Dubai’s real estate authorities are likely to step in to cool down the off-plan residential sales rush, which, if left unchecked, could have created the risk of too much supply coming in at the same time. Developers with upcoming off-plan launches are now expected to finish 50 per cent construction before they can start selling. Earlier, the cut-off was 20 per cent.
The authorities are stepping in before the risk of the market overheating became a reality. Already, speculative buying was starting to show up in recently launched projects, and industry sources were starting to voice real concern about a “2008-like situation”.
According to the consultancy JLL, residential projects with more than 90,000 units have been announced in Dubai and are either in their development stage or likely to start the activity shortly.
But all through last year, it did seem that sales of off-plan properties were running ahead of the market. Developers, even those with not much of a track-record, were getting on with their off-plan sales and sweetening the offers through post-handover payment plans of even 5 years and more. The risk was that these sales more often than not had minimal down payment requirements.
Interestingly, government-owned developers are exempt from the new requirements, market sources say. “The revised regulations regarding developers and construction timelines will reduce the probability of stalled projects,” said Nasser Malalla Ghanem, Senior Partner at the law firm of NP Associates. “This regulatory oversight ensures proper financial close of projects, plus further reduce the chances of investor disputes.”
Smaller developers with upcoming projects will need careful planning managing their funds ahead of the sales launch.