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An outlook of Investment In UAE

 The economic outlook :
for the United Arab Emirates (UAE) is positive as the economy has made a steady and strong recovery after the challenges it faced in 2009. The UAE has registered USD 11.2 billion of M&A deals so far in 2013, the highest total deal value in the regfion, according to a report. Economic growth of UAE is estimated to have reached 4.3% in 2012. In September 2013, the IMF predicted GDP growth of 4% however the fund may raise its economic growth forecasts for the UAE this year, helped by Abu Dhabi’s buoyant oil & gas industry and its significant infrastructure and industrial investment, and further bolstered by a rebounding Dubai economy, enhanced by the recent Expo 2020 win. During 2012, oil production expanded by 5.2%, and non-oil growth, driven primarily by growth in the services sectors, continued to accelerate to 3.8%. The real estate market, which had been a drag on growth since the 2009 crisis, experienced an uneven recovery. Inflation remained subdued at 0.7% on average, in light of a still declining rent component and limited pass-through of international food prices. The recovery in Dubai is largely concentrated in high-quality residential properties, helped by robust non-oil GDP growth, increasing numbers of expatriates, and Dubai’s relative stability as an investment destination. Residential real estate prices rose on average 16% year-on-year in April 2013. Supply growth was modest in 2012 but is expected to increase by the end of 2013. There are three primary growth drivers for the UAE in 2014. First is investment in the non-oil sector by the Emirate of Abu Dhabi, with project outlays continuing to flow to achieve the Emirate’s long-term development and diversification objectives. Second is that Dubai’s core trade and services sector are likely to continue benefiting from strong regional dynamics such as the Expo 2020, as bulging GCC fiscal surpluses drive long-term infrastructure and diversification projects. Dubai, as the regional hub, is well placed to capture these flows. Dubai’s non-oil trade was up 16% (USD 184 billion) in H1-2013 according to government statistics, against 9% (USD 158 billion) growth in the same period last year. Third, the tourism sector is likely to have another strong year. Hotel occupancy rates and tourist inflows to Dubai are very strong. In H1-2013 the number of tourists in Dubai reached 5.5 million, an 11% increase over 2012. 

Investment and business opportunities

 There are many options open to international companies seeking to establish a business in the UAE. Apart from forming a trading relationship through commercial agencies, for many companies there are distinct advantages in having an on-the-spot presence. This makes it easier to research market prospects, make contacts, liaise with customers and see through the details of any transactions. Having a presence is also important in the context of the commercial culture of the Middle East. Business owners and people in the region prefer to deal with someone they know and trust by building personal relationship. Another regional factor that adds to the importance of having a physical presence is that the buying patterns of some countries served by the UAE are unpredictable, creating a need for first class market intelligence and information. Direct trade International companies wanting to trade directly with the UAE by supplying goods and services from abroad should appoint a commercial agent who is already established in the market. The agent must be a UAE National, or a company solely owned by a UAE National. The foreign principal and the agent in the UAE are required to enter into a commercial agency agreement specifying the products and the territories to be covered by the contract. They should also comply with the relevant provisions of the Federal Commercial Agency Law and the procedures and conditions prescribed therein. It should be noted that a commercial agent can not carry out activities in the UAE unless the name is entered in the Commercial Agency Register maintained at the Ministry of Economy and Commerce. 

Banking system

 The UAE has 23 local banks and 28 foreign banks. These financial institutions, through their branch networks and affiliate service centers, cater to the financial needs of the UAE population of approximately 8.2 million. The Central Bank of the UAE is the banking regulatory authority in the country and its main responsibility is formulation and implementation of banking, credit and monetary policies. Additionally, the Dubai Financial Services Authority (‘DFSA’) is the regulatory authority for other financial entities including, investment banks, asset managers established in the free-zone, Dubai International Financial Centre (‘DIFC’). UAE’s currency, the Arab Emirate Dirham, is pegged to the United States Dollar at a fixed rate of AED3.673: USD 1. The country’s currency peg to the U.S. dollar limits the central bank from using interest rates to target loan growth. The central bank hasn’t changed interest rates since February 2009, when it cut the repurchasing rate by 50 basis points to 1 percent. The UAE’s banking sector is seen as highly liquid with the banking system’s liquid assets-to-total assets ratio of 30 per cent as of December 2012 as well as a loans-to-deposit ratio of 93 per cent (down from 108 per cent in 2008). The outlook for the UAE's banking system has been changed to stable from negative, according to Moody's Investors Service in a report published in November 2013. The outlook change reflects the continued improvements in the operating environment, as well as the ongoing recovery of the local real-estate market, which Moody's believes will lead to a decline in problem loan levels and an increase in profitability over the next 12 to 18 months. In addition, the rating agency expects that banks will continue to maintain high liquidity and capital buffers that were built up since the onset of the global financial crisis. Access to local credit financing Granting credit facilities to a customer varies according to the customer’s credit standing, as well as the credit appetite of banks. A number of factors are considered by a bank prior to the granting of the credit facilities, including the following: •

 Nature of the business activity and industry: 

• Legal status of the establishment 
• Establishment’s business history and accomplishments in the UAE 
• Financial position and future prospects of the establishment, and
 • Quality of the Management Key documents required by banks in order to open accounts are follows: 
• Copy of valid trade license or certificate of incorporation • 
Copy of the power of attorney or Board resolution 
• Passport copies, including resident permits of key people, and
 • Copy of valid chamber of commerce registration certificate (mainly for limited liability companies and branches of foreign companies)

