By Elizabeth Broomhall
Real estate watchdog sees steady trade among buyers in stalled projects to new developments
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.”
Is'nt putting UNLIMITED property into the market the main cause of Ajman's offplan property crisis. Who is to blame for putting 1,000 buildings on Emirates Road in the middle of the desert?
Don't understand who is to be blamed? Is it the government who sold undeveloped lands with no infrastructure what so ever for millions of dirhams and watched developers launching projects one after the other. And witnessed speculators from the developer's side (not buyers) as they were coming back to buy more land in Ajman with investors money, particularly in late 2007 and 2008 after tighter regulations in Dubai?
One question is - where is all this money now?
Any list of scrapped projects in 2012 should be interesting, many of the developers in Ajman had their headquarters in Dubai?
I imagine that the only projects to be scrapped are those where there is no residual evidence of the developer's presence in country, no escrow account and therefore little chance of the advance payments being refunded.
The only way to restore confidence in the UAE property market is to see a succession of buyers who have paid significant sums in advance and waited what is now several years with absolutely no chance of a property ever being delivered, get their money back from what is a now plainly fraudulent property transaction. This should come through a local court ruling fast tracked through the court process to set the legal precedent.
It is alright accepting money hand over fist in the first place, but you must be prepared to return it if you cannot deliver the goods, that is a fundamental of right and wrong and a code of conduct for all to live by.
How is it possible that we handed over all of our savings and now the developer will not speak to us. Nothing has come out of the ground. They still live in the UAE and run another business. We have to act like it was all just a bad dream and forget about our life savings. There must be something we all can do? This is day light robbery. Give back our money out of the Escrow, is it not there as a safety net?
Developers should return the money to investors from Escrow accounts, if projects are councelled or kept on hold. Instead, ARRA is pushing investors to switch to other projects and continue to pay.....There is no rules and regulations......
I invite every investors of Emirates City to join us on the facebook group : saveemiratescity. We have to fight together and find a solution to get out money back. The Emiratescity forum is ruled by Rholding, and a lot of investors cannot subscribe to the forum because they select the accounts ! Please join us now.
I would like to join the group as well.
I had invested in One BHK flat in the 4LVT(Lake View Tower) project. And have paid more than 25% 3-4 years back.
After 4 years, I still have no clue how to go about the same.
i do not blame the government or anyone else but myself for lack of knowledge in proeprty business and real estate transactions.