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Although no legislative decision has been made, Rera has told developers that buyers should pay no more than 20% of the cost of a property as an initial installment.
The remainder would then be paid in installments that are linked to the progress of the construction of the project and are commensurate with how far advanced the building is.
If payments over these amounts have been made and construction has yet to begin, investors could have a case for holding payments until the project is underway, although advice on specific cases should be sought.
Though these guidelines are not legally binding developers will be keen to work with Rera. 'The companies will want to work with the Rera and keep them onside,' Alexis Waller, partner at legal firm Clyde and Co, tells AME Info.
'These letters have been going out for a while, since November, but they are guidelines rather than law. The money is in escrow accounts, not with the developers, so the buyers are protected anyway.'
An 11-member Real Estate Development Trust Account Department has been set up by Rera to monitor the use of the escrow amounts, and ensure that amounts beyond the 20% are not collected until construction begins.
In parallel with this, potential investors in the city's property market will be able to check the status of Dubai's developers using a real estate ranking system currently being created by Rera.
Dubai developer grading
In answer to developers' worries as to the increasing number of investors who find themselves unable to pay installments and consider defaulting, Rera is considering proposing amendments whereby developers may be able to hold off repaying balances to buyers who are breach their contracts until the unit is resold.
The city's developers will be graded according to their liquidity, market experience, and the number of projects they have undertaken and completed. The scheme is being designed to increase investor confidence in the city's projects, and has generally been warmly received, despite some suggestions that smaller companies would be frozen out of the market.
Rera has also finalised its residential rental index, which has been sent on to the Ruler's Court for final approval. The final unveiling is expected by the end of the month, and the figures therein will not be mandatory, but rather serve as an indication of rents and tenancies for particular areas.
See also:
Dubai market at 'tipping point' as Rera warns against halting payments
Dubai property prices to fall in Q4 2008
Arabtec predicts 'substantial fall' in Dubai property market growth
Edward Poultney, Editor - English
