Dubai: One of the key pieces left in Dubai’s real estate regulations — an investor protection law — will soon slot into place. Top officials from the Dubai Land Department late last month made it clear that the Law (also known as Tanweer) and its provisos was on the cusp of being issued and that all options to “safeguard investor rights” have been incorporated.
With Dubai’s property values being where they are right now, the authorities are on much firmer ground when it comes to effecting sweeping laws on investor protection. Auctioning off distressed properties and plots as well as disposing off stalled projects is a lot easier now than would have been the case if, say, the law had come into effect a year or two ago.
Market watchers believe that when a new investor takes on a stalled project, he would place great emphasis on retaining those buyers who had bought in earlier and were hit by the delay. By ensuring they stay on board, the new investor can put off the need to part with precious funds to pay off these buyers and use the same on the project itself. They are also likely to offer more by way of incentives and repayment terms.
Plus, any law that guarantees a basic set of investor rights would find favour with those looking to an exposure in Dubai realty now. “As we move through a new growth cycle, investors are also keen to see new safeguards in place,” said Matt Green, head of research and consultancy at CBRE Middle East. “Recent measures undertaken by the government — such as the decision to introduce a rental dispute centre to further improve the speed and transparency of the resolution system — is certainly a step in the right direction.
“During the last cycle a number of developers failed to deliver on their development promises, leaving investors high and dry without either a completed property or compensation for the cancelled project. The government is now pushing to implement changes so developers are held accountable and that similar failings are not repeated again this time around.
“In the long run, providing recourse for investors on stalled projects will be hugely beneficial and will help to build further confidence in the market.”
It is not that investor protection laws are not there already — Law 13 of 2008 requires that all investor funds be returned if a project is cancelled. “However, this may not be realistic because the escrow account may not contain all of such funds, some or all of these having been spent on marketing and construction activities by the developer,” said Shahram Safai, real estate partner at the law firm of Afridi & Angell.
“Also, the land and any construction on it may not be owned by the developer if the land has not been fully paid — this would mean that it would be legally difficult to seize it and sell it for the benefit of the investors.”