Thursday, March 26, 2009

UAE Government steps-in to streamline property sector

The UAE Government has established a Federal Real Estate Regulatory Authority in order to co-ordinate regulatory efforts at the local and federal level, revealed a senior official at the Federal National Council (FNC) yesterday.

The Minister of State for Financial Affairs, Obaid Humaid Al Tayer, said "There are local real estate regulatory authorities and the government considers assuming a role at the federal level to co-ordinate between them."

While Dubai and Ajman have already set up regulatory bodies to govern the property sectors of their respective emirates, the concern is about foreign property developers, who wholly finance their projects from local banks, without sufficient capital.

A FNC member from Abu Dhabi, said that few foreign developers, even depend on the local banks for complete funding, putting the lenders at risk of losing their finances, when the developer fails to complete their projects, or flee the country, leaving behind a huge debt.
The member urged that a regulation is required to limit the finance being made available to foreign developers, who do not have a stake in the capital of their projects.

According to Al Tayer, the Central Bank and the UAE banking system are committed to a loan ratio of nearly 20 percent. The government is striving hard to keep its property sector safe even during such tough times.

The Minister emphasized that UAE has a free economy. Although the global economic and financial difficulties may prompt certain precautions in all sectors, including real estate, the investments in private sector should not be restricted.

He added that the banks are already following some precautions towards financing the real estate sector, and hence no additional restrictions are required for this sector, unless deemed necessary in future.

The Minister revealed that the government is also considering issuing freehold property visas with respect to foreign ownership of properties in various emirates. Several emirates have developed their own freehold visa arrangements as of now. Efforts are on to regulate this process at the federal level, by announcing a unified guideline for all emirates.

Such a measure was thought about, when leading developers like Emaar and Nakheel, who were earlier helping foreign buyers to gain a three-year renewable residence visas on purchase of freehold properties, suddenly stopped facilitating them.

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