Dubai: Dubai’s developers are starting to do their bit to attract — as well as retain — the longer term buyer for their off-plan projects. While doing so, they may be taking pre-emptive action in letting these properties become the target of too much speculative activity and spoil it for the genuine end-user.
G&Co, developer of the Millennium Estates, has put in a clause in its sales and purchase (SPA) agreements where in the case of any delay of more than 12 months over the stipulated timeframe, the buyer can cancel the deal and reclaim the “entire amount” paid up to that, according to the project’s sales and marketing agency. “The schedule is for a late 2016 handover — so in the unlikely event that a further 12 months elapse and the handover is still not done, the buyer can exert his right as per the clause and no questions will be asked,” said Kalpesh Sampat, director at SPF Realty. “This is about going the extra distance to convince investors that this is a project worth waiting for.
“It’s legally binding for both parties involved and the reality is this arrangement is something all are comfortable with. The Dubai Land Department has had measures to curb flipping for a few months now and developers, on their part, want to see buyers who can stay through the life-cycle of a project.”
To sift a speculator from a prospective end-user, developers are getting innovative. One of the leading names recently introduced a “Preferred Access” scheme, where those buyers who sign up get priority access to any new off-plan launches in the pipeline. To be eligible, members should be in a position to immediately pay 30 per cent of the value of the property and also commit to stick on until the project is completed.
But market sources say only a handful of local developers are in a position to engage in such an initiative. “The small, private developers in Dubai would not be able to generate such trust in my opinion,” said Jermaine Sterling, business development manager at Acrohouse Properties, a consultancy. “From an investor’s point of view, the idea of tying your money down on one asset may not be so appealing.
“But let’s not forget that a buyer who signs up could be investing a lot of money with no real guarantees on the development or the state of market at the time it will be completed. The idea is great but it does isolate the secondary market… to what extent we do not know now.”
There are other hooks that developers and market makers employ in winning over buyers, irrespective of whether they are end-users or have the speculative cap on. A key element in this is again the SPA, and more so on off-plan projects.
SPF Realty recently held a two-day event where SPAs were issued to buyers of properties at Grand Views (part of Millennium Estates at Meydan City) who had put up a 10 per cent deposit. “The off-plan agreement signing between buyers and the developer happened within two months after announcing the project whereas most others take a minimum of four to six months to do so,” said Sampat.
Under the current rules on off-plan sales and re-sale, transactions require the “Ocood”, “which is one of two documents (the second being the title deed) that you can legally sign a MoU (memorandum of understanding) or transfer a property,” said Sterling.
“This ensures that nothing can be transferred or even agreed on the market without one or the other. Everyone on an SPA from the old days now have to apply for the title deed/Ocood because if you sign an MoU without either you are liable for a Dh50,000 fine as a developer or agency.”