Home to some of the iconic structures in the world, Dubai is the most preferred choice for real estate investors seeking properties to add inventories to their portfolio. World-renowned real estate developers have their projects nestled in Dubai and its outskirts.
Apart from high ROI, relaxed tax obligations and a relatively easy process to buy property are some of the main reasons why the majority prefers this emirate to make an investment. One can either buy a ready property or invest in an off-plan project for this purpose. The latter option, in particular, is getting immensely popular. A total of 3,236 transactions worth 4.33 billion were recorded in the 3rd quarter of 2020.
Having said that, it is important to know that off-plan projects in UAE do not always guarantee a profitable investment. Surely, there is a higher possibility of your investment producing fruitful results, provided you have been tactful and diligent with the selection of your project. But, the fact that the projects are cancelled, shelved or delayed cannot be ignored as well.
If the project you have invested in got cancelled or shelved, it doesn’t mean you have lost your investment. It will be a temporary setback but now for long term as you can get compensated for your invested funds.
This article sheds light on the reasons that can lead to cancellation, laws that govern the cancellation of off-plan projects and how investors can get compensated. Continue reading!
How an Off-Plan Project is Termed as “Cancelled” by RERA?
As per Article 24 of Resolution No 6 of the Executive Council of 2010, there are nine reasons that can lead to the cancellation of an off-plan project by RERA. For instance, if the developer has failed to start the construction work even after getting the required approvals, RERA, under Article 24 of Resolution No 6, can pass a resolution for the cancellation of the project.
The developer can make an appeal against the cancellation resolution within seven working days. If the appeal is successful, RERA defines new terms and conditions for the project. The developer has to consent to these new terms in writing. In case, the appeal is denied, the project stays cancelled.
After the project has been cancelled, a report will be prepared by RERA. It will include reasons that led to the cancellation. This report is then submitted to the developer. The regulatory authority will also appoint an auditor to check the escrow account. The auditor will also be responsible for dividing the available funds to investors within two weeks of the project termination. The fees paid to the auditor will be borne by the developer, as per Article 25 of the Decree.
If there is a shortfall of funds in the escrow account, the developer must pay the remaining amount to the buyers within 60 days. This can be extended after getting approval from RERA.
A Formation of Committee for Liquidation and Settlement of Cancelled Projects
As per a Decree issued by the ruler of Dubai and Prime Minister of the UAE, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, a judicial committee is to be formed for the liquidation and settlement of the cancelled projects within the emirate.
The committee should have at least one panel consisting of three judges from the courts of Dubai. It will have the responsibility to review the projects termed cancelled by RERA. Once the committee has made a decision, it would be binding.
How Can a Buyer/Investor Claim for Compensation?
Any person who has purchased a Dubai property part of the project that has been terminated can claim for compensation by following the given steps:
- Step 1: First of all, the buyer has to obtain the confirmation of the project has been shelved or not. They can visit the DLD website or the office of the developer to get this information.
- Step 2: After getting the confirmation, they are required to submit the proof of ownership/investment to the DLD. They can show their ownership by showing sales and purchase agreements or other documents/receipts they may have.
- Step 3: Next, the investor has to file a petition for compensation with the DLD. The department will then forward the application of the investor to the committee. The investor will be notified if their petition has been accepted or rejected and the date of the hearing will be given to them.
- Step 4: After the hearing, they will be allotted their share of funds from the escrow account.
A Final Word
Generally, Dubai real estate is considered a safe bet for investors. However, there are some circumstances when a project may get shelved or cancelled. In such a state, the government protects the rights of buyers and investors so that they can get their investment back.