RERA Clampdown On Dubai Property Developers

Even before the property downturn here in Dubai, the government was already looking at ways it could further reinforce the legal aspects of the freehold property market, something that has now gained increased importance with the sudden price drops seen across all Dubai real estate. Many see the role that speculative buyers have played as being a key reason for the current property prices drop. The overheating of the freehold real estate market and prices increases witness based purely on speculative buying clearly have played a large role and as such new legislation has been implemented to limit this in future. But with investor confidence at an all time low, the Real Estate Regulatory Agency (RERA) here in Dubai has certainly been busy of late, and has in the past week or two introduced a range of new measures that it hopes will clarify and strengthen the process of purchasing freehold real estate in Dubai as well as toughening up on what developers can and can’t do with regards to payment and finance.

Last week it was announced that from the 1st of January 2009, developers would be barred from taking payments of more than 20% of a properties worth before construction had begun on the project. Those developers who had already taken payment above 20% are to have to wait until construction reached the satisfactory level before collecting more money off buyers. And this come on top of other legislation saying that 20% of construction will have to be completed before developers can start selling units of a project. And then a further shake up could see all investors having to pay a 30% lump sum with the other 70% required in installments during the construction process.

The aim of all the new legislation is to try and stop the conflicts that were arising between buyers and developers, where buying has almost fully paid for a property before construction has even got started. However the biggest change to hit developers may be yet to come. It is rumored RERA is considering implementing legislation that states a developer must own all of a projects land before being able to launch its sales. This would require obtaining large amounts of financing before developers could get freehold property developments underway. RERA also stated earlier this week that there would now be a new ranking system for Dubai properties and developers, ranking them by their financial health. A lot of new changes I think you will agree! We have will just have to watch to see how they are implemented and play out.

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