Final day of reckoning looms for Dubai off-plan property investors
Posted on 12 May 2011 with 7 comments from readers
The final day of reckoning is about to dawn for investors in around 500 Dubai off-plan property schemes whose cancellation is now imminent. Then investors will discover how much of their money is left in escrow accounts and the banks will know if more write-offs are necessary.
‘We have finished the technical review, site visits have already been done, so we know what stage the projects are at and the strength of the contractor. Now we’re waiting for the financial audit to finish,’ Real Estate Regulatory Agency chief Marwan bin Ghalaita told Arabian Business. ‘We will release the names [of the cancelled projects] very soon.’
Real estate crash
It will be three years ago this autumn since the Dubai real estate boom went bust. Property prices have declined by up to 60 per cent from that peak but have shown some signs of stabilization this year.
RERA said total property transactions were up 20 per cent in the first quarter to just over $8 billion, a rise confirmed by local estate agents. But the enormous uncoming supply of property may still depress prices further.
For off-plan buyers who bought into the 500 schemes about to be cancelled this is the end of the road. There is bound to be considerable angst as the true picture emerges and distress among some who thought their money was somehow still safe.
How much money people get back, if anything in some cases, will depend very much on the circumstances of individual projects. It will be a black day for many investors, and if they have borrowed the money also for their bankers.
Banks will also have to make a final reckoning of their losses on loans to developers whose projects are now dead.
Day of reckoning
Nonetheless, this is a problem that Dubai just has to face, however painful. For a real estate crash cannot really be said to be over until the financial mess left behind is cleared up and the losses taken.
To some extent this is the dark before the dawn for Dubai real estate. The city emerges from the trauma of the past three years with a greatly enhanced physical infrastructure and more reasonably priced rental property in all market sectors from housing to offices, retail and hotel rooms.
This is a major benefit for the future of a regional business hub like Dubai. But that will be little compensation for investors who have lost money on cancelled projects or their bankers.
7 Comments posted by readers:
About time!!!
The true test of whether or not Dubai has a “rule of law” is what punitive action is taken against errant developers who are refusing to refund investors monies.
If the wishy washy attitude of RERA continues, it will send the wrong signal to international investors that Dubai is like the ‘wild west’ where anything goes!!!
Developers who took deposits from investors must be forced by law to make an action plan of how they will refund the money.
Put a few of them in jail and see how fast they pay up!!!
The question is does Dubai have the will to enforce the “rule of Law” ???? or will this remain a safe haven for “fly by night” operators?
Jag – great post!..the blindfolded beauty w/ scales on her eyes is deceased..read the prospectus!
I have a few friends in Dubai who bought off plan. Their projects were never finished and until now they have not seen a Fils or Penny of their deposits back. The deposit was paid provided that they make good on their promises which is to build the homes of which the down payment was intended for but as we all know this is not the case in Dubai. To sue you need to pay another 10% of the amount you are suing for to the courts of Dubai and 10% more to the lawyers not to mention other expenses along the way. Throwing good money after bad does not always work out in Dubai.
Andy is correct. If you want to take legal action to retrieve say Dh1M, you will have to pay about Dh250K with no guarantee that you will get your money back, even if you win the case, which will take 2 years.
Nevertheless there are some brave (obdurate) souls who have taken the plunge! Let’s see how they fare.
This is not at all the right decission by RERA.
People have lost their hope & dreams at the mercy of these Unprofessional Developers. How can Dubai pride itself, with such rules that further benefiot the bad developers & make the investors cry in vain. Instead of part refunds, RERA should ensure that the unfinished projects are completed within a time frame orelse, all assets of the Developer should be taken over by RERA (including 20years jail term) of the developers.
Reramust act now and fast if regain confidence of investors and make an arrangements for settlement of all cancilled projects and builders like emar should offer alternative property at current market prices. This is the only way to bring back Dubai economy .
I have seen the ups and downs of Dubai. Unfortunately, the only people that will pay the big price are the small ones. The ones that saved all their money and gave it to developers who promised them something that they never delivered. Once I wanted to buy a property in Dubai and I happen to read about a strike from a labor camp because they have not been paid their wages. My friend asked me:” How can you trust a developer with your hard earned money, when they don’t even pay these poor workers”? It really donned to me.These people cheated the poorest of the poor. Let alone those who had jobs and some saved money like us. There was no way I would give them my money. And as proven, thank god I didn’t.