Analysis New rules concerning how sellers offer property are on top of the agenda for property brokers.
Tighter regulation for property brokers
New rules concerning how sellers offer property are on top of the agenda for property brokers. Currently, sellers can offer property through as many agents as they like, leading, brokers say, to inflated prices. Instead, Dubai agents would like to be able to charge sellers a fee to deter them from listing with others. "The best thing they could do is try and control sellers," says Gregory Antioch, a senior sales negotiator at Smith and Ken Real Estate. "At the moment, if a buyer goes through three or four different agents, the property owner thinks 'great, I can force the price up'. But if they set a standard by which agents could charge sellers for listing their property, then people would think twice."
Mr Antioch also says that once a regulation is in place it needs to be enforced, with authorities taking action against those he calls "rogue agents". "There needs to be an absolute standard that everybody adheres to," he says. "There are still a lot of rogue agents doing their thing." These sentiments are echoed by Iseeb Reham, the managing director of Sherwoods Real Estate, who calls for tighter regulation of brokers and more clarity on the property transaction process. "It's all there already, but it just needs to be activated and enforced," he says. "Most important are the agreements made between the sellers and the agents, and for the vendors to actually be held accountable."
When it comes to property being sold directly to the buyer from the developer, there needs to be one standard property contract, according to the managing director of a broker based in Dubai, who asked not to be named. "Right now, buyers have not only waited for months before receiving their contracts, but they have been subjected to changes made by the developers, which can differ widely from the property they agree to buy in the first place," the broker says. "We need far more transparency and accountability."
For their part, property brokers are already governed by regulations passed last year that require them to pass exams in ethics and law. Developers say their biggest challenge today is navigating a business environment in which customers are resisting paying for off-plan property they have purchased. During the boom, these off-plan sales boomed. But now, buyers can no longer afford or simply refuse to pay for the property, leaving many developers with no money to finance construction. Some developers have renegotiated payment plans and devised creative solutions to collect money, but the risk of buyers defaulting is still high.
Since the start of this year, new rules have been introduced for developers. One requires them to tie payment plans for buyers with construction milestones; the other requires them to have completed 20 per cent of the building before sales can begin. "This is absolutely the right way to go, as that's how it is in mature markets," says an executive at a large private developer, who asked not to be named.
"But the problem is there are hundreds of projects already under way and they're going back and changing the rules on all of these. The issue here is that the buyers are thinking 'I'm not going to pay any more' and are going to RERA, as a group, to ask them to force the developer to give their money back." The executive also wants to see master developers, such as Nakheel, Emaar Properties and Limitless in Dubai, be more flexible with private developers when it comes to payment for land.
Danial Schon, a director at Schon Properties, says the idea of the three groups working with RERA is a good way to gather everyone's concerns as new laws are considered. He would like to see a law governing the relationship between master developers and sub-developers. Right now, Law No 9 covers the relationship between only homebuyers and developers. "Such a law would further strengthen the market and help reduce disputes between developers and sub-developers," he says. "Having an arbitration platform at the Land Department would also help. This will make the Land Department more accessible for all and disputes of any nature could be solved without lengthy legal procedures."
Homeowners want more transparency from developers on projects, especially those that have yet to be built. One investor in a delayed development, who asked not to be named, says she is unsure whether to pay her next instalment of 30 per cent because construction has yet to begin. But she knows if she walks away, the developer is entitled to keep 30 per cent of the money she has paid so far. The Property Court was set up last September to help buyers resolve their disputes with developers. While requirements such as the developer linking payment to construction are helpful, buyers say, more needs to be done to revive investor confidence.
"Until there are proper regulations in place then I wouldn't buy again ? you need transparency and a sign that things will improve to bring investor confidence back," says Saqib Iqbal, who bought a villa at Nakheel's delayed Palm Jebel Ali. Aarti Chana, who also bought a villa at the development, says existing laws need to be enforced and new ones introduced for better buyer protection. Homeowners should also have better access to official documents on the project in which they have invested, Ms Chana says. "At the moment, you have to get permission from the courts before going to the Land Department to see official documents. We should have a copy, access to these as the homeowner."
Generally speaking, says Hamir Hamri, the interim chairman of Jumeirah Beach Residents Homeowners' Association, he is in favour of the dialogue between property stakeholders and RERA. "If they are looking for solutions, this would be a good move. But a dialogue alone is not going to help as we will still be running in circles," he says. "Homeowners are the biggest stakeholders and regulators will have to make developers deliver on their promises and contracts they have signed. "If that does not happen, no new investors will come to this market and existing investors will leave."