Dubai planning new fee, restrictions on off-plan property sales

Move to further discourage speculative demand

By

• Parag Deulgaonkar

Published Monday, June 16, 2014

 

Dubai is considering introducing new fees and restrictions to stop flipping of off-plan properties, the International Monetary Fund (IMF) has said.

“Imposing additional fees and restrictions on reselling off-plan properties, as currently under consideration, would further discourage speculative demand,” the IMF said in a new report.

“The increase in Dubai’s real estate registration fee from 2 to 4 per cent last October, along with regulatory measures to assure orderly market conditions for new real estate development, was a welcome step,” it added.

International experience shows that countries faced with real estate booms often repeatedly raised real estate fees and differentiated them by criteria such as the buyer’s residency, use of the property for occupancy or investment, or the time elapsed before reselling, with rates reaching up to around 30 per cent for selected types of properties resold within a year (Singapore).

Although it is not known on what measures the Dubai Land Department (DLD) is planning to introduce, market participant say the introduction of a slab-wise registration fee is likely.

DLD, however, did not respond to queries from Emirates 24|7.

“The plan to introduce new measures/fees on a sliding scale is a good move. This is what the market needs as we see speculative activity,” Craig Plumb, Head of Research, JLL Mena, told Emirates 24|7.

“Property prices are going up, driven mostly by speculators in off-plan projects.

“We need more regulations to discourage speculators,” he added.

Although Parvees Gafur, Chief Executive Officer, PropSquare Real Estate, said the new fee would be good for the market in long term, he believed that the market was no longer driven by speculators but by the end-users.

UAE developers have imposed self-restrictions with major developers such as Emaar Properties, Aldar Properties and Nakheel not allowing an investor to sell a property unless they have paid 40 to 50 per cent of the property value.

(Read: Major UAE developers team up against flippers)

Earlier this month, the UAE Central Bank said that low residential rental yields in Dubai and Abu Dhabi possibly indicate growing imbalances and overheating in the real estate sector.

“Current average rental yields in Dubai and Abu Dhabi are approximately 70 and 130 basis points below historical averages, which could indicate growing imbalances - overheating real estate market,” the Central Bank said in its financial stability report 2013.

Global Property Guide, a UK-based research house, said on Sunday that Dubai has topped the list of house price survey for the fifth consecutive quarter with house prices rising 31.57 per cent during the year to Q1 2014 and 9.58 per cent in the first quarter alone.

(Read: Dubai property prices up 32% in 12 months) 

if you have interest in Dubai real estate contact me on edith@flashproperties.com or +971557162933.

Emaar Launches Samara Villas In Dubai’s Arabian Ranches

The community will feature 177 villas in four styles.

By

Mary Sophia

19 hours ago

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Dubai developer Emaar has announced the launch of Samara, a villa community, in its popular development Arabian Ranches after recording strong investor interest for its previous communities.

The new project, which includes villas designed according to Spanish coastal architecture, will feature 177 three to five –bedroom villas in four styles, the developer said in a statement.

The community will also have amenities including a large retail centre, specialty food and beverage outlets, a healthcare centre and a daycare centre.

Located at the crossroads of al Qudra and Sheikh Mohammed Bin Zayed Road, Samara offers easy access to Dubai’s main hubs including Dubai Marina, Dubai Media City and Dubai Internet City.

“Each residential community within the Arabian Ranches development has recorded robust demand from investors,” said Arif Amiri, chief commercial officer, Emaar Properties.

“Through ‘Samara’ we are offering another opportunity to be part of one of Emaar’s fully-established communities featuring a golf course, polo club, and a Residents club.”

Emaar will launch sales for Samara in Dubai and Abu Dhabi on April 5 at 10am. Online registration for the sales in both the cities will begin on April 2, the developer said.

The real estate firm has been expanding the Arabian Ranches neighbourhood with various types of themed villa communities such as CASA, Rosa, Palma, Rasha and Lila. Most recently, it also announced the launch of Arabesque-styled villa community Yasmin within the development.

Emaar has been launching a string of new projects as it looks to tap into Dubai’s yet-again booming real estate sector.

The Dubai-based property firm recently launched BLVD Crescent, a residential development in Downtown Dubai, which features two towers of 39 and 21 storeys. The project will consist of over 300 luxury residential units.

