Abu dhabi unveils property market reforms
Abu Dhabi has unveiled its array of new property laws that will come into force next year.
The new law, which will officially be implemented in January 2017, has taken more than seven years of consultation and reviews, notes Al Tamimi & Company, which was part of the team responsible for drafting the emasures. The measures are designed to stimulate investment in Abu Dhabi and the UAE.
Indeed, while the UAE has enjoyed a rapid rebound following its equally rapid crash, the financial crisis has still led to some controversial disputes, with several building projects left unfinished after runnning out of money.
The new law is designed to both encourage transparency and safeguard legal rights, starting with the autorisation of the Department of Municipal Affairs to regulate all aspects of the sector.
Developers will be required to obtain a licence from the DMA before commencing any work, with no one entitled to claim renumeration if the developers in question are not licenced. At the same time, two new registers will be created to monitor both real estate developers and other information relating to licensees, escrow accounts and other details. Disposals of off-plan units must be logged in an interim real estate register.
One area of Dubai that has proven controversial in recent years is the off-plan sector, with authorities keen to discourage speculative investment and short-term flipping. Abu Dhabi will also clamp down on the the sector, requiring developers to own a right over the project and open an escrow account for it before being allowed to sell units off-plan.
Any administrative fees from developers - "registration fees" are banned - must also be approved by the DMA. This is intended to not only ensure transparency but also reduce costs for buyers, thereby stimulating investment. Investors will also be heavily protected in the event of developers failing to complete construction work, with the DMA potentially entitled to cancel the development and distribute the amount left in the escrow account.the escrow account.
Those who do not possess a licence will be fined a minimum of AED 50,000 (and a maximum of AED 200,000), while fraudulent off-plan sales or developers not depositing funds into the escrow account may be fined between AED 100,000 and AED 2,000,000.
"While the law itself is a great achievement for Abu Dhabi and the UAE, there remains the question of implementation. Having one authority, the DMA, in charge of developing the Abu Dhabi real estate market is beneficial, but for the changes to be truly effective, it is critical that the DMA is completely ready to regulate and supervise the market," Al Tamimi & Company writes on Zawya.