Business | Investment
Investors in Dubai off-plan market keep fingers crossed for draft laws
Investors in Dubai's off-plan market are counting on draft laws aimed at protecting them, that are expected to come into play soon.
- By Suzanne Fenton, Staff Reporter
- Published: 23:33 January 30, 2009
- Image Credit: Atiq-Ur-Rehman/Gulf News
- Some investors are worried that developers running low on cash may delay or stop several projects if no one chooses to opt for the early settlement of outstandings. Under the circumstances, the off-plan market draft laws can come in handy in restoring investor confidence.
Dubai: Investors in Dubai's off-plan market are counting on draft laws aimed at protecting them, that are expected to come into play soon.
Several investors aired their views on the issue on the Gulf News website.
"I bought a unit off-plan a year ago. The developer said construction would start in a couple of weeks. Construction has not started yet and the developer is sending letters to pay or I will face daily charges. I have already paid 30 per cent of the total price," said Frank, a Canadian investor.
And Frank is not the only one.
"I invested in a property in April, but the developer hasn't started construction yet and I don't think they will be able to build now, since there is no finance for new projects available and most clients are defaulting because of the financial situation," Katharina, a Dubai resident, said.
"The overwhelming majority believes that refunds should be given and projects cancelled if construction has not yet started," Bilal, an investor from Karachi, said.
"Yes, I think if six months pass and the developer has not started construction, the contracts should be cancelled and buyers should get refunds," he added.
These comments follow recent news about two draft laws set to bring further protection for investors in the shaky off-plan market.
One states that developers own the land and complete 20 per cent of construction before selling off-plan.
The second law says the payment plan must be linked to construction progress, thereby forcing developers to start work and making sure investors pay only 20 per cent of the property price up-front.
Now would be an ideal time for the laws to become effective with investors still worried about some developers.
Investors with Union Properties projects are concerned the developer is short of money, following a recent Prompt Payment Initiative offered to them for a two-week period only.
While any investor would welcome 10 per cent being slashed from their outstanding balance, especially given the current economic climate, some are viewing the initiative as a warning signal. Some investors are worried that the developer is running low on cash and the five projects will be delayed or stopped if no one chooses to settle the balance.
Union Properties wrote letters to investors of five of its projects, offering them a 10 per cent reduction in the remaining balance of their units, if they chose the Prompt Payment Initiative.
"If you choose to settle the balance due on or before February 15, 2009, we will reduce the amount due by 10 per cent as an incentive for early settlement," said Union Properties in letters to investors of Index, Limestone House, Green Community Motorcity, Uptown Motorcity and the Control Tower.
Union Properties had also announced a rent-to-own scheme back in November.
In light of potential investor cash-flow issues, it is not clear if anyone or most investors, will be able to stump out the remaining cash.
Officials at Sorouh did not respond when contacted repeatedly by Gulf News last week.
More from Investment
More from Business
Business Editor's choice
-
Two Europe banks to inject new cash
Bank of England to pump £50b into UK as ecb mulls second credit offer
-
Nokia cuts 4,000 jobs in 3 countries
Company is struggling to make inroads in the smartphone market