Spurred by strong investor interest, Emaar also launched the second phase of its residential complex Mulberry at Park Heights in its Dubai Hills Estate development.

for information on registration please contact me on edithmakena@gmail.com or +971557162933. 

All You Need To Know About Investing In Dubai Off-plan Properties and Escrow Accounts FAQ

THIS IS FAQ AND ANSWERS FROM DUBAI LAND DEPARTMENT.   What is the real estate escrow account? The goal of it? Who has to have it? The escrow account is the bank’s account of the project in which amounts collected from buyers of off-plan properties are deposited or amount by project’s financers. The escrow account aim is to regulate the functioning of the construction process of units sold off-plan, thus safeguarding the rights of investors. The law applies to all developers in Dubai without any exception who sell properties off-plan in Dubai, and in return they receive payments from the buyers or financers.  Who are the parties obliged to open an escrow account? The law applies to all developers in Dubai without any exception who sell properties off-plan in Dubai, and in return they receive payments from the buyers or financers.  Which financial institutions are approved by RERA to manage the escrow account? You can visit the Department's account of Trustees http://www.dubailand.gov.ae/English/Tanzeem/Developers/trusteeslist.aspx  Does the law apply to projects that have been announced before its release? The law applies to all projects selling off-plan either before or after the law. The law gives a period of 6 months since its release for all developers to adjust their situation in accordance with Law No. 8/2007 concerning real estate escrow account.  What are the ways available to communicate with the Real Estate Escrow Account Department? You can communicate with the department by: E-mail: trust@dubailand.gov.ae Phone: 042030555 Fax: 042349219 For more information, please visit the website: www.dubailand.gov.ae  What if the investor pays amount far outweigh the completion progress  or the project hasn’t started or under cancelation? If the project hasn’t started or under cancellation: The Land Department isn’t authorized to terminate any contract between the developer and the investor at  the request of the investor. If the investor is willing to terminate the contract,  he/she must refer to the concerned real estate court. The Department’s role in this case is to try to reach an amicable settlement between both parties. If the project is canceled: The escrow account is transfer to the Section of Projects’  Liquidation which, in turn requires the developer to repay investors within 60 days from the date of the cancellation. In case RERA sees a necessity to postpone the deadline it might extend this period. In case the developer fails to commit,  the case is transferred to the court in order to secure the right of investors. If the percentage of project progress is 5% or less, and all paid amount are deposited into the escrow account and the investor is willing to obtain the money back through RERA, given the developer hasn’t and wouldn’t construct the project, refer to the answer of question No 6 in the first paragraph. If the project isn’t cancelled and the investor is willing to obtain the money back, the investor must refer to the court. If the project in the process of cancellation or cancelled: At this stage, the project isn’t cancelled yet. And there are several procedures that must  be followed prior to the cancellation such as (submitting remedy, the Committee’s consideration of the remedy, issuing statement by the committee on which the necessary action is taken). This process takes 3 months at least.  What is the role of the liquidation of real estate projects section,  specifically for all projects canceled - under cancellation - completely stalled. The liquidation section role begin once the project is cancelled upon the developer’s request/or the project is cancelled and not in the process of cancellation.  Then, the section will recover the amounts from the escrow account and deposit them in the Trust Account in the Land Department to be distributed to beneficiaries, whether in full or in a certain percentage according to what is available in the account.  What about projects that have not been cancelled and the progress is less than 5%? RERA monitors progress of construction on the project on a regular basis and in the event that the project is stalled or the progress is very minor, the developer will be addressed to cancel the project. If there are no reasons justifying halt of construction of slow progress and failure to provide justifiable reasons for that, RERA will start the process of cancellation of project as per the procedures it follows.  Why there is no enough information about the history of progress in ongoing projects and delayed? Due to the current situation, and developer’s inability to start construction so there is no timeframe given about the start of construction by the developers, so it is difficult to identify specific date for the completion of these projects. However such projects might be subject to cancellation.  What the expected time period for the liquidation is of cancelled and stalled projects? The period is indefinite, once the complete documents and details of payments and eligible persons each projects will then be in the track of liquidation. Most investors complain about the inability to communicate with some developers and about the process and completion phase and they can’t obtain this clear  information from the developer, however they are demanded to make new payments. However, due to the payments are scheduled according to the percentage of completion, and the investor has the right once received a request for payment from the develop to inquire about the percentage of completion in the current project by a  letter from the project consultant/approved by the Land Department. Otherwise, the investor is not required to make the payment unless the project reached the specific stage or completion percentage according to the agreed payments schedule  between the parties. Does the investor have the right to request the completion rate for any project or a simplified report on the project. Investor may obtain completion percentage report prepared by the technical auditor  of RERA after paying the audit fees of AED 15000 + AED 10 as knowledge surcharge.  