Dubai considers scrapping 27 projects

Regulators are gearing up to review all outstanding developments under a new law that gives them authority to cancel projects that do not start construction within six months of being approved by the Dubai Government. They are already considering cancelling 27 projects and are ready to halt additional developments that show no sign of being built and force developers to repay any outstanding amounts. Marwan bin Ghalita, the chief executive of the Real Estate Regulatory Agency (RERA), said the new regulation would bring transparency to the market and encourage developers to follow through with their commitments. "Many of these projects are from developers that are coming to us and saying 'we don't want to be in trouble'," Mr bin Ghalita said. "It's better to cancel them, rather than leave them dangling. It will give the market correct data." With the property sector slowing, some developers are having trouble financing the completion of their buildings because buyers are defaulting on their payment plans. The 27 projects are just a fraction of the hundreds of buildings registered with RERA. Mr bin Ghalita said earlier this year there were 427 property developers and 695 projects with trust accounts. He said he expected about 25 per cent of these projects to be cancelled, with others consolidated and delayed over time. A committee made up of officials from RERA and the Dubai Land Department was set up last week to review all projects. Mr bin Ghalita said final decisions on the projects to be scrapped would be made by the end of the month. Last week, officials said the Dubai Government issued a law that introduced a sliding scale of refunds for investors who defaulted on their payment plans according to construction progress. Mr bin Ghalita said the law, known as Dubai Law Number 9 of 2009, would also give RERA and the Land Department the authority to cancel projects. The details of the mechanism that would let the regulators cancel projects had yet to be released to the public, lawyers said. Mark Nierada, a partner at James Berry and Associates in Dubai, said regulations allowing RERA and the Land Department to cancel projects would be a positive move from an investor's point of view. "Many investors are frustrated by the fact that it's obvious to everybody that certain developers are not going to get certain projects under way because they don't return the money," he said. "The real test of whether RERA can demonstrate it has some teeth is whether it will go looking for developers who are stalled and telling them that if they don't move their project along, they will be cancelled." bhope@thenational.ae