and buyer is expected to pay between 1- 3% deposit of the purchase price.

STEP 2 – At this stage, lawyer will prepare the Sales and Purchase Agreement (SPA) and major T & C in the booking documents will be transferred in the SPA. In the presence

STEP 1: Pre submission (select, confirm and booked)

STEP 2: Sales and Purchase Agreement signed by buyer and seller

STEP 5 : Duly stamped MOT submitted to Land Office for registration/transfer

STEP 3: Memorandum of Transfer (MOT) to Stamp Office/Valuation Department

STEP 4: Stamp Duty payment to Inland Revenue Board

Figure 1 : Simplified steps to acquire property in Malaysia

14. Asia & Middle East

Land Office/Registry) for consent transfer of ownership as stipulated under the Section 433B (Non – citizens and foreign companies may acquire, etc., land only with approval of State Authority) of the National Land Code, 1965. The approval for consent can take 1½ - 2 months depends on the property profile. Once approved, the buyer will be given 90 days to pay the differential 90% (including the stamp duty). The differential sum could be financed through loan or cash.

What Foreign investors should know

Malaysia is a regulated market with a fiscal environment which is going through some major changes:

1. Type of Properties – a foreigner can buy any properties in Malaysia EXCEPT :

✔ Properties valued less than MYR500,000 per unit

✔ Residential units under low and low medium cost

✔ Properties built on Malay reserved land

✔ Properties allocated to Bumiputera (indigenous ethnic groups) interest in any property development as determined by the State Authority

2. Property Title – there are two (2) categories of titles available for foreigners. Freehold (full/permanent ownership) and leasehold (stay in possession for a limited period – mostly up to 99 years).

3. Tax-related points

a. Real Property Gains Tax (RPGT) – in order to curb speculation in the property market, the Government had announced under budget 2014 some changes proposed to the current Real Property Gains Tax (RPGT) 1976, effective January 1, 2014 (yet to be gazetted). The changes are to both the tenure of holding before disposal and the RPGT rate.

b. Latest tax ruling effect – the latest tax ruling for foreigners, there will be a 3% levy on foreigners who buy properties in Penang. The same is true for Johor with its levy of MYR10,000 for foreign buyers, which is due to be raised to 2%. (When exactly this will be imposed remains uncertain).

c. Goods and services Tax (GST) - A Goods and Service Tax (“GST”) regime under the Budget 2014 is expected to take effect on 1 April 2015 at fixed rate of 6%. The sale, purchase and rental of residential properties are expected to be exempted from GST, though, the sale, purchase and rental of properties which are on a commercial and/or industrial title are likely to have GST implications.

1. The higher RPGT will greatly affect those who buy properties directly from developers to sell them upon completion. Known as ‘flippers’, these individuals will try to increase their selling price to recoup their RPGT-induced losses, if this can be absorbed by the market.

2. Minimum/Floor Value – the Federal Government in October 2013 has increased the minimum property price for foreigners to

MYR1 million (except in the Medini special zone of Iskandar Malaysia in Johor which is exempted from the MYR1 million floor price) from MYR500,000 previously, effective 1 January 2014. However, this is yet to be implemented (gazetted).

3. Stamp Duty and Legal Fees for Malaysian property transactions

Table 1: Proposed schedule of RPGT

Date of Disposal Companies Individual (Non – citizen)

Within 3 years of acquisition 30% 30%

In the 4th year 20% 30%

In the 5th year 15% 30%

In the 6th and subsequent years 5% 5%

Purchase Price (MYR) Fee (%) from Purchase Price

Stamp Duty (MYR)

1st 100,000 1% 0 – 1,000

Next 400,000 2% 1,001 – 9,000

Thereafter 3% From 9,000

Purchase Price (MYR) Fee (%) from Purchase Price

Legal Fees (MYR)

1st 150,000 1% (minimum MYR300) 300 – 1,500

Next 850,000 0.70% 1,501 – 7,450

Next 2,000,000 0.60% 7,451 – 19,450

Next 2,000,000 0.50% 19,451 – 29,450

Next 2,500,000 0.40% 29,451 – 39,450

Exceed 7,500,000 Negotiable (max 0.40%) From 39,450

Why should foreigners Invest in Malaysia?

Malaysia has opened up to foreign investment and has made steps to make it easier for foreigners to invest:

✔ Direct foreign ownership is permitted and can sell freely in the open market.

✔ Security in legal ownership with title document.

✔ Can own land/freehold properties of any kind in unlimited number.

✔ Foreigners can purchase bulk units, buildings, hotels, lands and projects.

✔ A single property worth less than MYR10 million need not obtain approval from Foreign Investment Committee (FIC).

