Real estate market awaits new laws to curb speculation

The issuance of the Mortgage Law in Dubai and Law No. 13 of 2008, which regulates initial property registration in Dubai, and imposing a requirement for the registration of all off-plan sales contracts with the relevant government departments, the Dubai Land Department and the Real Estate Regulatory Authority (RERA), are all significant steps toward curbing speculation in the market. However, all of these laws have been received with conflicting opinions and responses.

While the government sees these legal systems as necessary interventions to regulate the market and curb the rife speculation and unrealistic price hikes on off-plan property units, some real estate professionals refer to the contradictory nature of these laws to Dubai's free market principles, which have long been key to maintaining the emirate's competitive edge as a leading international investment destination.

Al Mazaya Holding, the region's leading real estate developer, says that any new property law that aims to regulate relations between developer and investor, or corporation and individual, is welcome, as it benefits all parties concerned. However, the developer feels that the new law needs to be further clarified.

Al Mazaya has expressed concerns regarding the initial structure of the new laws published in the media, as these laws contradict the free market principles that have been adopted in Dubai and which make the emirate an attractive investment destination.

Eng. Salwa Malhas, Executive Vice President at Al Mazaya Holding, said, "New laws are being issued in Dubai's real estate market from time to time, in order to regulate the market. Most of the time, these laws receive some criticism and disapproval from real estate professionals but, once adopted and implemented, their significance becomes apparent to the market. These new laws are issued in order to safeguard the activities and stability of our real estate sector and to eliminate harmful practices. The latest laws, once implemented, will shock the real estate market, since most sales contracts are being signed on off-plan property units. The new laws pose a serious threat to property sales activity in the emirate."

"Our final judgment on the proposed laws will be revealed after the issuance of the law, as we will then be able to recognize both the positive and the negative aspects of it. We recognize the need for a mandatory system to streamline off-plan sales contracts for real estate units and to limit the current level of market speculation, which significantly increases the property prices within short periods of time, resulting in excessively high property prices," she added.

In conclusion, Malhas said, "This law is quite appropriate, as it is accompanied by organizational laws to protect the developer and guarantee his continued survival in the market. The new law fixes the real prices of the off-plan real estate units. But it is important to look into developing tools to streamline this law so as to protect the developer and to allow him to continue operating in a free market. The authorities might impose taxes on the resale of properties purchased within a 12-month period, or introduce higher deposits as a measure for curbing short term speculation."