Ambiguities in real estate policies are not going to help Dubai sustain the market and to control the driving forces that are required to accelerate the momentum of growth. The authorities are requested to act swiftly in order to redress cases of unscrupulous practices resorted to by some players in the real estate sector that will have serious impact on the market.
The current vagueness in legal infrastructure has allowed dodgy and corrupt practices to flourish. These practices range from quality of construction to prices, in addition to unfriendly relations between developers and clients. It is happening even more now than it was before due to intense competition and despite the establishment of the Real Estate Regulatory Authority (Rera) which was established to regulate the market in July last year.
The reason for the weak impact of Rera on the market is the real estate sector has been functioning for more than five years in vacuum, thereby allowing the big players to create their own norms and standards. Till today, both old players and newcomers are still acting as if there is no law and are still enforcing their own set of rules and procedures. This is not an exaggeration. It is a fact, simply manifested at different occasions and whenever there is a dispute between the parties involved in the operation. A developer, regardless of its size and history in the market, has the upper hand and believes that what it says is the final word in resolving any dispute. Going to court might not be possible as per the contract governing the two parties or might be very costly for the client. In such a case, the weaker party - the client - in the contract accept the rules of the developer.
Two folds
The vagueness in legal infrastructure is however of two folds - the first, concerning the relations between developers and buyers during the construction stage and after handing over the property to the new owners including delays and variation in quality. The second is regarding the relations between the two parties on one side and the government and its institutions on the other side.
For instance, property owners are still uncertain about the accepted conditions in the contracts binding their relation starting from the promotion of the property throughout the realisation of the project including handing it over to buyers. Every contractor believes that his sole authority over the project entitles him to impose whatever conditions on buyers with no respect to the basic contractual norms which strive to maintain minimum level of balance of liabilities and responsibilities amongst different parties in any contract. Developers still have the power to force buyers to sign on contracts, the whole purpose of which is to give them the advantage to do anything without any liabilities. The buyers at this stage are considered as mere financers who have no right whatsoever in the process. Any failure on his part to perform his sole duty (financing) will subject him to lose everything. Yes, everything.
Buyers, up till today, have no clear idea of the difference between 99-year-lease contract and freehold. They also don't know what kind of ownership entitles them to enjoy a residency permit in the UAE and under which conditions the developer or the government and any of its agencies have the right to revoke the right to residency.
People are also unsure about the responsibilities of the original developers after the completion and handing over the property. The developer, be it a company owned by the government, a public share holder, a privately owned local establishment or a foreign developer, all can impose any condition on buyers with variable operational and maintenance fees. This allows the developer to keep his grip on the project in order to draw reasonable income from it after being sold.
Despite the existence of Rera and the Escrow Account meant to make sure that the money deposited by buyers is not misappropriated, developers are still allowed to advertise rosy promises while floating their projects in order to sell their flats and villas in a market that is getting more competitive than before. No authority as yet seems to have the power to oblige developers to fulfil their promises if they chose not to do at a later stage. No one is clear about the exact role of the government and its regulatory body and when buyers in dispute could approach them to seek help.
Incapable
It is true that Rera was set up a little more than six months ago (July 29, 2007) to act as a subsidiary body to the Dubai Land Department. The move was long overdue, but was highly welcomed in the market. However, Rera is still incapable of addressing simple and hot issues such as the need to introduce a unified property contract that is balanced and offer equal protection for all parties involved in the contract. And that is unacceptable. A delay in addressing such important issues means more unscrupulous developers will make illegal profits due to the lack of transparency in the contracts with their clients.
Individual investors who form the base of the real estate sector are falling prey to unscrupulous practices because they are unaware of their rights as per the law. The most disturbing part is that victims in most cases cannot expect effective help from Rera because the dispute has either been created by an agreement that was endorsed before the establishment of Rera or that Rera has not yet developed the rules to regulate such disputes. The very pressing factor here is: the market cannot wait anymore to absorb fraudulent acts. Hurry up Rera before it is too late.
