Cashback plan will boost Dubai property market - analysts

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(Image for illustrative purposes only).

(Image for illustrative purposes only).

A decision to create a legal committee to help return money to investors in cancelled developments could help improve confidence in the Dubai property market, according to analysts.

The decree issued by the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, on Tuesday establishes a legal committee to liquidate cancelled property projects and settle related disputes, including paying out investors who have struggled to get their money back from developers.

CBRE head of research Matthew Green said the problem of investors losing their money in cancelled projects had darkened Dubai’s reputation among investors.

“It’s probably a situation that has been hanging over Dubai in terms of its ability to attract new investment,” Green told Arabian Business. “The fact we have had investors who have bought into projects in the past and have never seen a project developed or any compensation for a cancelled project.

“As we get into the new growth cycle I think it’s something investors will be very keen to see in place.”

On Tuesday the International Monetary Fund warned the Dubai government may need to intervene in the present property market recovery to prevent another boom-and-bust cycle, with prices rising about 35 percent in the year to June.

During the previous boom, countless projects were announced but were postponed or cancelled – either partway through construction or before work had begun – when the market dramatically dropped in 2008-09.

Many sites have sat idle for several years, although not all affected projects have been officially cancelled and some developers claim frozen projects, such as Palm Jebel Ali and The World, will still go ahead.

Real estate lawyer Joe Durkin said there were thousands of potential cases for the new committee but warned investors may not get back all of their money.

“In nearly all cases of cancelled projects there will be insufficient assets to pay all creditors or investors,” Durkin, who is a partner at Davidson & Co, said.

“Investors will be interested in understanding what will be the general order of distribution of assets. For example, will investors who have an arbitration or court judgment in their favour rank in priority of payment to other investors, who may or may not have claims against a developer?”

“It will also need to be addressed as to how cases which are currently sub-judice are addressed by the special committee.”

Head of commercial sales and leasing at real estate company Better Homes, Sandrine Loureiro, said the initiative was “long overdue” and although investors may not get back everything it would bring some closure.

Returning the money could free up funds for other projects.

“Some investors may choose to re-invest monies received into completed real estate, others may not. Still, in the long term this step will clear up years of frustrations for many, which will be good for confidence in Dubai real estate investments," Loureiro said.

“Additionally, as a city, Dubai needs to complete its master communities. Stalled and cancelled projects can be re-positioned and new opportunities will arise from the space being liberated.”

Green said it was not clear whether the committee would hear cases relating to partly constructed buildings, which would be much more difficult to rule on.

“This situation will be a bit more difficult to resolve because we have already had money spent on the development and then it’s more of a case of is this project on hold or is it cancelled?”

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Posted by: Abdul Sheikh

Dear Sir
I am one of the investore s in dubai in 2008 the builder didnt make any thing but took money out from escrow account I think the dubai government should pay all investores money back so that we can reinvests and also the market will boom with the new investors also the government should cancelled all project and put new strong builder to make new property with new law

Please Dubai government should take action as soon as possible

Thanks

Abdul Sheikh

Posted by: K M Furqan

I will like to say that this much-awaited decree can serve its purpose only with equally well-intentioned participation of Rera which till now has been blatantly siding with developers only. Till now there is no published list of the much talked about cancelled projects. There are projects which are delayed more than 4 years almost no construction took place but the status of the project and condition of escrow A/C are not disclosed to investors.

Posted by: Mohamed Ali Ghanname

to get monies back from developers (canceled or on hold project ) you need a lot of time , so the governments should invest in the case ,like paying investors back and taking properties from the developer and investors , then the government will be a strong developer .
so if you need more details ,just ask me !

Posted by: On hold or cancelled

ROFL - the big projects will be perpetually on hold and the small ones have no money anyway

Posted by: Mohsen Rafaat

Please take a look at Dubai lagoon in Dubai investments parks as well, they are not saying this project in cancelled, but technically they have been supposed to deliver the flats by 2007 to people. even now not real construction is happening in the site and they just kept some labors to show that the project is alive.

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