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Putting Things in Perspective – Transparency in Dubai’s Real Estate Market

Putting Things in Perspective – Transparency in Dubai’s Real Estate Market

Property Magazine

28 August 2011

By: Ludmila Yamalova, Managing Partner, HPL Yamalova & Plewka DMCC

Since the setback in Dubai’s real estate market, precipitated by the global financial downturn, much disappointment has been voiced about the workings of Dubai’s real estate market and its ability to respond.  The criticism has revolved around apparent lack of regulations and transparency, post-crisis as much as pre-crisis.

While the overall sentiment is understandable, given the letdown in people’s expectations and the reversal of fortunes, it is important to put things in perspective.  Much progress has in fact taken place and within a rather short timeframe.  Many new regulations have been passed, with many more announced for the future.  Few countries can boast such a quick turnaround in their legislative process.  Therefore, with all due respect to the criticism, much of which has merit, it is also important to give credit where credit is due.

It started back in 2007.  Undoubtedly realizing the need to regulate the unprecedented growth of its real estate market, Dubai began to rapidly introduce a series of legislations.  The intended effect of these regulations was, among other things, to understand the true state of the market.  Investors and the regulators alike needed to know what off-plan projects were being launched, what sales were taking place, who was selling and how money was being spent.  Laws requiring that all projects are registered with the RERA, developers are approved by RERA, sales contracts are registered with RERA and money is deposited into escrow were introduced.  Regulations requiring payment plans to be linked to construction and approved by RERA followed shortly.

Changes continued after the downfall of the real estate market.  Management of many of the biggest developers was swiftly restructured, with subsequent restructuring ongoing today.   A specialized Property Court was introduced.  Although, in practice, the Property Court is part of the same Dubai Courts and its effectiveness is subject to debate, the intention was to have a dedicated set of judges to deal exclusively with property cases.

A series of regulations by RERA are also noteworthy.  One example is RERA’s system of tracking construction progress of projects in Dubai.  While it is unclear how comprehensive this system is, it does serve as a useful resource.  Another example is RERA’s recent announcement that it has completed surveying majority of projects and, on that basis, has cancelled 250 projects.  Although, the list of these projects is yet to be published, if at all, the move is positive.  Then there is RERA’s Tayseer program to pair up approved developers and banks to fund completion of projects.  Equally important is RERA’s recent regulation requiring real estate agents and brokerage companies to be licensed by and registered with RERA.  This was in response to cases of real estate agents defrauding investors and renters with a series of scams.

RERA has become more approachable, meeting with investors and trying to mediate.  It has also been active in the formation of owners’ associations, working with developers and associations.  Although that process is still ongoing and much delayed, their activism and openness are encouraging.

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