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Real Estate

New Law for Unfinished and Cancelled Real Estate Projects

Sheikh Mohammed

Impact of Sheikh Mohammed’s new Tribunal on Unfinished and Cancelled Real Estate Projects

The Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum announced a new law in December 2020. Sheikh Mohammed, the Vice President and Prime Minister of UAE, issued Decree No. (33) Of 2020. The law primarily targets canceled, and unfinished Dubai real estate projects and has been formed according to 2013’s Decree No. (21).

What is the new law all about?

Key highlights of the Decree are:

  1. A special tribunal has been formed that will replace the existing committee set up in 2013. The Tribunal has been named the Special Tribunal for Liquidation of Cancelled Real Property Projects. The Tribunal is responsible for settling related rights and liabilities in unfinished and canceled Dubai real estate projects. It is in charge of the liquidation of such properties.
  1. The Chairman of the Dubai Judicial Council is responsible for appointing the Chairman and members of the Tribunal.
  1. The Tribunal has been given the power to appoint auditors and create subcommittees.
  1. The Tribunal has also been entrusted with the power to issue an order to the trustees and escrow account holders of such projects.
  1. The Decree forbids Dubai courts to accept any disputes that fall under the purview of the Tribunal. Even the DIFC Court has been asked to keep out all appeals and complaints pertaining to canceled and unfinished projects. Only the Tribunal has complete jurisdiction over such properties. It is the only body responsible for resolving the disputes and grievances related to them. It will also determine the rights of buyers and investors in such projects.
  1. Dubai RERA (Real Estate Regulatory Agency) has been asked to support the Tribunal in the Decree. One of the foremost tasks assigned to RERA was to prepare a list of unfinished and canceled projects. RERA will also play an active role in dispute settlements as it is required to provide recommendations to the Tribunal.
  1. In case a project is being transferred from one builder to another, the Tribunal has to establish the obligations and responsibilities of each party.
  1. The Tribunal will be additionally responsible for liquidation and fair settlement if RERA has canceled any real estate project.
  1. The decision of the Tribunal in all regards is final and incontestable. Any law that contradicts the Decree has been declared null and void. The Execution Committee has been assigned the role of executing the judgments of the Tribunal.

The new Decree came into effect on the date it was published in the Official Gazette.

Sheikh Mohammed also announced Law No. (19) Of 2020. It is an amendment of Article (11) of Law No. (13) Of 2008. The law is related to the Interim Real Estate Register in Dubai. It states that a project developer needs to refund the entire amount to investors if they did not initiate construction for various reasons or if RERA had canceled the project.

Impact of Sheikh Mohammed on real estate projects

Impact of the new Law on Dubai Real Estate

The residential space in Dubai has been witnessing a steady growth in the past few years, especially the supply of new inventory. A Knight Frank report accounts the numbers at –

  • 28,500 new household units added in 2018
  • 36,300 units added in 2019 and
  • 50,700 units in 2020, even with Covid around.

Dubai is a prime market for buying property and investing in real estate. The new real estate law has been hailed as good news by experts.

One of the significant impacts of the Decree has been the new drive to complete the construction of stalled real estate projects. By giving the Tribunal absolute power to resolve all kinds of issues of unfinished and cancelled real estate projects, the grievance handling process has been streamlined effectively. Instead of approaching courts in Dubai, complainants can now head directly to the Tribunal for decisions, thereby shortening the resolution route.

Also, the second Decree concerning unfinished projects ensures that the money of buyers and investors is safe and well-protected. If a project does not take off because the developer did not begin construction or RERA had the project canceled, depositors will get a refund of their money.

Another significant area of concern that the new Decree addresses are issues that the preceding committee had failed to resolve. As per the new law, all such pending cases have the chance of amicable resolution by the Tribunal.

The new law has been interpreted in various ways by real estate experts in Dubai. Most of them feel that it is an investor-friendly decision. The new Decree will strengthen the confidence of prospective buyers and investors, especially foreign buyers and non-residents in Dubai.

Real estate projects are not failsafe and often do not get completed. There are endless reasons behind non-completion or the cancellation of a project. It can be fund issues, compliance-related issues, political causes, design-related issues, etc. When investors and buyers purchase flats in under-construction or new projects, there is always an associated risk. With the formation of the Dubai Special Tribunal, the government has taken a step towards minimizing risks.

The kind of wide-ranging powers vested in the Tribunal is an indication of the same. Investors and purchasers can now assertively decide to invest in a real estate project in Dubai as any dispute gets resolved effectively by the Tribunal. Alongside, investors and buyers who had grievances due to the cancellation of projects in the past can now look for an immediate and fair settlement.

Wrap Up

The new Decree is a definite boost to real estate investment in Dubai. One of the fundamental fears of investors in real estate projects is unfinished or canceled projects. The new law grants sole decision-making authority to the Tribunal, removing all intermediaries in between. Even courts have been directed to stay away; thereby, the time-consuming processes of the judicial system get eliminated at the onset itself.

The rights and the obligations of all parties in a real estate project – builder, developer, investor, buyer, etc. have been defined more effectively. The Tribunal, for sure, will initiate an agreeable settlement between conflicting parties in case of a canceled or unfinished real estate project.