Does regulation make a difference to the property market?

It’s fantastic to see such a big effort being made by the UAE government, particularly the Dubai Land Department, to implement some much needed legislation on such a young property market. The interest in property here has been strong in the local market and in the international market, creating the need for better property law to protect buyers. Now that prices are competitive on a global level, it is extremely important to establish understandable and secure legislation without loopholes. In recent months, we have seen decisive action to enforce such laws but given the previous disregard for rules by developers and landlords, will they make a difference?

Firstly, we have rent caps. These have been put in place to stop the excessive rise in rents which have been the main cause of inflation in the country. Dubai and Abu Dhabi particularly have placed a 7% limit on rental increases and 0% for people who suffered increases in the previous year. While this has had some effect for people, landlords have still tried to find ways to continue raising rents. From throwing people out of their accommodation without just cause to claiming they wish to use the property for themselves, tenants are facing a battle at the rent committee to fight for their rights against greedy landlords. On top of all this, the rent cap offers no protection for new tenants who are forced to pay whatever stupid prices the landlords charge to cover for being legally unable to overcharge current residents.

Secondly, we have the new trust account law. There are countless people who have bought from the many developments of the UAE, predominantly Dubai, and are now facing a long wait to move in due to construction delays. As all properties were sold off-plan, there are many that are yet to be completed and even some that haven’t been started yet! This is worrying for people who are choosing to buy property as an alternative to the aforementioned rental issues. Enter law no. 8 this year that stipulates the creation of Escrow or Trust accounts which buyers will pay their money into and the developers won’t get access to until they complete specified phases of the development up to the correct standard. This should make the market friendlier to buyers but this law is so new, only one developer has registered a trust at this point. Watch this space.

Finally, we have news that the Dubai Land Department has created the Real Estate Regulatory Agency or RERA for short, aimed to oversee property procedures and increase market transparency. This is a huge step for the real estate market here, which aims to stand out as a leading property market on a global scale. With better property regulations and more laws to protect investors, this is surely the most important advance in property legislation that Dubai has seen so far.

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