Several developments around abandoned projects have brought relief to investors who had lost all hope of recovering their investment. On one hand, Dubai’s Decree 21 allows abandoned real estate projects to be sold at fair market value and the proceeds from those sales will be used to pay back investors. On the other hand, with real estate prices going up steadily, developers are finding it lucrative to restart abandoned projects, albeit with checks and balances by
the Real Estate Regulatory Authority (Rera).
Under a decree by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, a special legal committee will study disputes related to Dubai real estate projects that were officially cancelled by the Rera.
Rana Zeeshan Saleem, Head of Assets and KSA Retail Banking, Retail Banking Group, Emirates NBD, says, "This is a good step to salvage investments of people in abandoned real estate projects. It will further boost investor confidence in Dubai’s real estate market and we anticipate wider positive impact on contractors and real estate linked businesses. Therefore, we foresee a positive multiplier effect in the near future."
Repaying investors
Cancelled property projects will be liquidated and the funds raised will be used to repay investors hard-hit by the real estate market crash. The committee will supersede all courts in Dubai and the implementation of relevant court verdicts will be halted for the moment.
According to data released by Rera, between 2009 and 2011, around 217 property projects were cancelled in Dubai.
In its August newsletter, UAE-based law firm Hadef & Partners says, "This will create greater certainty and a faster and more inexpensive process for aggrieved purchasers to make claims. However, given that the decree applies only to projects that have been cancelled by Rera, it is too soon to assess with any accuracy how dramatic the impact of Decree 21 will be in the property market."
A related development has been that private developers are applying to Rera to restart work on abandoned projects. "We have taken over some of those properties. We have two that we are building. One is at Jumeirah Village Triangle, which is ground plus four and the other is a 20-storey property at Business Bay," says Miguel Guadalupe, COO, Pacific Ventures, a real estate developer.
In taking over abandoned projects, typically a developer ensures overall feasibility — whether the location is good and the project is legally sound. "Any developer who takes over these projects wants to ensure that he can start building right away, to deliver within 15-30 months, depending on the size," Guadalupe tells GN Focus.
Construction guarantee
Rera on its part ensures that the developer is solvent and can demonstrate that the property can be built with money from the company. In any case, all projects in Dubai are now launched with a construction guarantee, where the developer has to give a 20 per cent construction guarantee and make 100 per cent land payment.
In case of taking over abandoned projects, says Guadalupe, "The hardest part is communicating with the people who have invested. We go out of our way to contact them to let them know that we are planning to continue developing the property."
In some cases emails and phone numbers are no longer valid, but in most others, Guadalupe says, they have been able to make contact. "People who invested back in 2008 often did not think they were not going to see the money again. They are interested. They want to see it through," he says. n
