News that Dubai’s Real Estate Regulatory Agency is conducting an ‘internal audit of transactions’ at four local developers comes as complaints about off-plan sales practices are reaching a hiatus in the emirate. But a few scandals are bound to emerge in any booming marketplace, and the RERA is taking strong action at the appropriate time to ensure the integrity of the real estate market.
It would be far worse if the authorities had decided to hold back and let the market forces send the market into a bubble and then a slump when abuses became an unsustainable weight on confidence. Frustrating as it might be for those caught up in these scams at least somebody is acting on their behalf.
An early indication that RERA is proving effective of sorting out such disputes between off-plan buyers and developers came this week with the resolution of the allegedly missing monies in the Bonnington project in Jumeirah Village.
All 250 buyers who paid deposits to Bonnington have reportedly now received their money back plus five per cent interest. Only 250 apartments were sold in this 900 apartment scheme which has now been cancelled.
This is not likely to be the last case. This newspaper is investigating several tip offs from worried buyers from other projects. But it looks as if RERA, which was only created a year ago, is doing a sterling job.
CEO Marwan bin Ghalita has already won a reputation in the local realty sector for a combination of toughness and fairness, and a dogged determination to save the reputation of the Dubai property industry from con-artists.
RERA has moved quickly to regulate a sector which operated with very few rules until its formation, albeit major developers like Emaar Properties have always had world-class systems in place for off-plan sales and have successfully delivered many thousands of units. Off-plan certainly works in Dubai. You just need to be careful who you trust with your money.
The agency has licensed 710 development companies and their 1,560 projects, and 1,487 brokers. Some Dh4bn has been deposited in 476 trust accounts at 33 registered banks.
Another clampdown is underway on overcharging for transfer fees by developers, an abuse which has included some of the major players. The proper charge is two per cent, payable one per cent by the buyer and one per cent by the seller.
Some developers have reportedly been charging seven per cent of the project value which Bin Ghalita states is illegal and should be reported to him. For while a flat administration fee for handling the payment to RERA might be acceptable, why should buyers pay an additional percentage to the developer whose really just upping the selling price?
However, the only thing that could really derail the Dubai real estate boom is a slowdown in finance to the sector. And that would be shown by a slowdown in the UAE loan syndication market where most real estate and mega project finance is raised.
But in the first quarter UAE based companies raised $28 billion, according to Emirates NBD. Its analysts say this puts the UAE banking sector on target to achieve loan syndication of $150 billion this year, up from $100 billion last year.
