All properties sold off-plan in Dubai will need to be registered under a new regulation to be introduced this month.
Off-plan land to require registration
All properties sold off-plan in Dubai, on both the primary and secondary markets, will need to be registered under a new regulation to be introduced this month by the Dubai Land Department. Since the introduction last year of the Real Estate Regulatory Authority (RERA), land plots and completed units have fallen under this obligation, and the new rules are being introduced to increase the protection of consumers. Buyers currently have only a developer's stamp on the first buyer's purchase agreement as proof of ownership of a property.
Mohammed Sultan Thani, the assistant director general at the Dubai Land Department, said a registration system was used only for completed buildings in most countries. "But we have this situation here where a lot of transfers are happening on the secondary market with off-plan properties," he said. "In other countries most people buy a house to live in, not because they want to make money out of it. They will make a downpayment and the rest of the money will come after the building is completed. Those countries don't need pre-registration. But things are different here."
David Sanson, a partner in the Dubai property practice of DLA Piper, a leading international law firm, said that the old system required trust. "A lot is being done here on trust and it certainly seemed to work, because people have sold and resold off-plan properties many times over," he said. "But it's a short-term approach. Investors are very active, people are very keen to get the deal done as soon as possible and move on to the next plot."
"If you are a first-time buyer and you buy directly from a developer, you will be able to get comfort [from the fact] that he owns the land on which you are buying," he added. "But the further [along the chain] you get, the further removed you also get from that comfort." Mr Thani said the Dubai Land Department had been developing and testing a pre-registration system for two years. "We hope to install it by the end of this month," he said. "We are in an early stage right now, where we are contacting the developers and taking the details of their buildings to register the sales."
Mr Thani said that the onus would not be on the buyer to register the property. "Developers will take care of it on behalf of the Land Department for all off-plan sales," he said. "It will be part of their duty." Each time an off-plan unit is resold, the transaction will need to be registered at the Land Department; however, there will be a charge only for the initial registration, not for resales. Title deeds will be issued only after completion of the unit, when the owners take possession. Mr Thani suggested that the cost of the deeds would be about Dh250 (US$68).
The biggest challenge now would be to put the rules into practice, said Mr Sanson, due to the number or properties involved and the need to educate the market. Mr Thani agreed that the new regulations would add a huge workload. "Since the beginning of this month we have registered 13,000 property sales [under RERA] which includes completed units and land," he said. "This is more than had been registered during all of last year."
He said that more than 60 per cent of completed buildings in Dubai were now registered and that "within two to three years, everything will be registered". "We have also already registered some off-plan properties, since we have been testing the system for awhile," he added. @Email:email@example.com