Law to protect realty buyers
Law to protect realty buyers
Dubai: The chance of cowboy developers raking in buyers' payments for new property and running away are now remote after an eagerly-awaited law was issued this week, government officials said.
Under Law No 8 on Guarantee Accounts (commonly known as trust or escrow accounts), people buying properties in Dubai off plan will make their payments into special accounts managed by banks, instead of directly into property developers's pockets.
Government officials say money in these accounts will be released to developers only when certain stages of construction are completed, encouraging companies to keep building work on time and easing fears that they will gather payments and flee the country before a brick has been laid.
"It's a major step towards consumer protection in Dubai. We want people from all over the world to have trust in Dubai when buying off plan," said Mohammad Sultan Thani, director of development and marketing administration at the Land Department.
Industry analysts and many established developers have long called for trust accounts on the grounds that they will add legitimacy to a market where use of buyers' payments is currently unregulated.
A draft law was finalised in April and submitted to Dubai Government for comment and approval before being published in the Official Gazette this week.
Overseeing mechanism
Dubai Islamic Bank yesterday launched its Al Islami Escrow Account, the first such account service in the region designed specifically for real estate developers. Several more banks will follow suit, and the Land Department will oversee the system, said Thani.
An area for concern during the law's consultation phase was the impact it would have on small developers. Companies who lack large financial resources and struggle to secure bank finance tend to rely on money generated from off plan sales to fund their projects.
From now on all developers launching new projects have to produce certificates showing that building work has reached certain pre-selected stages before trust account managers give them access to buyers' money. "This could weed out smaller private developers operating in Dubai," said Iseeb Rehman, managing director of UAE-based property consultants Sherwoods.
