More new real estate laws being considered for Dubai which will give investors grounds to cancel their contracts if they fall victim to failing developers and aimed at restoring confidence in the emirate’s property market.
The real estate investor protection law, which is being looked at by the Land Department of Dubai, will detail grounds upon which a property buyer may demand cancellation of a contract.
Grounds for cancellation would include a developer’s refusal to link payments to construction milestones, or if he makes material changes to specifications. The law will also deal with refund or replacement issues in the event of a material defect and financial penalties for delay in delivery.
‘There are lessons to be learned from the crisis and we are emerging with a new legal regime. Loopholes in laws are being dealt with and things will become more organised in 2010,’ said Emad Eldin Farouq, senior legal adviser, Land Department.
The move is designed to restore confidence to Dubai’s real estate market which has been badly hit by the impact of the global economic crisis. House prices in some areas of the city have fallen by 50% during the downturn.
Currently there is no recourse for investors seeking cancellation of a contract even in cases where construction has not commenced even after years. In May 2009, the Land Department set up a committee to decide on cancellation of unviable projects but no official announcement has been made of any cancellation.
Meanwhile, it has been announced that Saudi Arabia is to have its first mortgage law soon aimed at boosting the real estate industry and allowing banks to diversify their balance sheets.
Saudi Arabian central bank governor Muhammad al-Jasser said that the Shariah compliant legislation which has been discussed for the past two years will consist of five parts. It will define the terms of mortgages, how they are designed, how they are granted, how companies are licensed and how procedures will be enforced.
The law is on the way to the council of ministers before going to the Shura Council, the country’s consultative assembly, for final approval, he added.
‘It will be a qualitative jump in the way we finance housing in the country and in the way we use financial instruments that are linked to the housing market. Hopefully, the mortgage law will ensure the production of sufficient sukuk and corporate bonds that will be held by banks in lieu of government bonds,’ al-Jasser explained.
