In the second half of 2015, with the oil prices tumbling in the open market, there was a slowdown in the number of office/real estate enquiries, reported by real estate consultancies. However, with the coming into effect of Abu Dhabi’s new real estate law, experts are predicting a boost for ‘inward’ investment in the sector. This will, in turn, benefit the choice and competitiveness in the occupational market. The new property law is aimed at regulating the real estate market in Abu Dhabi. This law has been in the making for seven years and has undergone several rounds of consultation, reviews and drafting. It is aimed at attracting investment to the real estate sector and at the same time, takes care of the concerns of investors and developers. So, if you are looking for a business setup in UAE, now’s the time to go ahead and invest in Abu Dhabi.
The background of this law is that UAE’s real estate sector saw a lot of changes over the last decade. It also suffered a severe shock during the global financial crisis. Tough lessons were learnt during the slump period and this has led to greater stability and maturity in the market. Let’s look at some of the interesting provisions of the law.
Designated authority for development: The law gives Abu Dhabi’s Department of Municipal Affairs (DMA), the responsibility to develop and organize the real estate sector in Abu Dhabi. It also gives the department the sole right to supervise, control and coordinate all aspects of the sector and to coordinate with different municipalities for this purpose. The law mandates that a new structure will be formalized for the DMA for developing the new law and putting its various provisions into effect.
Off-Plan Sales: One of the key points of the law is the regulation of off-plan sales. Off-Plan sales include the purchaser’s rights over a unit proposed to be built according to the pre-determined floor and complex plans. According to the new law, the developer is not allowed to sell units off-plan, unless it is proved beyond doubt that the developer owns ‘real estate right over the project land’ and has also, opened an escrow account for that project. The escrow account is meant for paying out money for advertising, marketing an off-plan project, etc. The law also disallows developers from collecting registration fees from investors and allows developers to charge only administrative fees, approved by the DMA. This will result in lower costs for buyers.
Real-estate financing issues: The law allows units sold off-plan to be mortgaged, with the condition that the loan amount should be paid into the relevant escrow account, and the loan allocated for payment of the purchase price. Further, the developer is prohibited from mortgaging the project land or any related real estate right unless it is for the purpose of financing construction of the project. This will help banks address issues connected to real-estate financing and will encourage them to play a more proactive role in real estate lending.
Owners Associations: The new law clearly lays out proper provisions for the formation of the owners association. This will include all the owners of units in multi-unit real estate development projects. Owners’ associations’ will be independent legal entities which will hold the title for the common parts of the developments and they will also be responsible for the proper management of these projects.
Legal Sanctions: The law clearly sets out punishments for people violating its provisions. For example, any person working as real estate brokers, owners’ association managers, appraisers and surveyors without having an appropriate licence from the DMA, will be punished by imprisonment or a fine of not less than AED 50,000 and not exceeding AED 200,000. Also, anyone pursuing real estate development activities in the Emirate of Abu Dhabi, if found fraudulently marketing off-plan units for sale or has not deposited the necessary funds into the escrow account, will be liable for punishment with a fine ranging from AED 100,000 to AED 2,000,000.
If you harbour dreams of a Dubai Freezone Company Setup or want to start a business in Dubai, then this is the right time to invest in property; and, with the new real estate law coming into effect in Abu Dhabi, it will boost both growth and investment!
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