Business entities Summary Under UAE law
 foreign entities interested in establishing a formal presence in the UAE have five options: create a permanent establishment, of which there are seven different types; establish a branch / representative office; create an entity in a UAE free zone; create a civil company (only in Sharjah and Dubai); Furthermore, Limited Liability Companies (LLCs) are more commonly used by the foreign investors. Federal company Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation, which can be established in the UAE. Structure of business organizations The types of companies in which foreign equity participation is permitted under Federal Law No. 8 of 1984 concerning Commercial Companies, as amended (the "Companies Law"), and compares and contrasts the material provisions applicable to such companies. A branch established by a foreign entity under the Companies Law is not considered a separate company but rather a part of the foreign entity. Thus, the foreign entity is considered to be directly doing business in the U.A.E. and has unlimited liability for the operations of the branch. Business entities The Companies Law recognizes seven types of companies for formation under its provisions and permits foreign equity participation in all but one (the general partnership). The companies in which foreign equity participation is permitted are as follows: the public and private joint stock company (the "JSC", which references hereafter is both the public and private variety unless otherwise indicated), the limited liability company (the "LLC"), the limited partnership company (the "LPC"), the share partnership company (the "SPC") and the joint venture company (also known as a contractual venture or consortium company) (the "CC"). Of these, the LLC has been the vehicle of choice for foreign companies forming companies under the Companies Law. Capital and shareholders Capital requirements under the Law varies for each type of company. A company in which the State or any other public body hold any share capital, irrespective of its amount, shall be incorporated only as a public joint stock company. Public joint stock company capital must adequately achieve the objectives of its incorporation, and in all cases may not be less than ten million dirhams. In all cases the company's capital shall comprise only cash. It is a requirement for the establishment of a company to have one or more national partner(s) whose share in the company's capital is not less than 51%. Filing requirements Under the Companies Law the auditor is obliged to submit a report of his finding to the General meeting, which is required to be convened within four months of financial year end and the auditor must deliver copies of his report to both the Ministry and the Concerned Authority. 8 Dissolution The company should be dissolved in the event of expiration of the company's term without renewal, completion of the company's purpose, adoption of a resolution to dissolve by the extraordinary general assembly or merger, and, if the losses of the LLC to one-half of the capital, the general assembly or the extraordinary general assembly, respectively, must vote on dissolution. Dissolution of the LLC requires the approval of partners representing three quarters of the capital. If the LLC's losses amount to three quarters of the capital, partners owning one quarter of the capital may demand dissolution. The LLC cannot be dissolved by the withdrawal or death of, or by adjudication of distrait, bankruptcy or insolvency against, one of the partners unless the articles of association of the company (the "AOA") provides otherwise. The LLC dissolution must be made public by informing the relevant authorities and by publication in two local Arabic daily newspapers. Legal and other reserves Dubai’s rise to one of the most dynamic business hubs in the world has made the city an immensely attractive commercial destination. To ensure that this growth and success continue, it is essential that each new business venture complies with a standard set of directives and regulations. You need to be fully aware of what is considered to be breaking these rules and what the penalties are : for not sticking to them. The fines range from AED 250 for failing to renew a license within the specified time limit, to AED 20,000 for using Dubai Summer Surprises or Dubai Shopping Festival logos without permission. Business Licensing and Registration Officers make regular random checks to ensure that companies licenses are up to date, that they are complying with all regulations and that they have not changed any aspects of their business without approval from DED. Establishing a sole proprietorship A business owned by a natural person to practice economic activity in the emirate of Dubai, inseparable of its owner personality and financial standing, being fully responsible for all financial liabilities against others, and, - A sole proprietorship can only be owned by an individual, not a company. This person will own 100% of the business control all of its operations and keep 100% of any profits. - A professional-type sole proprietorship can be owned by an individual of any nationality - A sole proprietorship that is industrial or commercial can be owned only by UAE Nationals or GCC Nationals. - A sole proprietorship that is a commercial or industrial business must be owned 100% by a UAE National. - A sole proprietorship requires a Local Service Agent (LSA) if the owner is not a UAE-National.

Real estate and Property Management Business 
While the world’s property markets continue to face a sharp slump, the real estate markets of Dubai and other emirates such as Abu Dhabi, Sharjah, and Ajman continue to grow and thrive. In Europe, the real estate market slowdown started last year while in the US, the property downturn had begun a year earlier. The crisis is now hitating some of the major global real estate markets such as Russia, China, India, and Brazil where prices are declining sharply.

Dubai real estate sector, still buoyant and booming, goes on to attract investment from around the world. The figures show that Dubai real estate market has somehow managed to remain immune to the current recession that has taken the world’s financial markets by storm. Although some uncertainty surrounds Dubai real estate market’s growth with property analysts predicting an imminent correction, the city’s municipal bodies and developers dismiss the fears.

Investors and common property buyers, though made a little cautious by the distorted market perceptions, don’t seem to have lost interest in Dubai real estate in any way. The demand for Dubai real estate, both residential and commercial, has not only remained afloat but also retained its upward trend. The Government’s assurance of the market stability and the continuing boom in Dubai’s real estate that have helped retain investor confidence.

As always, the best selling Residential Real Estate in Dubai includes apartments and villas, while the best selling Commercial Real Estate includes offices, labour houses, and warehouses. Holiday property is equally popular with the locals and expats and includes holiday apartments, villas, beach resorts and condos. Dubai has numerous short and long-term rental properties that range from studio and large apartments, to villas and luxurious hotel rooms. Talking of hotels, it’s interesting to note that Dubai is the world’s only city to house a 7-star hotel, besides being home to a cluster of 5-star, 4-star and 3-star hotels of international repute.



Keeping in mind Dubai’s uninterrupted real estate boom even in the midst of the global financial crisis, it’s easy to assert that this growth will increase manifold once the economic situation normalises globally. Even today, the best place for secure and lucrative real estate investment is none other than Dubai.

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