✔ No capital control and repatriation for property investment and gains.

Table 2: Legal/Lawyer Fees for Sales and Purchase Agreement

Table 3: Stamp Duty or Memorandum of Transfer (MOT)

✔ Legal fees, stamp duty and reimbursements payable for purchase and selling for foreigners (i.e. same treatment as local Malaysians).

✔ A foreign interest purchasing a residential unit of MYR500,000 (for most states) from 1 March 2014, are exempted from approval from the Economic Planning Unit (EPU) under the My 2nd Home Programme (MM2H).

✔ Foreigner can borrow from local banks to purchase properties.

The investment potential in Malaysia is attractive, with foreign investment being welcomed. It is of course essential to ensure that a local licensed property consultant and lawyers are implicated from the outset to guide foreign investors through the acquisition structuring, formalities & protocol and ensure a successful investment.

15.Asia & Middle East

Today’s Real Estate Market in Tokyo

The real estate market in Tokyo has been in a slump for 20 years after the collapse of the ‘90s bubble, but this situation would appear to be changing.

The official land prices of Tokyo as of January 1, 2014, announced in March by the Nation’s Land Ministry, has increased by 0.7% (compared to a 0.7% decrease in 2013) in residential areas and increased by 1.7% (compared to a 0.5% decrease in 2013) in commercial areas from a year earlier.

This is the first time after the Lehman shock that we have seen some recovery. Secondly, the office vacancy rate in Tokyo’s 23 districts decreased to 7 % as of the end of September 2013 for the first time in 3 years and 11 months (according to Miki Shoji). This rate will be down 2 points within 2014.

There are some factors, mainly, the economic policy “Abenomics” of Mr. Abe who became the Prime Minister in December 2012 for the second time, the rush to buy before the consumption tax hike (from 5% to 8% in April 2014) and strong interests of overseas investors in Tokyo’s real estate market. These

factors are discussed in more detail below to understand the environment surrounding the real estate market in Tokyo and future perspectives.

The Position of “Abenomics” in Modern Economic History

Economic policies of developed countries are, roughly speaking, regular cycles of “fiscal spending and keeping tax revenue with big government” and “emphasis on free markets and reduction of government spending with limited government”, and Japan is no exception. “Abenomics” is also an economic policy approach in accordance with international trends as shown in Figure 1.

Prime Minister Abe promoted a fiscal policy based on a consumption tax hike and raising taxes on the rich. Prime Minister Abe is left-wing in economic policy but on the political right considering his visit to Yasukuni Shrine, constitutional amendment and so on.

Outline of Japanese Consumption Tax and Influence on the Real Estate Market

The key dates regarding consumption tax in Japan are detailed below:

The Japanese tax system, which was designed on the model of the USA after the war, had been income tax oriented, but in 1990 a consumption tax was introduced for the first time.

Sales of land are originally non-taxable in real estate transactions under the Consumption Tax Act and only sales of residential and commercial buildings are taxable. The rent of commercial buildings is taxable but the housing rent isn’t. Japanese people have basically strong desire to own real estate. Therefore, the rush to buy real estate before the consumption tax hike of 2014 seemed to be considerable and more demand is expected before the next tax rise to 10% from October 2015.

A Comparison of Real Estate Value between Tokyo and Other Major Cities in the world

First, Figure 3 shows three comparisons of the multiple residential value and the rent (monthly per m2) in the multiple residential area and the rent (monthly per m2) in the central commercial area among world major cities, New York, London, Paris and Tokyo. (Tokyo=100) (The Survey of Japan Association of Real Estate Appraisers, January 2013)

In comparison to other major Asian cities, Seoul, Beijing, Shanghai, Hong Kong, Taipei, Singapore and Jakarta. Figure 4 shows the property value index and the rent of prime office buildings and high-end apartment buildings (Tokyo=100) (The Survey of Japan Real Estate Institute, October 2013)

The statistics show that in Hong Kong the value of both office and apartment buildings is high but the rent is relatively low. In Singapore, the value and the rent of office buildings are substantially lower than those in Tokyo, but on the other hand, the value and the rent of apartment buildings are 50% higher than those of Tokyo.

