Restoring investor confidence top priority, says GIO Developments

GIO Chairman Rashid A.W. Galadari said that these initiatives were something that his company had incorporated as an integral part of its work ethos as early as 2006 with the idea of ensuring higher levels of investor confidence in future and current enterprises.

He said:

"Any move that impacts positively on the real estate sector has to be welcomed. In the case of RERA's announcement there is only unqualified backing from frontline construction companies like ours and there are very strong reasons for it. In the first instance, there is enough liquidity being offered at the outset for the construction company to commence work so it cannot find grounds for delay. Along with that, the investor also gets a boost in confidence because he is able to see the physical development at each stage and this, for him, reflects money well invested."

Commenting on the need to rectify any imbalances in the system where there is some concern that the gap between the investor and the builder has widened, Mr Galadari said, "There has to be more transparency between the investor and the real estate companies who must ensure that their level of service incorporates the promise given in their building schedule."

He added that the need of the hour was to increase confidence in the investor and lauded the RERA move to establish an 11-member team with the specific task of monitoring the construction process and ensuring that the escrow amounts are collected in accordance with the schedule. "As a recognised innovator in the real estate field we would like to see accountability reflected in the system where each milestone in the construction process is given due accord and reached on schedule."

He said, "At GIO it has been an ongoing policy to see investors as partners and keep them within the loop at all times. One of the major movers in achieving this standard is to have moved from a time-based payment system to one that is linked to construction schedules. The milestones cannot any longer be arbitrary or loaded in favour of the builder. Although we cannot predict the future in such uncertain times, I would even go as far as saying the brokers must also support these moves by accepting payment over a number of milestones rather than as a lump sum. This would support the developer in the initial phases by optimising cashflows in a project."

He added, "Although this may be unpopular initially with the agencies, there is a silver lining, because they are now less exposed should a client seek reimbursement of commissions paid in the event of a dispute / default situation with the developer. The upshot for the entire market would be that brokers will perform more diligence on their clients in terms of credit worthiness before making a sale. If this kind of diligence were performed more thoroughly by all parties initially, then many of the deals currently defaulting would not have been allowed to reach that point."

In recent weeks, RERA's priorities have been aimed at streamlining this sector and RERA's initiatives have been picked up by other emirates also seeking guidelines for promoting a robust construction sector and are placing similar restrictions and regulatory parameters.

Mr Galadari added that the new rules were being formulated to protect all the concerned parties as well as bring a certain mutual trust and faith into the contractual obligations. "At GIO, we are not surprised by the RERA initiatives since we have been compliant with these aspects of our business for a long time...and they have always worked for us. If they do become an industry norm the fallout will only be positive."

Calling for an honest look into what ails the industry he said, "There is a great opportunity here to jumpstart the real estate and construction sectors and GIO will always be at the fore front of any attempt to generate that impetus and the further strengthening of the regulatory framework."