Rera sets payment rule

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Starting from January 1, 2009, developers and banks have been ordered to stop taking payments more than 20 per cent of the cost of properties from buyers or investors until construction begins, a Real Estate Regulatory Agency (Rera)Real Estate Regulatory Agency (Rera) official has revealed.

"We have sent out letters to 100 developers - as well as having meetings with them and lending banks and institutions - telling them to take payments from buyers worth only up to 20 per cent of the contract value," Essa Saeed Ahmed Al Mansoori, Head of the Trust Accounts Section at ReraRera's Real Estate Development Trust Account Department, told Emirates Business.

"With properties that are already being built, developers who have collected more than 20 per cent of the contract value from buyers will immediately have to stop asking for further payments until they correlate the escrow amounts already collected to construction progress."

ReraRera has set up an 11-member Real Estate Development Trust Account Department that will supervise and monitor the construction process and ensure the escrow amounts are collected in accordance with the agreed schedule.

"We have all the figures in our database and are asking developers to stop collecting money from buyers," said Al Mansoori.

ReraRera Chief Executive Marwan bin Ghalita said developers could protect their rights by referring disputes to the Property Court where contractual agreements would be enforced. "The message we want to send out to the developers and lending banks is to consider the situation of the investor before they take action," he said. "In this time of crisis, everyone should work together and everybody's rights will be protected."

Meanwhile, ReraRera has announced that a revision of Law No 8 is being considered by Dubai Land DepartmentDubai Land Department.

"For new sales and purchase agreements the booking amount has been set at a fixed amount rather than the previous rate of five to 10 per cent of the contract value," said Al Mansoori . "In January, ReraRera will set up a technical audit team. The new system will enable stricter auditing of the escrow account, the developer and the trustee."

He added that ReraRera was introducing regulatory procedures covering Law No 13, which established the Interim Real Estate Register.

A land department spokesman said 100,000 units had already been registered.

By Anjana Kumar

© Emirates Business 24/7 2008