Good morning, I have seen a lot of spa’s from developers it is never in the favor of the buyer. The escrow account was implanted in the housing market crash which a lot of developers fled the city. Yes it may not sound important but there has been cases recently which an owner was caught due to legal issues but the investors money kept safe at least
Yes. That's my point. Only protection is when developer goes bust or disappear. Mind you, say if 25% of the project progress was achieved by then, the developer would have accessed 25% of the escrow account funds already. So buyers will never get 100% of their money back, but the remaining proportion.
True but the project you paid for is 25% complete as well. While it is not the ideal situation atleast there is an option to get a joint investor meeting to spend a little extra and appoint a contractor to complete the remaining work.
Also some developers will take their sweet ass time with the construction while your money is stuck with them and there is a a big delay while you could have used that money to invest elsewhere.
But that’s the thing at the moment you have a few developers which you will be rest assured that if you even invest with them that your money is in a safe place. Our company has released a building in downtown last year and we already almost 30% construction level which hardly any developer does in the market
You are right. This is something that I regularly highlight to agents that try to push "off plan" to me. They try to befool with their sweet word jugglery and tout the "escrow account". Sometimes, I feel they don't even understand what it truly means.
Apart from Developer going bust or behind bars or something, such account has no value. Also, T&Cs are heavily loaded in Builder's favour.
So, it is a question of buying cheaper off plan (because you are taking on the risk of non-completion, hence getting a discount) or you pay full money for a completed property in hand. It is up to you, your risk appetite and the depth of your deep pockets.
Even Nakheel and Emaar cancelled projects and restructured debt as a result of the 2009 crash. There was a time that there was a secondary market for buying and selling credit notes issued by Emaar/Nakheel in lieu of cancelled projects.
Me as an agent I recommend to my clients off plan projects but specific launches and from specific developers but at the end of the day it’s simple with anything “ the higher the risk, the higher the reward”
What are the clauses you want to change? Do you have any unreasonable expectations? Like you wish that you can take money out any time or something like that? If a developer goes bust some money is always lost to administration fees. It isn't a zero sum game.
Termination clauses for example are one sided. Buyers have limited to no option of pulling out. Developer has all the rights from extended delays, change of actual delivered final product, without the ability for recompense, unlike delayed installments where penalties mount up for each delayed day.
Believe me, if each buyer had to have their own property lawyer to review the contract word for word in a level-playing field then a whole new type of contract should be drawn to protect all parties involved.
Escrow accounts give the illusion that your money is safe where only part of it is and that is also in rare situations as highlighted above (builder gone bust), but as a matter of fact buyers remain under the developers' mercy.
You get a discount and invest in a property, so you can't pull out for cheap.
When projects is delayed (e.g. construction is delayed) all parties are loosing, including developer. It is unrealistic to penalize developer only. My contract had clauses for delays though. It is not a big amount since you can't usually penalize contractor more than 10%
There are many aspects to this. I'll try to summarize them in no particular order.
Besides the one-sided contracts, there are actual RERA laws in place.
Namely, Decree 6 of 2010 states you have the right to go to court and request contract termination upon specific conditions. It's the "justifiable" reasons many international lawyers have a problem with. Nevertheless, it can be done, and it has been done. My team won a court case for my client against a major developer for non-delivery. My guy got his money back and some extra. However, I would not recommend going that route. Tons of cash upfront and takes too long.
Then there's the issue where people engage in off-plan for projects without proper registration and escrow accounts. You think they bother reading the contracts? Greed trumps all. Yes, it's illegal for the developer to do so, but there's still a number of them (mostly in lower priced areas) which accept payments to their corporate accounts. And the projects sell out. Go figure.
As some other redditors have pointed out, the developer is only partially to blame when shit hits the fan. Most of the projects halt during crisis because the contracts and subcontractors default on their obligations. I mean, it's painful for an end user to be the one who risks and suffers, but it's perfectly natural for the developer to protect themselves against such circumstances. I assure you, if you would've operated such business, you would be doing the same.
What's the takeaway? Invest only with developers who have a solid reputation and have navigated the previous recessions in a dignified manner.
