Dubai: The top master-developers in Dubai are going to set strict limits on property and plot deals that involve cash only. This would mean that only up to Dh55,000 in cash can be used by the buyer in any transaction with these master-developers.
The rest of the payments will have to be through the banking system, which industry sources say is about bringing in stringent transparency into such deals. In the last three years, a sizeable share of property and land sales in Dubai have been through all-cash deals.
It is not known for now whether private developers too will bring in the same Dh55,000 ceiling on the cash component in their own sales to buyers.
Whatever be the case, the decision by the master-developers assumes significance. The local authorities are now pushing for all big-ticket transactions to be processed through the banking system.
This is what a master-developer said in a note to its clients: “We strongly recommend utilising alternative payment methods such as checks or electronic bank transfers to our designated account.
“The change is essential in maintaining the highest standards of financial integrity and transparency within the real estate sector.”
Part of the ‘AML’ push
Across sectors and business activities, the UAE authorities have been setting clear guidelines on the deployment of funds. This should be seen as part of the wider anti-money laundering (AML) framework currently in place.
“It appears inevitable that all developers will have to follow suit with the cash restrictions given the regulatory AML regime that will have to be followed,” said Sameer Lakhani, Managing Director at Global Capital Partners. “While this might have a ripple effect on offplan sales in the short term, this is expected to be muted.
“What it signifies is a healthy trend for the property sector as the economy transitions under a broad corporate tax regime.” (The UAE corporate tax does not apply to real estate transactions by individuals, but for businesses there are, of course, clear compliance requirements.)
How will the new rule play out?
Adnan Ahmed is Managing Director of Solid Roots Real Estate, and this is his take on the situation: “The restrictions on cash for property buys will have some impact on our sales. Some percentage of the market prefers to pay in cash (especially overseas investors).
“But it will open up other services that we can offer via our strategic partners such as company formation and corporate services as demand for property is expected to remain strong in the long term.”
Offplan boom phase continues
Currently, offplan sales make up 60-70 per cent of all property deals in Dubai in any given month, and within this, cash-based sales represent a sizeable share. It is not uncommon for multi-million dirham homes or plots to be bought entirely via a cash sale.
With master-developers now introducing the ‘Dh55,000 limit’, property market sources will be watching carefully as to what sort of immediate effect this will have on sales volumes.
