Dubai is seeing a steady outflow of new off-plan projects, but property buyers would do well to look closely at the sales contracts from developers.
Emaar has imposed restrictions in its Sale and Purchase Agreement (SPA(s)) on when investors can sell their properties on the secondary market.
“Previously developers had imposed conditions to the effect that any secondary market purchaser is required to make certain accelerated payments to the developer upon purchasing the property before being permitted to sell,” said Shahram Safai, real estate partner at Afridi and Angell.
“The new restrictions go beyond this - there is now a requirement in certain Emaar SPAs that an investor pay a percentage of the sale price and/or number of instalments before being able to sell the property on the secondary market.”
This percentage amount varies by project but typically ranges between 30-40 per cent. This makes it “more difficult” for investors who have made a relatively small investment -. 5-10 per cent - to flip properties on a short-term basis.
“Investors purchasing on the secondary market should also read SPAs carefully to ensure that the original investor has the right under the SPA to sell,” said Safai. “If the investor has tried to sell the property to a secondary investor, such sale may not be considered valid under the SPA if the minimum number of instalments has not been paid. It is important to note that any off-plan sale of a property which is not registered in the Interim Real Estate Register is not valid under Dubai real estate laws.”
According to data from Asteco, sales prices for apartments and villas were up by 9 per cent during the fourth quarter of 2012. The increases were most pronounced in at The Springs, Jumeirah Islands and Arabian Ranches. For apartments, Palm Jumeirah, The Greens and Downtown Dubai reflected sizable gains.