Tuesday, December 23, 2008

UAE investors seek "affordable exit route" to prevent distress sale

Buyers and property analysts in the UAE are of the opinion that UAE property developers should offer investors with an "affordable exit route" in order to keep away from distress sales.

According to the analysts, given the current situation of global financial crisis and thereby the sudden slump in property sector, it is imperative for developers and authorities in-charge to arrive upon a series of measures to restore investor confidence.

A leading banker in the UAE has suggested that probably an initiative from the government's end, such as reconsidering provision of residence visa facility for buyers of free-hold residential units, would help restore the confidence and boost the property sector.

He pointed out that when the property boom in Dubai began, several developers had given an impression that buying a free-hold property would entitle buyers with residential visa status. This resulted in a major boom in the sector and brought about considerable growth. But, just a couple of months ago, when the authorities clarified that buying a free-hold property does not grant a residential visa status, several international investors backed out of the market.

Despite several legislations such as the Escrow Account, interim real estate register rule by RERA, all helped in building investor trust, the sector needs more proactive measures for revitalization, he added.

The Founder-Chairman of Overseas Indians Economic Forum, Dr. Ram Buxani, said that those who bought several units to take advantage of lucrative earning opportunities, should be granted with an affordable exit route, so that they do not end up with distress sales, which would further delay recovery of property market. Also, the projects that are yet to tak-off or get started should be put on hold and incapable investors should be allowed a convenient exit.

Dr. Buxani explained that about 30 percent of property buyers in the market are individual investors, who play a major role in boosting property sector. Another area that needs to be considered is the penalty clause, which should be maintained at a reasonable level of below 5 percent for those intending to exit. In cases where cash refunds are impossible, even issuing bonds which could be redeemed in 3-4 years are a better option.


SHARAN said...

This article provides pro-active, sound and quite pragmatic suggestions; and thus becomes the voice of hundreds and hundreds of first-time buyers. Certainly these suggestions have the potential to revive the sector which needs urgent remedial measures. I hope and pray that the authorities look into these suggestions which can be summarised as follows:
1.putting off or on hold for quite some time the off-plan projects yet to start.putting off or on hold for quite some time the off-plan projects yet to start.
2.Revival of the provision of residence visa even with some strict conditions
3.Bringing down the penalty clause to a reasonable level,
4. Changing refunds into some kind of bonds to be cashed later on
5. Treating individual (not corporate) and single (not bulk) buyers particularly the first time buyers, differently and more sympathetically.

M F Khan (Abu Dhabi)

M F Khan (Abu Dhabi) said...

The most effective measure would be to stop the new projects which are yet to start constructions, and give the money back to buyers. When the supply will be restricted, demand will increse slowly. M F KHan

Anonymous said...

One more suggestion is that all builders and developers should reschedule the payments structure to progressive basis to facilitate buyers.