Realty needs a dose of stability

It has been reported that the authorities concerned have finalised the amendment of the by-law of law 13 which tackles the issue of termination of sale and purchase agreements (SPAs) for off-plan property units and the damages payable.

It goes without saying that the enactment of a particular law or by-law is a positive development.

Laws are intended to provide stability and security in the field that they regulate. They also tend to enhance investor confidence as they provide transparency and clarity in the market.

Taking all this into consideration, one can only welcome the Real Estate Regulatory Authority's (Rera) latest effort to fin-ally issue the long awaited by-law. This optimism, however, turns into disappointment when one examines the provisions of the draft by-law.

One cannot deal with all the flaws of the draft by-law in the limited space of this short article. However, we will attempt to shed light on one of what could, in my opinion, be the most problematic provisions that Rera has ever enacted.

The draft by-law lists eight reasons on which Rera can rely to cancel a project. These range from a developer not starting a project without a proper justification to the developer being declared bankrupt.

Although one may argue with some of the reasons that are listed in the by-law, the fact that there are clear reasons permitting the cancellation of a project is, in itself, a good sign.

Developers and investors will be able to ascertain their rights and obligations and understand at what stage their respective projects will be subject to cancellation and on what grounds.

Unfortunately, that is not the end of the story. The draft adds another reason for cancellation of a project and that reason is 'any other reason that Rera deems fit!'

This is totally bizarre.

If the intention was to give Rera the absolute discretion to cancel any project 'for any reason that it deems fit' why then is there any need at all to list the other eight cases?

Would it not have been easier just to mention that Rera is the absolute auth-ority and can decide to terminate any project for whatever reason it deems fit in total disregard to the parties' intention and conduct?

Truly, such a provision would be bad, but it can't be worse than giving the investors the illusion of following objective criteria when obviously that is not the case.

Further, how can the fate of projects worth hundreds of millions or even more be subject to the arbitrary discretion of Rera or of a Rera employee?

How can investors have confidence in the investment climate and in the system when the regulatory authority gives itself such an arbitrary right?

What is even worse is that the by-law specifies no guidelines for Rera when exercising that 'right'.

Hence, in theory, Rera can decide to terminate any project for no reason. To add insult to injury, the only recourse the aggrieved parties have is to appeal before Rera.

There is no other form of review, whether judicial or otherwise, to Rera's decisions.

Obviously, a by-law of this nature is not going to do any good to an already turbulent market and it will certainly not help to regain investors' confidence.

I believe it is time for Rera to take serious steps to bring stability and confidence to the real estate market.

Investors have lost much and it is for sure not a good time to test the market through trial and error.

- Dr Habib Al Mulla is Founder and Executive Chairman of Habib Al Mulla & Company.