What is interesting is that the property value of apartment buildings in Taipei is 50% higher that in Tokyo but the rent of apartment

Market watch: Tokyo real estate

Naoshi Ogasawara, Managing Partner at AVANTIA GP (ogasawara.n@avantia.or.jp)

Naoshi Ogasawara, partner at Avantia GP provides his views on the Japanese economy and the implications for the Tokyo real estate market

The 19th century: Classical liberalism

1989: the introduction of a consumption tax (3%)

The 30s: Keynesian economics (emphasis on government spending

after the Great Depression)

1997: consumption tax hike (from 3% to 5%)

The 80s: Neoliberalism (departure from big government, Reganomics)

2014: consumption tax hike (from 5% to 8%) for the first time in 17 years

2010: New Keynesian economics (after the Lehman shock, Abenomics)

2015: raising the tax rate (from 8% to 10%) is planned

Figure 1 Figure 2

16. Asia & Middle East

buildings is only 65% of that in Tokyo. According to local information, overseas Chinese money has come back because of the inheritance tax cut from 50% to 10% which created a real estate bubble.

It’s hard to make a definite conclusion based on data from different sources, Hong Kong and Singapore appear to have reached the same level as London and New York already. 　

Finally, the numbers in Figure 5 represent the value and rent index of office buildings in Asian major cities as of October 2013(October 2010=100.0). (The Survey of Japan Real Estate Institute, October 2013)　

Tokyo has seen little change over the last couple of years, compared to the booms in other, major cities in Asia such as Beijing and Jakarta.

The real estate market in Tokyo : a new awakening

In my opinion, it will be difficult for Abenomics to stimulate economic growth. Japan has assets of 600 trillion yen but tax revenues of 40 trillion yen can’t cover the public debt of over one quadrillion yen, which is increasing every year.

The rapid population decline because of the falling birth rate and the aging population (The population of Japan is 128 Million today and estimated to be 80 Million by 2060 and 50 Million by 2100.) increases the cost of social security but any drastic decisions and actions have yet to be made.

Even though domestic demand has become mature and essentially saturated, the development of overseas markets has not progressed because of strained relationships with our neighbors and the recent effects of a weak yen.

However, stepping back from national issues and looking at the real estate market in Tokyo in the medium term, we can be optimistic because the urban infrastructure will be redesigned and upgraded towards the 2020 Tokyo Olympics, there is a population flow from rural to urban areas, and Tokyo is now relatively cheap compared to other major Asian cities.

Of course, the desire of the Japanese people for high quality services and a clean, hygienic and comfortable environment to be passed on to the next generation is clear. After the collapse of the ‘90s bubble, there is now tangible signs that the real estate market in Tokyo has woken up after its long slumber of 20 years and there is a positive outlook, especially in the residential market, for the next 5 or 6 years.

Figure 3

Figure 4

Figure 5

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terms of apartments: Downtown, Dubai Marina, JBR, Jumeirah Lake Towers; in terms of villas: Palm Jumeirah, Jumeirah Park, Al Furjan and Meadows; in terms of commercial areas Business Bay had seen increase in foreign companies setting up their offices.

Financing acquisitions

Prior to 2014, LTV lending was available at 85% for non-nationals and 90% for nationals. However this has been changed by the Central Bank policy, which saw the lending cap changed to 75% for non nationals for properties under $1.5m, and 65% with property prices above $1.5m. Investment properties are now capped at 60%, with under-construction properties being capped at 50%. The loan period will be a maximum 25 years for individuals, 10 years for corporate.

The process to complete the mortgage process will take around 4 weeks. For Non-Residents, there are a few banks that have started to offer finance to non-residents due to the increase of international investors.

Offshoring in Dubai

Investors can own the property under their individual names or setup an offshore in Dubai. There are different offshores in different cities, but the only offshore that are

Dubai – gateway to the Orient

Mashal Alzarooni is the founder and managing partner of MASHAL ALZAROONI CHARTERED ACCOUNTANTS providing advice to foreign investors in Dubai (mashal.alzarooni@mazca.ae)

Our UAE partner, Mashal Alzarooni provides some interesting insight on the recovery of Dubai’s economy and pragmatic advice for foreign investors

Background

The year 2002 is when freehold property rights were created in Dubai, the stage was set for a real estate boom, allowing non UAE-Nationals to buy property freehold. The local real estate market was changing and maturing even at this point in the boom. The Real Estate Regulatory Authority (RERA) was established when international investors were allowed to invest freely in property. RERA maintains a healthy real estate investment in Dubai and also set policies, plans and helps to create awareness of the the real estate sector in Dubai in order to increase foreign investment.

The Arab Springs, and Dubai winning the right to hold EXPO 2020, real estate prices have been increasing dramatically, and to control speculators and price volatility in the market, Dubai has raised property registration fees to 4 per cent from 2 per cent since October, while the UAE Central Bank has introduced new mortgage rules that ensure higher down payments for buyers/investors.

