Thursday, January 29, 2009

Dubai Government steps-in to curb cancellation of real estate projects

To prevent further cancellations of property projects and to motivate developers to extend payment plans, so as to keep the economy floating, the Dubai Government has stepped in, says legal officials at the Land Department.

A Senior Legal Adviser at the Dubai Land Department, Emad Eldin Farouq, said that the Government is trying to stop the panic.

The RERA (Real Estate Regulatory Authority) and the Land Department will have to give their final approval before the developer could cancel any contracts for all properties purchased after 31st August 2008, it has been confirmed.

31st August 2008 was the date, when the regulation giving authorities opportunity for increased involvement in property sector, was introduced. The authorities, therefore, have better control over the cancellations process and are able to broker agreements between buyers and developers.

As for purchases prior to 31st August, the parties concerned must abide by the contract and authorities will not have much power to mediate in a contract dispute.

The Land Department had also passed a regulation in November, wherein the numbers of cancellations were reduced, based on emergency reinterpretation of Article 11 of Law 13, which stipulates how much an investor would stand to lose on termination or cancellation of their contract.

As per the interpretation, the developer would keep 30 percent of the property value and 30 percent on any payments made after that. According to Land Department officials, such a change was required to avoid a property crash.

The authorities are also in the process of preparing regulations that change the manner in which property is being developed in Dubai, to prevent the sector from overheating in future. The regulations expected to be announced in coming weeks would require developers to enter into payment plans for buyers apart from construction milestones.

In the other regulation, expected to follow the first one, developers should have completed 20 percent of their building prior to announcement of sales. This will help prevent developers from focusing on sales, before making major equity investment in the project, the situation prevalent in the market for past two years.

1 comment:

Anonymous said...

This is not about curbing the cancellations of property projects, it is about curbing the cancellations of Sale Purchase contracts.
Cancellation of the of yet-to-start-construction real estate projects, is very good for the health of real estate market, it will help a lot to correct the current market situation by reducing the supply. For example: Arabian Tower and many other projects in Jumeirah Village South have not strted their construction. But as cost of construction has gone down developers are keen to start as their projects were sold at higher prices. Mohammad Khan, Abu Dhabi