Good news for potential property buyers: you can buy off-plan developments more securely now. Initially, a lot of people took the brave step of buying a freehold property before construction had even started but delays in completion and no leg to stand on if plans changed have caused buyers to be very wary of such projects. Thankfully, law no. 8 this year enforces a rule that Dubai developers must set up a Trust with one of the Dubai Land Department's specified banks in order to protect buyer's investments. We are glad to report that the first developer has already set up the account which others are sure to follow.
But what does that mean? Basically, a Trust or Escrow account is a bank account where investors will deposit their payments for a property in stages, and the developers will only have access to this money once certain phases of the development are achieved and finished up to a specified standard. That way, developers cannot use buyer's money to fund their projects and must use company investor funds to do so.
This is sure to put faith back into purchasing off-plan, especially after the numerous delays in a lot of projects and buyers left with no option but to wait. Developers are going to have to finish on time in order to get buyers money, so delays do not cost the buyer, they cost the developer. Furthermore, with complaints of shoddy finishing on some projects, developers must complete the projects up to the standards that are specified in the development contract otherwise, again, they cannot have access to the money. This is an important step for the Dubai government, which in the past year alone has made significant steps to better protect buyers and tenants in the property market. A tighter rent cap on accommodation was implemented at the end of 2006, the Real Estate Regulatory Agency (RERA) was recently established to monitor freehold property regulations and the implementation of the new trust law are all aimed at boosting Dubai as a leading contender on the overseas property market.
The first Trust management company to be affiliated with the Land Department is Badr Al Islami Bank, an Islamic branch of the Mashreq group which already offer financing to freehold investors. This great first step has also been met with the first developer to register for an Escrow account, Al Manal Development. Juma Al Ghurair, chairman of Al Manal Development said: "We encourage all other property developers in Dubai to come on board and follow this ethical approach, so that investors can have complete confidence in their investment." With such a big developer taking a decisive step so early on, investor confidence can only grow stronger. Now you can have that dream property on time, and finished to the standard you expect!
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