In recent years, Dubai has experienced significant expansion as a major player in the global property market. The dramatic expansion of the city’s skyline with numerous high-end residential developments and master-planned neighborhoods would be impossible without the governing structure of Dubai’s property market. The regulatory environment, which enables transactions and provides a clear path to enforcement of those transactions, is provided by RERA (Real Estate Regulatory Authority), a division of the Dubai Land Department.
The Regulatory Framework Behind Dubai Property Transactions
While developers are responsible for developing their projects and while brokers are responsible for negotiating transactions with them, RERA is responsible for establishing and enforcing the laws and regulations that govern the transparency, accountability and compliance of real estate transactions.
Licensing Standards and Professional Accountability
RERA regulates direct brokerage/real estate company licensure. Prior to obtaining a license as a broker, each broker is required to complete a state-approved training program, pass a certification exam and remain actively licensed. This process limits the amount of unlicensed agents in the marketplace allowing buyers to verify whether an agent is licensed prior to commencing negotiation.As opposed to relying on the reputation of a broker, buyers have the ability to verify the legitimacy of a broker.
Developer Regulation and Escrow Protection
Prior to starting work on a project, developers must make a formal registration for their project and create a special escrow account where all payments made by a buyer (for example, down payments) will be kept until the completion of the project. The use of this escrow account protects the off-plan buyer from losing money while the developer is working on the project; this way the buyer’s money is protected because it is being held by the bank specifically for the development project.Payments are disbursed to the developer in accordance with verified construction milestones, which serves to limit the potential for developers to misapply funds or delay project completion.
The example below illustrates the use of an escrow account in a scenario where a buyer reserves a unit in a new residential tower. In contrast to paying funds to the developer’s general corporate account, the payment for the unit reservation is paid into a regulated escrow account tied to that specific development. RERA monitors the disbursement of funds from the escrow account to the developer and verifies that such disbursements are consistent with the applicable construction milestones. The use of an escrow account greatly reduces the risk of a project being delayed or abandoned.
Marketing Oversight and Transaction Transparency
Another area that falls under regulation is advertising standards. All of the broker/developers are required to be accurate with their descriptions of the property (i.e., square footage, amenities and expected completion date). Misrepresentation of the property will result in a penalty. Requiring the accuracy of the representations that are made by the developers/brokers will allow for honest and clear marketing practices, and provide consumers with the ability to make an educated decision regarding the purchase of a property that is based on true data versus misinformation.
Access to data is also a component of transparency. Buyers may find that they have a variety of official avenues through which to contact the Dubai Land Department in order to check the status of the developer’s registration, the ownership of land for the development and whether or not the selling agent is licensed by the government. These avenues are able to allow investors to complete their own “due diligence” instead of completely depending upon the sales narrative presented to them by the real estate sales person.
Legal Safeguards and Dispute Resolution
The last piece of the regulatory framework for real estate transactions in Dubai includes methods for resolving disputes related to the transaction.When a disagreement arises between a buyer and a developer in Dubai, there are established legal processes for resolving the issue. A well-established process provides assurance to both parties regarding the enforcement of contractual obligations.
International investors typically compare multiple markets as part of their investment decision-making process. While many cities may provide attractive returns, few cities provide the same level of regulatory oversight. RERA’s regulatory framework enhances Dubai’s competitive advantage by providing assurance that its rapid growth is occurring in a well-defined legal environment.
An understanding of the regulatory framework used in the Dubai property market changes how investors assess opportunities. Prices, rent yields, etc. matter; however, the regulatory compliance framework will determine whether a transaction is safe from a legal perspective. Investors who understand how RERA works feel more confident when approaching the market and are able to manage risks more effectively.
Professional Guidance Within a Structured Regulatory Framework
Keyspace Realty operates within the structured regulatory framework provided by RERA to assure that each transaction we facilitate complies with all established legal standards. Therefore, we will review and verify that the Developer has all necessary Registration Documents; verify that the Escrow Accounts have been set up correctly; verify that the Brokers are Licensed; and help our Client to fulfill all required Documentation as requested by the Dubai Land Department.
In addition to having an intimate knowledge of the Dubai property market, Keyspace Dubai provides confidence and additional assurance through regulatory compliance of the Dubai property market based on the regulations and guidelines provided by RERA.
Frequently Asked Questions
What does RERA do for Dubai real estate?
The main job of RERA is that it supervises brokers, signs up developers, monitors (checks) how money is being put into and taken out of escrow accounts and makes sure developers are complying with rules so they don’t cheat consumers or otherwise damage the market.
In what way does RERA protect buyers who purchase off-plan units?
RERA requires all developers to create an escrow account that will be specific to each project and to keep track of how much money from that escrow account is given to them as the project advances through its milestones.
Can a consumer find out if a realtor has a license?
Yes; A consumer can check whether a broker has a valid license by checking his status on the official platform of the Dubai Land Department.
Does RERA resolve disputes between buyers and developers?
Dubai provides formal legal avenues for dispute resolution and special committees to resolve disputes in a regulated framework.
Why is regulatory oversight important to investors?
Regulatory oversight assures transparency, enforceability of contracts, and accountability for financial transactions, which reduces the risk inherent in a transaction in the Dubai property market.
NOTE: Pictures used in the advertisement are for illustration purposes only.
