More than a third of investors stung by the collapse of Ajman’s offplan real estate market have switched their cash to units in projects nearing completion, the emirate’s property watchdog said.
The emirate last year offered buyers in stalled projects the chance to trade their offplan units with those in developments nearing handover, after the Gulf property crash slowed work to a standstill on more than a dozen projects.
“Around 40 percent of the active investors have decided to transfer their investments from off-plan projects to others under construction or completed projects,” Yafea Eid Al Faraj, the executive director of Ajman Real Estate Regulatory Agency (ARRA) told Arabian Business.
The transfers are helping to fill up vacant units in properties nearing handover, he said.
Scores of investors in Ajman’s real estate industry were hit when the emirate’s offplan market collapsed in late-2008, sending house prices tumbling. In the $15bn Emirates City development alone, more than a dozen projects are on hold, affecting hundreds of buyers.
Ajman’s property watchdog pledged in September to publish a list of the emirate’s scrapped real estate projects by early 2012. The move could clear the path for buyers to pursue court action against the developers or attempt to secure a refund against their initial investment.
But ARRA warned it would only consider cancelling suspended projects as a last resort, and would look to scale-back developments first.
“Only in cases of force majeure circumstances or when the cancellation decision serves interest of both parties [would we scrap a project],” said Faraj. “Downsizing a project may also be an alternative solution.”
The watchdog said it is pursuing five lawsuits against developers that fled the country in the wake of the property crash, but refused to name the companies involved.
Billions of dollars worth of projects were suspended or scrapped in the UAE in the wake of the global financial crisis, which saw house prices in Dubai slump by more than 60 percent.
Many speculators who previously earned huge sums from property deals fled the market and defaulted on purchases as funding dried up and banks called in all real estate loans.
Ajman moved to tighten its real estate laws in 2008, in an attempt to close loopholes for developers and speculators. But many buyers hold contracts that pre-date the ruling, which required developers to secure investment funds in an escrow account.
Faraj said a lack of investment knowledge among buyers was partly to blame for the emirate’s offplan crisis, alongside shortfalls in regulation.
“Lack of regulation cannot be the only reason,” he said. “Errors also include lack of awareness, the absence of real estate investment culture among investors and the uneducated speculators who caused severe damage to their investments.”
Follow us on
