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Overseas Property Professional

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Q: What does Law Number 8 concerning Guarantee Accounts of Real Estate Development mean for agents promoting in Dubai?

A: Agents promoting property in Dubai in recent years may have borne the brunt of buyers’ anger with late project starts or an absence of physical progress on their projects. Law Number 8 concerning Guarantee Accounts of Real Estate Development may come as a welcome development for agents with a long-term commitment to the Emirate.

Under Law 8, developers launching new complexes will now have to apply to the Dubai Land Department to open a ‘guarantee’ or ‘escrow’ account. To do this they have to submit certain documents, including the title deed of the plot being developed, a letter of approval from a master developer and a trade licence. If these papers are in order, the account will be opened according to a written agreement between a developer and the Land Department. Money paid by buyers towards properties will then be deposited in a special account opened under the name of the property development in an approved bank.

There are still questions over whether the law will apply only to developments started after the law was passed. Overall, though, this is a much awaited and positive development. However, one conclusion is that it is likely to dampen new project launches, and there have been so many over the past year that this may well mean an end to new projects for a while, at least from smaller developers. But a slowdown in the supply of new projects is unlikely to deter agents in it for the long haul. In fact, Law 8 should give further confidence to promote investment in an active market with increased protection for their buyers.

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