Dubai: In the first flush of revival for Dubai’s stalled projects, the processes were quite straightforward. Investors would identify a particular project they felt stood a good chance in an improving marketplace, put up a proposal to the Land Department, and see how they could square off the original buyers in the project.
Such transactions were relatively straightforward as the affected buyers were willing to consider any option to make a full exit from their exposure. But things are getting more complex by the day, and three factors illuminate the extent of this:
The clearance of off-plan unit holders who did not obtain Oqood certificates:
“This was not a common practice in 2007-08 and as a result this liability was never registered,” said Sameer Lakhani of Global Capital Partners. “Even now, there are a number of complaints from investors in a number of projects who never received anything other than non-registered SPAs (sales and purchase agreements). In a number of instances, these complaints surfaced after the revival in real estate prices.”
There is a multiplier effect for those original investors who had paid a sizable upfront payment in lieu of discounts on the sales price.
Investors entering into agreements with developers for financing in exchange for a percentage of the profits:
These agreements were never registered with the authorities and fall under the category of off-balance-sheet liabilities, These are now surfacing when negotiations are being entered into for the revival of such projects.
Contractor liability for unpaid work:
This has accumulated because often smaller contractors could have left their cranes and equipment on site and that would accrue rents.
“Often this was procured from equipment providers that make the negotiation a tri- or multi-party dispute thereby prolonging the process of settlement,” said Lakhani. “Adding to the complexity in this is the fact that many developers had given contractors equity stakes in lieu of cash payments.”