Dubai: Clarification is needed on key issue relating to Dubai's recently released law on trust accounts (also known as escrow accounts), say two Dubai-based companies.
One aspect, which targets foreign investors and developers looking to buy and develop plots in Dubai's freehold areas, was not addressed by the law, according to law firm Bin Shabib & Associates and Morison Menon Chartered Accountants.
Currently the licences required to develop land and sell and purchase property are only granted by Dubai Economic Department (DED) to UAE or GCC nationals.
"This means that foreign investors, who have a title deed to a plot of land, have had to go through 'local' companies, mostly contractors, to gain the appropriate licence and right to build developments on these plots," said Jimmy Haoula, managing partner at Bin Shabib & Associates
"Will expatriate developers be comfortable investing in the name of UAE or GCC nationals," asked Raju Menon, managing partner at Morison Menon Chartered Accountants.
According to the trust account law, development licences are required for developers to set up trust accounts, which safeguard buyer's payments and release funds upon completion of certain stages of building work.
HSBC, Dubai Islamic Bank, Badr Al Islami (the Islamic financial division of mashreq) and Standard Chartered Bank have stepped forward to establish trust accounts, and more could follow. Clarification of the issue is essential as foreign developers will only increase their activities in Dubai if they are provided with adequate security and the legal framework to do business, said Haoula.
"This would mean them being granted licences to develop projects on the plots they own without having to go through local intermediaries," he said.
Haoula said this can be done through the DED by opening up the licensing requirements to permit foreign investors to hold property development licences.
Alternatively, the recently established Real Estate Regulatory Authority could act as the licensing authority for real estate developers (UAE/Gulf nationals or otherwise) in the freehold designated areas, he said.
Menon also suggested that the introduction of the trust account system could pave the way for development licence to be opened to 100 per cent expatriate ownership.
"As construction is guaranteed for investors, Dubai free zones may come up with development licence, which will hold good the legal requirement to have a trade license and Dubai chamber membership," he said.
