Only in Dubai: The ‘ultimate guarantee’ from real estate developers
Dh29bn in hand reflects confidence in the market, says Ghalita
Some developers in Dubai are giving 100 per cent construction guarantee, which is the “ultimate guarantee” that any developer can give, Real Estate Regulatory Agency Chief Executive Officer told Emirates 24|7.
“There are developers who have given 100 per cent construction guarantee and this is the ultimate guarantee,” said Marwan bin Ghalita without giving names of the developers.
He revealed that Dh29 billion are being held escrow accounts which reflects confidence of developers and investors’ in the market. It is compulsory for every developer in Dubai to open an escrow account under Law No. (8) of 2007 concerning escrow accounts for real estate development. All the payment received from investors has to be deposited in it. Money is released by Rera after it assesses the project’s construction having met the required percentage.
Rera chief said they were no longer afraid of projects being stalled, as developers were launching projects to build them than mere selling them.
“Developers want to complete their projects with many of them wanting to start selling only after the project nears completion. This shows that the industry has matured over the time.”
Among the guarantees sought is 100 per cent of the land cost to be paid by the developer, a minimum of 20 per cent of the construction cost to be deposited with Rera with contractors having to pay another 10 per cent of the construction cost. In the first quarter 2016, 38 new projects were launched in Dubai. In 2015, 46 projects were completed. The Dubai Land Department has reported Dh55 billion worth of property transactions across all categories in the first quarter 2016. Ghalita said investors had become very smart and were asking questions on materials used, sustainability, finishes and service charges, which was not previously the case.
We reported earlier that Rera chief wanted developers to cut down on service charges by allocating some portion of the built-up area in their projects to generate revenue.
“My advice to developer is to allocate some of the built-up area for revenue generation. Start with 50 per cent of the service charge going up to 70 per cent of the service charge to be covered from this asset and not from the investor. Hence, the investor will be paying only 30 per cent,” Ghalita had said on sidelines of the Dubai International Government Achievements Exhibition (DIGAE 2016).
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