Full refund for cancelled developments in Dubai

Property investors in Dubai who find that the development projects they have invested in are cancelled by the state's real estate regulators will receive a full refund, it has been revealed.

The Real Estate Regulatory Authority has confirmed that under Law No 9 of 2009, which provides a sliding scale of refunds, if a government review shows the project has been officially cancelled all cash paid by buyers will be returned by developers upon termination of the contract.

It is hoped that the law, which becomes binding soon, will provide clarification over the termination of sale and purchase agreements for off plan units. There has been concern about the number of investors who have been keeping up with payments to developers who have failed to start construction because of the global economic downturn.

According to legal firm Lovells if RERA confirms the cancellation then the buyers will get a full refund.

'Law 9 will provide significant guidance to the real estate market and will clarify the uncertainty on terminations and damages,' said Mohammad Kamal, Head of Real Estate Middle East at Lovells, who was part of a Rera working group that helped draft the new rules.

'Rera will apply the law and give directions to developers on what steps to take,' Kamal added.

The new law contains a sliding scale that spells out the rate of investor compensation to be paid by developers based upon the amount of construction completed. Currently over 800 projects are being examined by government inspectors across Dubai to determine the progress of each development.

Under the new law all terminations must be served through the Dubai Land Department and the purchaser shall be given 30 days to rectify a breach.

If the project is 80% complete the buyers forfeits 100% of cash paid to date; if it is 60% completes the buyer loses 40% of the purchase price; if it is less than 60% complete the buyer forfeits 25% of the purchase price, under the sliding scale.

If construction has not yet started the buyer forfeits 30% of the amount paid to date but if the development is officially cancelled by RERA the buyers will get a full refund.