New project launches armed with tough clauses against speculation

Dubai: There can be no instant “flipping” of properties in Nakheel and Emaar’s new project launches with the developers taking specific steps to pre-empt speculative buying. Investors who bought in now will have to wait until 35 per cent of the unit price has been paid before they can release the property into the secondary market, market sources confirmed.

In one stroke, the developers have sought to place a tight lid on the speculation buying and selling these properties might otherwise have attracted. Speculative transactions were the root cause for the unsustainable run-up in values in Dubai’s freehold market during 2006 to 2008. The instances were many when someone would buy units at a launch and within hours would have sold it off at hefty premium. No one in the industry wants a repeat of those times.

“Emaar has looked to curtail this (property flipping) by saying that 35 per cent has to be paid before allowing re-sales, while Nakheel for its recent Jumeirah Park launch has its sales contracts explain that only if 35 per cent has been paid will it issue the pre-title registration or Oqood,” said Mario Volpi, head of residential sales and leasing at Cluttons, the property firm.

Emaar — which launched The Address The BVLD serviced residences in Burj Downtown — declined to comment on the tighter provisions, while a Nakheel official said all steps are taken to ensure stability in the local marketplace. More than 300 high-end villas in Jumeirah Park with price tags upwards of Dh4 million were put on the market last week.

Industry sources were unanimous that curbing speculation will go a long way in attracting investors with a longer term outlook on their exposures. Dubai’s property market has had a good run of late, helped in large measure by acquisitions set off by funds flowing in post the Arab Spring breakout. Now, with the new launches from a select group of developers, the market is hopeful of other groups of investors joining in.

“Indeed, the new clauses will ensure that only the serious investor will buy the new launched properties and the flippers stay well away,” said Mahendra Singh, partner at SPF Realty. “The good thing is that Emmar has linked its payment plans with the construction, whereas Nakheel is asking for time-linked payments and, on top of it, asking for post-dated cheques (PDC). However, the catch is that PDCs not linked to the construction schedules will not support the end-user motivation to buy property.”

It is not clear whether developers have set a clause for exit charges if the original investor wants to sell on.

Meanwhile, investors who bought in now are looking at a three- to five-year investment horizon. “New villas in Dubai remain a limited asset class and there’s every chance the Jumeirah Park properties will get a significant mark-up once key construction milestones are reached,” said a buyer who booked a Dh5 million unit there. “That is a major motivation for investors looking at Dubai property now.”