Can the investor cancel his contract with the developer without resorting to the judiciary? The Land Department isn’t authorized to terminate any contract between  the developer and the investor at the request of the investor.  If the investor is willing to terminate the contract with the developer, then he/she must resort to the concerned real estate court. The LD role is limited to conciliation between the parties and settles the dispute amicably without having the final word in the dispute and  without intervention in the final settlement.  What if completion rate, for example, 40% - 60% and the project is  completely stalled and the developer is absent like Dubai Star Project? In such cases, the Land Department and RERA intervene to safeguard the  rights of the concerned parties and for the completion of the project.  Is there a law deterrent to developers’ manipulation and those offenders by RERA? All laws issued stipulate the existence of sanctions against developers in conflict with the laws and regulations for real estate development.  What are the procedures to open an escrow account? The developer must fill the form on "registration developer & project approval"  and provide the required documents after the adoption of the project by RERA represented in the Department of escrow account. The account is opened by the account trustee based on the certification of the project.  Who can manage the escrow account? A bank or financial institution licensed by the Central Bank of the United Arab Emirates to receive deposits of others and operating in Dubai can serve as account trustee. This bank or institution, must be accredited by RERA and must sign a written agreement with RERA stating the terms and conditions of managing escrow accounts.  Can escrow account trustee, offer financing for the project’s developer? Yes, the bank or financial institution can serve as account trustee can provide financing of the project.  For which purposes amounts deposited in the escrow account can be utilized? As a general rule, the amounts can only be paid from the escrow account to make payments for the land, contractors, consultants and marketing related to the project. Not all expenses incurred by the developer on the project are eligible to be paid from the escrow account. For example, a 5% only of total sales can be used for marketing the project.  Can amounts deposited in the escrow account be used for making payments? The written agreement between the developer and the account trustee contains details of the main phases of construction required for releasing certain amount from the escrow account. The project’s manager working for the developer will inform the account trustee abut completing a certain major phase, and will submit a request to make payment to service providers. The responsible engineer of the trustee side will visit and audit the project, and to confirm that the major construction phase mentioned has been completed. Once this is done,  the account trustee is entitled to pay the needed payment to service providers from the escrow account.  What is the purpose of the withheld amount of 5%? Article 14 of the escrow account law states holding 5% of the total amount paid in the escrow account for a period of one year after completion of the project. This amount act as a guarantee that the developer or contractor will effectively address any clear flaws in that property upon completion which can appear within one year of completion. The law became effective on June 28, 2007, when it was published in the Official Gazette.  If the developer had begun selling off plan and need to open an escrow account,  shall the developer deposit the amount he collected earlier from the investors? Yes, all amounts received from the buyers must be deposited in the escrow account.  What are the financial institutions approved by RERA for the management of the escrow account? 1. Dubai Islamic Bank 9. National Bank of Abu Dhabi 2. Emirates IslamicBank 10. Bank of Sharjah 14. Al Masraf 3. Abu DhabiCommercial Bank 11. Bank of Baroda 15. First Gulf Bank 4. Emirates NBD Bank 5. Standard Chartered Bank 6. Mashreq Bank 7. Al Ahli Bank of Kuwait 8. Noor Islamic Bank 12. Citibank 13. Abu Dhabi  Islamic Bank 16. Sharjah Islamic Bank 17. United Bank  What are the objectives of the escrow account law? The law was issued in order to control of the real estate market in Dubai and to regulate the construction and selling of properties off-plan to guarantee the rights of buyers.  What about projects that have been announced before the law issuance? The law applies to all projects announced by before/after the publishing of the law in the Official Gazette. In some cases, the developer may be excluded  from opening the escrow account, especially for projects near completion and has  if company doesn’t have other issues in its projects or with its investors. However, the granting of the exception, is jurisdiction of RERA.  How to manage the escrow account? The escrow account must be opened bearing the name of the project, and it must be utilized for purposes related to developer of the project. The amount deposited in the account can’t be seized on behalf of the developer’s creditors. if you need more information on the Dubai market please contact me on edith@flashproperties.com