RERA is taking strong action to ensure the integrity of the real estate market
News that Dubai’s Real Estate Regulatory Agency (Rera) is conducting an “internal audit of transactions” at four local developers comes as complaints about off-plan sales practices are reaching a hiatus in the emirate. But a few scandals are bound to emerge in any booming marketplace, and the Rera is taking strong action at the appropriate time to ensure the integrity of the real estate market.
It would be far worse if the authorities had decided to hold back and let the market forces send the sector into a bubble and then a slump, when abuses became an unsustainable weight on confidence. Frustrating as it might be for those caught up in these scams, at least somebody is acting on their behalf.
An early indication that Rera is proving effective of sorting out such disputes between off-plan buyers and developers came earlier with the resolution of the allegedly missing monies in the Bonnington project in Jumeirah Village.
All 250 buyers who paid deposits to Bonnington have reportedly now received their money back plus five per cent interest. Only 250 apartments were sold in this 900-apartment scheme, which has now been cancelled.
This is not likely to be the last case. This newspaper is investigating several tip-offs from worried buyers from other projects. But it looks as if Rera, which was only created a year ago, is doing a sterling job. CEO Marwan bin Ghalita has already won a reputation in the local realty sector for a combination of toughness and fairness, and a dogged determination to save the reputation of the Dubai property industry from con-artists.
Rera has moved quickly to regulate a sector which operated with very few rules until its formation, albeit major developers such as Emaar Properties have always had world-class systems in place for off-plan sales and have successfully delivered many thousands of units. Off-plan certainly works in Dubai. You just need to be careful who you trust with your money.
The agency has licensed 710 development companies and their 1,560 projects, and 1,487 brokers. Some Dh4bn has been deposited in 476 trust accounts at 33 registered banks.
Another clampdown is under way on overcharging for transfer fees by developers, an abuse which has included some of the major players. The proper charge is two per cent, payable one per cent by the buyer and one per cent by the seller.
Some developers have reportedly been charging seven per cent of the project value which Bin Ghalita states is illegal and should be reported to him. For while a flat administration fee for handling the payment to Rera might be acceptable, why should buyers pay an additional percentage to the developer whose really just upping the selling price?
However, the only thing that could really derail the Dubai real estate boom is a slowdown in finance to the sector. And that would be shown by a slowdown in the UAE loan syndication market where most real estate and mega project finance is raised.
But in the first quarter UAE-based companies raised $28 billion (Dh102bn), according to Emirates NBD. Its analysts say this puts the UAE banking sector on target to achieve loan syndication of $150bn this year, up from $100bn last year.
Tighter liquidity in global markets is one reason for the surge in local bank lending. But HSBC recently closed a five-year Dh2.25bn dirham-denominated bond, the largest ever from a local financial issuer with strong investor demand in Asia, Europe and the Middle East.
In truth the high oil price is flooding the region with liquidity and foreign investors are keen to participate here, even when times are hard for banks elsewhere. All the same local banks have a cap of 20 per cent on the amount of their loan book that can be invested in real estate, and some banks have apparently already reached their ceiling for the whole of 2008.
That could mean a few applications to increase capital will be made to the UAE Central Bank before long. But as the Emirates NBD figures suggest there is going to be a huge amount of money pumped into the domestic economy this year, up a thumping 50 per cent on 2007, and this will continue to drive the real estate sector forward to say the least. Indeed, this kind of stimulus with sharply negative real interest rates are a sure-fire reason to think house prices are going to surge far higher this year as the impact of ultra-low US-driven interest rates add fuel to the fire of oil at $120-a-barrel. And a few scandals in the real estate sector will be nothing compared to this economic tsunami.
/Emirates Business 24/7/
It would be far worse if the authorities had decided to hold back and let the market forces send the sector into a bubble and then a slump, when abuses became an unsustainable weight on confidence. Frustrating as it might be for those caught up in these scams, at least somebody is acting on their behalf.
An early indication that Rera is proving effective of sorting out such disputes between off-plan buyers and developers came earlier with the resolution of the allegedly missing monies in the Bonnington project in Jumeirah Village.
All 250 buyers who paid deposits to Bonnington have reportedly now received their money back plus five per cent interest. Only 250 apartments were sold in this 900-apartment scheme, which has now been cancelled.
This is not likely to be the last case. This newspaper is investigating several tip-offs from worried buyers from other projects. But it looks as if Rera, which was only created a year ago, is doing a sterling job. CEO Marwan bin Ghalita has already won a reputation in the local realty sector for a combination of toughness and fairness, and a dogged determination to save the reputation of the Dubai property industry from con-artists.
Rera has moved quickly to regulate a sector which operated with very few rules until its formation, albeit major developers such as Emaar Properties have always had world-class systems in place for off-plan sales and have successfully delivered many thousands of units. Off-plan certainly works in Dubai. You just need to be careful who you trust with your money.
The agency has licensed 710 development companies and their 1,560 projects, and 1,487 brokers. Some Dh4bn has been deposited in 476 trust accounts at 33 registered banks.
Another clampdown is under way on overcharging for transfer fees by developers, an abuse which has included some of the major players. The proper charge is two per cent, payable one per cent by the buyer and one per cent by the seller.
Some developers have reportedly been charging seven per cent of the project value which Bin Ghalita states is illegal and should be reported to him. For while a flat administration fee for handling the payment to Rera might be acceptable, why should buyers pay an additional percentage to the developer whose really just upping the selling price?
However, the only thing that could really derail the Dubai real estate boom is a slowdown in finance to the sector. And that would be shown by a slowdown in the UAE loan syndication market where most real estate and mega project finance is raised.
But in the first quarter UAE-based companies raised $28 billion (Dh102bn), according to Emirates NBD. Its analysts say this puts the UAE banking sector on target to achieve loan syndication of $150bn this year, up from $100bn last year.
Tighter liquidity in global markets is one reason for the surge in local bank lending. But HSBC recently closed a five-year Dh2.25bn dirham-denominated bond, the largest ever from a local financial issuer with strong investor demand in Asia, Europe and the Middle East.
In truth the high oil price is flooding the region with liquidity and foreign investors are keen to participate here, even when times are hard for banks elsewhere. All the same local banks have a cap of 20 per cent on the amount of their loan book that can be invested in real estate, and some banks have apparently already reached their ceiling for the whole of 2008.
That could mean a few applications to increase capital will be made to the UAE Central Bank before long. But as the Emirates NBD figures suggest there is going to be a huge amount of money pumped into the domestic economy this year, up a thumping 50 per cent on 2007, and this will continue to drive the real estate sector forward to say the least. Indeed, this kind of stimulus with sharply negative real interest rates are a sure-fire reason to think house prices are going to surge far higher this year as the impact of ultra-low US-driven interest rates add fuel to the fire of oil at $120-a-barrel. And a few scandals in the real estate sector will be nothing compared to this economic tsunami.
/Emirates Business 24/7/
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