Off-plan properties in Dubai have long been considered lucrative investment opportunities, particularly in a dynamic market like the city’s real estate sector. With more affordable prices and flexible payment plans, investors can secure properties at lower costs compared to completed developments, offering the potential for significant returns.
However, some off-plan projects may face delays or even cancellations, raising concerns among investors. To address these issues and ensure transparency, the Dubai government has implemented a set of regulations that provide clarity on refunds for off-plan projects that are cancelled. Below is an overview of what happens when a project is marked as ‘cancelled’ or ‘under cancellation’ and the associated refund procedures.
In Dubai’s real estate sector, a project’s status as ‘cancelled’ or ‘under cancellation’ is determined by the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (Rera).
A project is officially deemed ‘cancelled’ when Rera issues a final, reasoned decision to terminate it. This decision is typically made due to significant delays, insolvency, or failure to meet regulatory standards. Once a project is cancelled, the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai oversees the liquidation process and settlement of related rights. This tribunal was restructured under Decree No. (33) of 2020.
A project is marked as ‘under cancellation’ when it is in the process of being reviewed by Rera for potential cancellation. During this phase, Rera assesses the project's progress, financial stability of the developer, and compliance with regulatory requirements. A project remains in this phase until Rera makes a final decision to either proceed with cancellation or allow the developer to continue.
The legal procedures for handling cancelled real estate projects are outlined in several key laws and decrees:
Decree No. (33) of 2020: This decree created the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai and restructured the committee responsible for handling unfinished and cancelled real estate projects.
Dubai Law No. 13 of 2008 (as amended by Law No. 19 of 2020): This law specifies the procedures for developers to refund payments to buyers when a project is cancelled.
Law No. (8) of 2007: This law governs Guarantee Accounts for real estate development in Dubai. It requires developers to return all payments received from purchasers if a project is cancelled, following the guidelines outlined in the law.
The refund process is regulated to ensure that buyers are compensated fairly if a project is cancelled. Refunds are typically made from the guarantee account set up for the project, which is managed by a trustee and supervised by the DLD. The steps involved are as follows:
Completion between 60% and 80%: If a project is 60-80% complete, the developer may choose to rescind the contract. The developer is allowed to deduct no more than 40% of the unit's value, and the remaining amount must be refunded to the purchaser within one year from the contract cancellation date, or within 60 days of reselling the unit.
Completion less than 60%: If the project is less than 60% complete, the developer may rescind the contract at their discretion, with a deduction of no more than 25% of the unit's value. The remaining balance must be refunded within one year or within 60 days of reselling the unit.
No work commenced or project cancelled: If the developer has not started work on the project or if it is officially cancelled by Rera, the developer must refund the full amount received from the purchaser. The refund process is managed using the guarantee account, with funds provided back to buyers by an authorized financial institution.
File a Grievance: Buyers should file a grievance with the Judicial Committee for Unfinished and Cancelled Real Estate Projects. The grievance should detail the issues with the project and the request for a refund.
Judicial Committee Review: The committee reviews the grievance and assesses the circumstances. Rera submits a report on the project's status to the committee, including proposed solutions and actions taken.
Decision by the Judicial Committee: The committee makes a final decision regarding the grievance, which may include ordering the return of amounts deposited in the escrow account or paid to the developer.
Refund Process: If the committee orders a refund, the trustee or developer must return the amounts to the purchaser. The decision is final and cannot be contested through ordinary appeal methods.
Dubai’s legal framework offers significant protection for property buyers. Laws such as Law No. 8 of 2007 and Law No. 13 of 2008 (as amended) prioritize the rights of purchasers, ensuring that funds in guarantee accounts are protected and refunds are processed transparently.
While delays may occur in resolving issues, the legal framework is designed to ensure fairness and accountability. If buyers are dissatisfied with the resolution, they can also initiate legal action through the Special Tribunal for Liquidation of Cancelled Real Property Projects to resolve disputes and enforce refunds or compensation.
Dubai's real estate market continues to offer promising investment opportunities, even in the off-plan sector. However, it’s crucial for buyers to understand their legal rights and the procedures involved if a project is cancelled or faces delays. With robust laws in place to protect purchasers and ensure transparency, investors in Dubai's off-plan market can have confidence that they are safeguarded against potential risks, including project cancellations.
