Abu Dhabi’s latest realty law explained

The new legislation introduced in Abu Dhabi is set to give a boost to the real estate sector in the capital. Zisha Rizvi, Partner - Corporate Commercial and Arbitration, and Rini Agrawal, Legal Associate - Corporate and Commercial at Sunil Thacker Associates (STA), explain the new law.

New law

The new property law being introduced in Abu Dhabi mainly aims at securing and enhancing the transparency of transactions in the real estate sector. It aims to empower the Department of Municipality Affairs (DMA) and maintain a register to save all documents or data relating to real estate development. The administration of such a register would safeguard the rights of the buyers. The commission of the register would enable the authorities to track all the transactions of real estate units sold off-plan. The DMA is also set to oversee a list of registered developers, appraisers and other parties to curb the flipping practice to some extent.

The new law mandates the setting up of a “project guarantee account” in an accredited bank. Such an account should be opened by the developer for each project after obtaining approval from the Abu Dhabi Department of Municipal Affairs. The model is similar to Dubai’s escrow account. The funds paid by the buyers of off-plan properties towards payment for the units in the project would be deposited in the project guarantee account. The account cannot be used for any purpose other than for deposits by the buyers and the amounts in this account would be released to the developer only if the property is developing as per the schedule. The setup of this account will ensure that the property is completed on time without troubling the buyers. Its main purposes are to make sure that the interests of the buyers are met and to prevent failure of completion of projects by the developer.

An escrow account is not the same as a project guarantee account, but both have undeniable similarities as they are both created by the developers to protect the interests of the buyers.

Looking ahead

Abu Dhabi has experienced exponential growth in the last few years. But the disputes relating to real estate will remain an important factor for potential homeowners to feel somewhat reluctant. The introduction of a more streamlined regulatory authority in Abu Dhabi (similar to the DLD and RERA in Dubai) would be a step forward to ceasing this hesitation of investors. The implementation of such a dedicated department solely for the purpose of dealing with property registration and impediments would enhance and safeguard the rights of investors.

Real estate is and has always been a sector that has stability and high potential for growth. By the establishment of the land department and the enactment of the regulatory authority, such stability and potential would be unassailable and resistant up to a level from economic and market variations.

Due diligence

Not all places in Abu Dhabi provide expatriates with the option to purchase freehold properties. The Abu Dhabi property laws permit expats to buy properties in specific areas known as “investment zones” (for instance, Yas Island, Saadiyat Island, Reem Island).

Hence, firstly, it is necessary for the expat buyer to determine whether the property he wishes to buy is in one of the investment zones or not. If the property is not in one of the investment zones, then an expat would not be able to purchase such property.

Secondly, he should make sure that the seller has ownership over the property and has an unencumbered right to sell such property because the ownership of a property can only be transferred from a rightful seller.

Thirdly, the buyer should inspect and verify the size and particulars of the property and make sure that he is not being defrauded or misled in any sense. It is also highly advisable for him to investigate and determine the existing finance over the property and ensure that such finance or mortgage has been cancelled before the ownership of the property is transferred. The buyer should also see to the current tenancy of the property as the sale would then be subject to tenancy rights. Due diligence on part of the buyer is very important to avoid future tribulations.

Scource: S. Dhar, Special to Freehold

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