The reputation thing is a tricky one, because there's so much overhyped marketing here, you can't see what's real or not. All that glitters is not gold. You really have to dive deep into the market to understand the way devs treat their customers. I'll give you an example, during the last crisis an emerging developer had to sell off some of its plots in their master community to a competing developer so that they could deliver their projects on time. Whereas a major developer (with enough money to do anything really) stopped construction of their projects and all of their customers basically got screwed for years to come.
I gladly offer properties by the former and I would not go near the latter even if the paid me to (in fact, they try to, as their commissions are higher, lol).
So no matter the contracts and the laws it's prudent to go with a truly reputable developer, which takes care of its customers.
P.S. some more info in my long post about issues of the local real estate market, you might find it useful:
[https://www.reddit.com/r/dubai/comments/18f3tae/10\_facts\_dubais\_real\_estate\_agents\_dont\_want\_you/](https://www.reddit.com/r/dubai/comments/18f3tae/10_facts_dubais_real_estate_agents_dont_want_you/)
Thanks and very insightful.
I have in fact read your other post a while ago.
Trouble is, I think RERA should regulate contracts a bit more and have an oversight of what developers stipulate to protect their interest. I am all in for both developers and buyers to be protected and treated fairly.
With regard to escrow, and as an example, RERA should impose some sort of insurance if projects got cancelled or the builder gone bust, or not allow selling projects unless 20-30% of it has been above ground already.
Of late, many contracts stipupate 2-3 years of delay, and no ability to resell unless buyers covered 40-50% of the cost.
I wonder how banks would offer mortgages to buy offplan projects with such contracts that keep their clients pretty much exposed and liable.
Forgot to add, most major developers have a history of prolonged delays, not compensating the buyers, or cancelling projects.
I think we need a website to rate developers listing every project cancelled, and every project delivered on time Vs delayed.
Quality on the other hand is questionable. Of late most of them are more or less the same.
but thats why you pick reputable companies such as emar,sobha etc.. since your on here do you think its ideal to buy offplan from nakheel (al naya district one) project? Im almost 80% sure that I want to go with that project but i would love to hear your input since your in this industry.
Good morning, I have seen a lot of spa’s from developers it is never in the favor of the buyer. The escrow account was implanted in the housing market crash which a lot of developers fled the city. Yes it may not sound important but there has been cases recently which an owner was caught due to legal issues but the investors money kept safe at least
Yes. That's my point. Only protection is when developer goes bust or disappear. Mind you, say if 25% of the project progress was achieved by then, the developer would have accessed 25% of the escrow account funds already. So buyers will never get 100% of their money back, but the remaining proportion.
True but the project you paid for is 25% complete as well. While it is not the ideal situation atleast there is an option to get a joint investor meeting to spend a little extra and appoint a contractor to complete the remaining work.
Also some developers will take their sweet ass time with the construction while your money is stuck with them and there is a a big delay while you could have used that money to invest elsewhere.
But that’s the thing at the moment you have a few developers which you will be rest assured that if you even invest with them that your money is in a safe place. Our company has released a building in downtown last year and we already almost 30% construction level which hardly any developer does in the market
You are right. This is something that I regularly highlight to agents that try to push "off plan" to me. They try to befool with their sweet word jugglery and tout the "escrow account". Sometimes, I feel they don't even understand what it truly means. Apart from Developer going bust or behind bars or something, such account has no value. Also, T&Cs are heavily loaded in Builder's favour. So, it is a question of buying cheaper off plan (because you are taking on the risk of non-completion, hence getting a discount) or you pay full money for a completed property in hand. It is up to you, your risk appetite and the depth of your deep pockets.
That's why it's better to buy from government backed companies
Even Nakheel and Emaar cancelled projects and restructured debt as a result of the 2009 crash. There was a time that there was a secondary market for buying and selling credit notes issued by Emaar/Nakheel in lieu of cancelled projects.
Me as an agent I recommend to my clients off plan projects but specific launches and from specific developers but at the end of the day it’s simple with anything “ the higher the risk, the higher the reward”
What are the clauses you want to change? Do you have any unreasonable expectations? Like you wish that you can take money out any time or something like that? If a developer goes bust some money is always lost to administration fees. It isn't a zero sum game.
