Investing in off-plan developments has always carried with it a degree of risk. Buyers are expected to put down a significant amount of cash and then wait, usually between four and five years, before the property is handed over.
There is nothing wrong, per se, with that type of investments. It is an easy way for investors to enter the property market, and those with cash and patience stand a fair chance of seeing their investment blossom.
But in these volatile financial times, four to five years can be a very long time. Five years ago, the price of oil was $108 (Dh397.22) a barrel; BitCoin sold for as little at $14; and Barack Obama had just been sworn in for his second term as president of the United States. Times change and these days they change fast.
That is why we are applauding the move by the Dubai Land Department to require developers to complete construction on 20 per cent of the value of their projects, a significant increase, before they can begin selling them. Previously, developers were required to finish only 20 per cent of the construction value — usually a significantly lower value than the project’s overall value — before they could begin selling the units. This action will tighten the market, as well as protect it from becoming overheated.
This will have an adverse effect on smaller developers, as they will have a more difficult time raising funds to complete their projects. However, this will help ensure that buyers have a significantly better chance of seeing financial returns on their investments. Given the events of the last two decades — which include a subprime crisis, a global financial meltdown, not to mention a BitCoin bubble — this was a wise call. UAE authorities should be doing everything in their powers to ensure its markets remain stable.
