Business | Property

Channel Sponsor

Law to protect realty buyers

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.

  • By Robert Ditcham, Staff Reporter
  • Published: 22:58 July 25, 2007
  • Gulf News

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.

Click here to see the full text of the law (pdf)

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.

  • Rate this article
  • Average reader rating (0 votes) 0 Stars
Tools

Emailing an article to friend is a simple way to share a news item. Your friend will receive an email with your name and email address as well any personal message you choose to send.

The information you provide on this page will not be used to send unsolicited emails.

This service is not intended to encourage spam, and action may be taken against individuals who maliciously enter personal details of another individual.

Share this article

Related Articles

  1. Boom time for UAE property sector

    Boom time for UAE property sector

    Boom time for UAE property sector

  2. DIB unveils escrow trust account

    DIB unveils escrow trust account

    DIB unveils region's first escrow trust account service

  3. Law reduces risk in realty investment

    Law reduces risk in realty investment

  4. Escrow account law for property issued

    Dubai issues escrow account law for property sector

Property

Gulf News
Gulf News classifieds
  5. Browse all jobs
  5. Browse all cars
  6. Browse all properties
  5. Browse all classifieds
Popular in Business
Business Editor's choice
Mortgages: there's light at the end of the tunnel
Banking

Mortgages: there's light at the end of the tunnel

UAE buyers are securing home loans again

Popular in GNTV
Popular in Pictures