UAE is expanding in the run-up to the 2020 Expo. Many consider it quite conservative to forecast a doubling or trebling of house prices in Dubai by 2020 as the city’s house prices become more aligned with the top hub cities

of the world, and house prices continue to surge year after year. There is already a flow of money from other global cities into high-end property in Dubai, and Dubai has built plenty of real estate for investors to acquire in its runaway boom. But real estate is normally a long-term proposition for investors and on that basis Dubai is considered by many commentators to be an excellent arbitrage opportunity.

GDP

Dubai’s economic recovery was underlined in the 2013 annual report from the Dubai Chamber of Commerce and Industry showing a five per cent increase in GDP in 2013, and exports and re-exports by its members growing by eight per cent. Last year the recovery fuelled up the local property market again with some of the highest house price rises in the world being recorded.

Dubai Real estate property prices have increased 30-40% compared to last year figures. This was due mainly confidence in the Dubai Economy, the Dubai Government debts being restricted, Dubai considered as a tax haven compared to other parts of the world, and the Arab Spring revolutions, in which investors relocated to Dubai. The following residential areas have seen big demand in

18. Asia & Middle East

100% - the project that has an escrow account is 100% is trusted approved project by RERA.

4% - the transfer and registration fees are 4% of the purchase price paid by the buyer in favor of RERA

2% - the professional brokerage fees are 2% of the purchase price paid by the buyer.

0% - there is no capital appreciation tax in Dubai, your profit is 100% tax free.

1. Ensure that the project is registered with the relevant authorities (RERA).

2. Ensure that the project developer and the real estate agent/broker are registered with RERA.

3. There should be an escrow account to deposit the amount received from the buyers, and this can be checked that the escrow account had been mentioned in the Purchase and Sales Agreement (PSA).

4. Know the bank which handles the escrow account and confirm it is abiding by the RERA regulations in dispersing the funds to the developer.

5. Choosing the right property whether it’s an apartment, villa, office, taking into account that what’s mentioned in the design is the same matching with what will be delivered.

6. Understanding the types of services and facilities available within the project such as concierge, security, and proper infrastructure.

7. Average price per sq ft within the same area.

8. The reason for buying the property whether self use or investment purpose.

9. Location of the property with the transportation, amenities, schools and hospitals, which increase the value of the property.

10. Don’t rush in taking decision to choose the property; there are many opportunities in the market and supply of properties, so the best decision can be chosen by analyzing the positives and negatives of each property.

11. Read the terms of the PSA properly, and ask for clarification of the term that is not clear.

12. Avoid undated delivery period of a project, and ensure that the delivery date is mentioned in the PSA.

13. Register the off plan property initially with RERA through OQOOD which ensures that your property is registered with the Dubai Land Department, and once the property is ready then can complete the process of registration and applying for the title deed of the property.

14. Ask the developer for the banks that approves mortgaging the property.

15. If decided to mortgage/ finance the property through a bank, look at the interest rate (approximately 4%), and LTV limits for foreign nationals/corporates (refer above).

Key Steps to note when investing in Dubai

allowed to have the properties registered is the Jabal Ali Freezone Authority (JAFZA) Offshore. Many international investors are registering their properties under the JAFZA offshore for tax purposes, since Dubai has 0% income and corporate tax and capital appreciation tax.

Investment in Dubai Real Estate

Investing in real estate in Dubai is not difficult, but it is important to have a grasp of some of the key things to look out for before making a commitment. Whilst this is of course not an exhaustive list, I have listed a few pointers

below to be aware of:

100% - Make sure that the developer own the land 100% by showing the proof of title deed.

100% - Make sure that the design of the project is the final design and got the approvals from the RERA (Real Estate Regulatory Authority).

5% - If the size of the property that’s been delivered to the end user is less than 5% of the size agreed in the design, then RERA will impose 5% penalty fine on the developer.

19.Asia & Middle East

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Real Estate SeminarThursday 25 September 2014

KING’S FUND, N° 11 CAVENDISH SQUARE LONDON W1G 0AN UK

16.30 – 17.45 UK REAL ESTATE (“THE INS AND OUTS”)

Richard Kleiner – Managing Partner – Gerald Edelman Chartered Accountants

Tom Leahy – Director of Research Lambert Smith Hampton, property consultants

Alastair Moss – Real Estate Partner – Memery Crystal, solicitors Colin Burns – Senior Tax Partner – Gerald Edelman Charlie Foster – Head of Strategy and Research – Real Estate

Structuring Research Department – Royal Bank of Scotland

17.45– 18.30 REAL ESTATE INVESTMENT IN EUROPE

Mark Bathgate – President of i2an and Partner at Denjean & Associés (France)

John Redmond – Head of Operations European Real Estate Fidelity Worldwide Investment

Eric Biren – Managing Partner – Signes (Luxembourg)

18.30 COCKTAIL RECEPTION