Last year his highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, introduced new Escrow (Trust) Account Law in Dubai, to retain investor’s confidence and Emirate’s reputation as reliable real estate market. An integral step for the real estate sector was taken where law ensures the money is released only with the approval of Dubai Land Development (DLD).The introduction of Law No. 8 has been well accepted by developers and agents as they realize it can drastically help in stabilizing the market and will increase investor confidence. The mechanism introduced, to cancel registration of developers that fail to perform, has also given a boast to investor’s confidence in this sector.
Considering the grievances of property investors, Law No. 13 has put an end to the woes and expected an increase in property investment. The legal consultants suggest that the new law will make Dubai real estate market, investor friendly.
Will Grinter, legal consultant in the UAE at international law firm, Clyde & Co, said: "The law is a further step forward in Dubai's aim to develop an appropriately regulated real estate market, with particular emphasis on transparency and consumer confidence."
According to the new law, no developer can launch a project and collect deposits without giving a guarantee, that, the funds would be used appropriately. The Real Estate Regulatory Agency (RERA) is a government agency that has its own administrative and financial independence to regulate real estate sector in Dubai, legally. This was inaugurated by His Highness Sheikh Mohammed Bin Rashed Al Maktoum, vice president and Prime Minister Ruler of Dubai, as a part of the Dubai Land Department, on 21 July’07. Now, RERA would keep a close look at the issues that have led to the fall in investor’s confidence in this sector, due to the delay and lack of funds. Escrow accounts for each development must be managed by financial or banking institutions approved by the DLD (referred to as “Escrow Agents”). Therefore, Law 13 states that the contracts of all sales of off plan properties must now be registered with the Land Department, creating a fixed official database of all property transactions. In addition to that, Law 14 - the mortgage law, suggests the pre-registration law facilitates securing the proof of land titles by the bank. Before this law came into existence, certain developments could get finance by showing banks their internal register of buyers and giving MoUs that they wouldn't transfer contracts without a No Objection Certificate from them.
Impact of New Laws on Dubai
The new law filled investors with new confidence to invest, as the land transactions in Dubai earned Dh175 billion, as compared to Dh162 in 2006. Several renowned property companies like Tanmiyat Group, Schön Properties and Fakhruddin Properties have registered their accounts on ESCROW, for the projects they have already started.
The high rise residential properties or villas by the lake and commercial properties for businesses are the hub of real estate investment in Dubai. Off plan property requires 10% deposits with the stage payments, which is a boon to extend investment potential. Multiple units attract discounts and the tax free nature of Dubai means your money is set to grow without penalties.
It has been noticed that the Dubai Government is more interested in overseas investor, thus they have changed their freehold laws to attract them. Before we discuss this, what is a Freehold law? The owner of a freehold enjoys the most superior form of private property ownership with complete title of the property and land. The new Dubai freehold property law entitles that the Foreigners will have the right to lease or purchase the land after the buyers and investors take permission from the three major developers of Dubai - Emaar, Al Nakheel, and Dubai Properties. The ownership will be granted to a foreigner only after the developers submit the No Objection Letter from the bank, that the payment has been made in full. One of the important aspect of this law is the clause which talks about, legalising their property purchase by registering with the authorities. Another important feature of the law is the recognition of the land development lease. The Freehold law would specify the functions and responsibilities of the Department of Land and Property, which has so far been doing all the work by virtue of practice, without legal clarity. Now as per the law, this department would have to approve the land map and the fees and determine the survey area.
According to the ‘Property Law in UAE’ article : “The DIFC is a federal financial free zone that was established in accordance with UAE federal law and Dubai law. The Real Property Law (DIFC No. 4 of 2007) (the “DIFC Property Law”) creates a new registration system, pursuant to which the DIFC will guarantee freehold and leasehold title (for a term of over 1 year) to real property within the DIFC for all companies and
individuals, including foreign companies and nationals. An instrument does not transfer or create an interest in real property until the interest is registered. Completion of the registration, according to the DIFC Property Law, is conclusive evidence that the property owner is the owner of that interest and that its title to that interest is
indefeasible and is enforceable by the DIFC courts. Leases with a term of less than 1 year may, but need not, be registered, and if they are not registered, they are still valid as contracts and enforceable by the parties. As with the Dubai Property Law, interested third parties may be registered.
Concluding this discussion, many leading estate agents have predicted, a wave of prospective buyers to enter the real estate sector due to these changes and the rental yields looking strong. As per the experts, Dubai is now the perfect destination for the overseas investor.