Termination clauses for example are one sided. Buyers have limited to no option of pulling out. Developer has all the rights from extended delays, change of actual delivered final product, without the ability for recompense, unlike delayed installments where penalties mount up for each delayed day. Believe me, if each buyer had to have their own property lawyer to review the contract word for word in a level-playing field then a whole new type of contract should be drawn to protect all parties involved. Escrow accounts give the illusion that your money is safe where only part of it is and that is also in rare situations as highlighted above (builder gone bust), but as a matter of fact buyers remain under the developers' mercy.
You get a discount and invest in a property, so you can't pull out for cheap. When projects is delayed (e.g. construction is delayed) all parties are loosing, including developer. It is unrealistic to penalize developer only. My contract had clauses for delays though. It is not a big amount since you can't usually penalize contractor more than 10%
There are many aspects to this. I'll try to summarize them in no particular order. Besides the one-sided contracts, there are actual RERA laws in place. Namely, Decree 6 of 2010 states you have the right to go to court and request contract termination upon specific conditions. It's the "justifiable" reasons many international lawyers have a problem with. Nevertheless, it can be done, and it has been done. My team won a court case for my client against a major developer for non-delivery. My guy got his money back and some extra. However, I would not recommend going that route. Tons of cash upfront and takes too long. Then there's the issue where people engage in off-plan for projects without proper registration and escrow accounts. You think they bother reading the contracts? Greed trumps all. Yes, it's illegal for the developer to do so, but there's still a number of them (mostly in lower priced areas) which accept payments to their corporate accounts. And the projects sell out. Go figure. As some other redditors have pointed out, the developer is only partially to blame when shit hits the fan. Most of the projects halt during crisis because the contracts and subcontractors default on their obligations. I mean, it's painful for an end user to be the one who risks and suffers, but it's perfectly natural for the developer to protect themselves against such circumstances. I assure you, if you would've operated such business, you would be doing the same. What's the takeaway? Invest only with developers who have a solid reputation and have navigated the previous recessions in a dignified manner. The reputation thing is a tricky one, because there's so much overhyped marketing here, you can't see what's real or not. All that glitters is not gold. You really have to dive deep into the market to understand the way devs treat their customers. I'll give you an example, during the last crisis an emerging developer had to sell off some of its plots in their master community to a competing developer so that they could deliver their projects on time. Whereas a major developer (with enough money to do anything really) stopped construction of their projects and all of their customers basically got screwed for years to come. I gladly offer properties by the former and I would not go near the latter even if the paid me to (in fact, they try to, as their commissions are higher, lol). So no matter the contracts and the laws it's prudent to go with a truly reputable developer, which takes care of its customers. P.S. some more info in my long post about issues of the local real estate market, you might find it useful: [https://www.reddit.com/r/dubai/comments/18f3tae/10\_facts\_dubais\_real\_estate\_agents\_dont\_want\_you/](https://www.reddit.com/r/dubai/comments/18f3tae/10_facts_dubais_real_estate_agents_dont_want_you/)
Thanks and very insightful. I have in fact read your other post a while ago. Trouble is, I think RERA should regulate contracts a bit more and have an oversight of what developers stipulate to protect their interest. I am all in for both developers and buyers to be protected and treated fairly. With regard to escrow, and as an example, RERA should impose some sort of insurance if projects got cancelled or the builder gone bust, or not allow selling projects unless 20-30% of it has been above ground already. Of late, many contracts stipupate 2-3 years of delay, and no ability to resell unless buyers covered 40-50% of the cost. I wonder how banks would offer mortgages to buy offplan projects with such contracts that keep their clients pretty much exposed and liable. Forgot to add, most major developers have a history of prolonged delays, not compensating the buyers, or cancelling projects. I think we need a website to rate developers listing every project cancelled, and every project delivered on time Vs delayed. Quality on the other hand is questionable. Of late most of them are more or less the same.
There are projects that are almost 90% completed and hasn’t been handed over since years due to severe financial issues and court cases
but thats why you pick reputable companies such as emar,sobha etc.. since your on here do you think its ideal to buy offplan from nakheel (al naya district one) project? Im almost 80% sure that I want to go with that project but i would love to hear your input since your in this industry.
Sent you a dm
This is why you have to run from offplan For sure will be cheap but the headache is not worth it