Our professional internal audit and risk advisory team providing real estate company services in UAE to assist in managing risk and improving operational performance.
2. The market for real estate businesses in the United Arab Emirates is constantly shifting,
and the arrival of risks associated with property management, fraud can threaten a
company’s financial performance. Disjointed activities, weak internal controls, insufficient
process design implementation, reporting mistakes, and uneven financial reporting are
among the issues that real estate organizations face.
To handle the numerous requirements and financial risks that come with distinct
industries, new ways must be devised. HLB HAMT has a professional internal audit and
risk advisory team providing real estate industry services to assist in managing risk and
improving operational performance without restricting development opportunities.
3. KEY RISKS IN REAL ESTATE INDUSTRY
1. General Internal Controls
Internal control risks have an effect on the overall performance and efficiency of
internal controls, and consequently on the company’s ability to fulfil its goals. Certain
risks that need to be addressed are the absence of properly specified qualification
standards with flaws in the division of responsibilities; insufficient standard operating
procedures in different departments also make a big impact. A risk analysis that is
sufficiently thorough and completed on a regular basis should influence internal
control systems.
4. 2. Financial Reporting & Cash Management
Improper tracking of cash management and control practices, absence of evaluation of
daily purchases/validation of vendor comparative prices, slowdowns or factual errors in
bank reconciliation statements, delays in books of accounts finalization, and
insufficiency of backup documentation and many more are all finance-related issues
that need to be addressed in the retail sector.
3. Inventory
Inventory control is vital in the real estate industry for maintaining accurate records
and preventing fraudulent activities. Inventory management systems help to eliminate
risks such as the failure to record inventory ageing, poor management processes, delays
in completing frequent inventory counts and material receiving storage, failure of
supervisory control, and finally, loose procedures in material transfer.
5. 4. Investments
The United Arab Emirates’ real estate industry offers several opportunities for both
existing companies and new entities. Dubai’s real estate market is on the rise, and
investors should be wary of certain risk elements such as lack of adequate feasibility
studies, investments currently regulated, insufficient purchase, liquidation, and exit
plans.
5. Fixed Assets
The risk component of fixed assets is compounded by the lack of fixed asset registries,
control procedures for the addition of assets, insufficient asset movement regulations,
and gaps in asset warranty tracking. Any business must keep a record of fixed assets
throughout their existence. A company with a high number of fixed assets must identify,
monitor, record, and reconcile its assets, which is critical for asset management.
6. 6. Leasing
Leasing a property is a serious financial choice, so proceed with caution. To guarantee
you have the most updated information relevant to your locality and situation, we
recommend seeking assistance from knowledgeable financial and property specialists.
In Dubai’s property market, there are several success stories. However, there are some
risks that you should be conscious of like disparities in property registration,
brokerage contracts, leasing rental and security deposit collections, bad tenant
practices with lax rules, insufficient leasing and subleasing processes for new leases,
renewal and termination of current leases, and rental concessions.
7. 7. Facilities & Property Management
Managing own properties or third-party properties is increasingly becoming an
important activity for many real estate developers. Property management offers an
opportunity to maximize profits at relatively lowering expenditures, and minimal
investments. Property management however is hampered by a number of key issues,
including ineffective tracking and management of tenant complaints and relationship
strategies. Similarly, the facilities management function should not suffer from a lack
of responsive ticket management, asset coverage under PPM schedules, disparities in
building inspection and reporting, and HSE compliance violations.
8. 8. Construction
Real estate construction projects are fundamental to a country’s economic development. The
construction industry, on the other hand, is experiencing significant capital losses as a result
of a variety of constraints and stereotypes, including insufficient checking of project
execution, deliveries, variation orders, and non-compliance reports, disparities in payment
certification to developers, project insurance, project closure, handover, and commissioning,
and an absence of adequate site inspections.
9. Sales & Marketing
In recent years, the real estate industry has evolved. From media platforms to digital
marketing, the opportunity to reach target markets has significantly increased, as have the
risks associated with it, such as poor tracking of inbound leads, gaps in sales contract forms
and weak sales reporting. Similarly, it is important to ensure a tight monitoring of
marketing budgets, and a strong system to review and respond to social media feedback
along with digital marketing campaigns.
9. 10. HR/Payroll
Managing HR/payroll activities in any company is a difficult process that necessitates a
significant commitment of time and money. Companies can get into difficulties if they
are not managed by qualified experts because of hazards including poor controls in
employee management, gaps in recruiting processes and procedures for promotions and
salary calculation with inappropriate practices for employee entitlements.
11. IT systems
The real estate business has seen substantial transition over the last decade, and it
continues to adapt with the newest innovations in Information technology. Technology
will be the foundation that attracts new players to the sector, but it will also expose
them to risks like insufficiency of IT systems with shortfalls in workflows with no data
protection controls and use of manual interfaces between multiple systems used (such
as) Property Management software, Finance and Accounting systems and HR & Payroll
systems
10. 12. Procurement and Contracts
Strategic procurement is an important aspect of the real estate sector for any
organization that wants to stay profitable. A well-developed procurement process
immediately translates into enhanced company performance by focusing on eliminating
risks such as a lack of control over price comparisons and purchase lead times,
loopholes in purchase order processing, vendor selection, periodic monitoring, and
agreements with third parties. Management of contracts including contractor
identification, selection, performance evaluation as well as payment certification are
crucial aspects that need to be well monitored.
11. REAL ESTATE INTERNAL AUDIT IN UAE
Real Estate is one of the most significant industries in the UAE, and its attraction to
investors has made it a market catalyst. The sheer complexity of development and
construction services, coupled with the high funding costs, shortage of skilled
resources, and high competitiveness with suppliers around the world, keeps exposing
investors to a variety of risks that must be handled constructively to maximize the
value of the company.
Our qualified auditors at HLB HAMT provide internal audits for real estate company
and ensure that all departments within the organization work together efficiently and
productively.
12. HLB HAMT
Level 18, City Tower-2,
Sheikh Zayed Road
PO Box 32665
Dubai – United Arab Emirates.
Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
