What investors need to know before buying Off-Plan

1. Is the real estate project registered with RERA?

Every real estate project in Dubai must undergo registration with RERA, and the registration fee currently stands at AED 150,020. This fee must be paid at the time of submitting the project registration application. Investors can directly verify the project's registration details on the DLD website (www.dubailand.gov.ae).

Failure to register the real estate project with RERA or engaging in development activities without a license can lead to penalties of up to AED 100,000 or even criminal sanctions, as stipulated in the Escrow Law (Law No. 8 of 2007 concerning Escrow Accounts of Real Estate Developments in Dubai).

2. Is there an escrow account for the project? What is the escrow account number and the name of the escrow account agent?

Developers intending to sell off-plan units in a development project are required to establish a separate escrow account for the project with an accredited escrow agent (a bank or financial institution) as per the Escrow Law. The developer must deposit all amounts received from third-party purchasers of off-plan units and loan payments funded by financiers into this escrow account for the purpose of construction. These funds can only be used exclusively for the development project's construction and related financing payments. Every developer must register in the RERA TAS system and record all financial transactions accordingly.

The sale and purchase agreement between the developer and investor must include details of the project's escrow account number, and any funds received from the investor must be directly deposited into this designated escrow account. The investor can easily verify the escrow account agent's details and account number either on the DLD website or by using the 'Mashrooi' application launched by the DLD. This application lists all registered developers in Dubai, along with their projects and essential details like construction status and escrow account particulars.

3. What is the percentage of completion of the project, and what is the expected date of completion?

The DLD website provides a project status tracking service that allows investors to monitor the current completion status of real estate developments in Dubai by entering specific details such as the land number, project number, or project name. The Mashrooi smart application also offers this project status tracking service.

The expected date of completion should be clearly stated in the sale and purchase agreement between the developer and investor, and the agreement should address any issues related to default committed by the developer in meeting the estimated timeline. It's common for developers to include a buffer period in the agreement, such as an additional 12 months from the expected completion date, to account for any potential delays in project completion.

4. Is the developer registered with RERA, and does the developer own the development land, or is there a development agreement between the owner and the developer?

RERA allows companies registered with the Dubai Department of Economic Development (DED) with the activity of 'real estate development' or DED Professional License holders to be registered as developers for new development projects.

The title deed of the development land should be in the name of the developer. Alternatively, the developer and the owner of the development land can enter into a project development agreement. The registration fees for such agreements between the developer and the landowner are 4% of the current market value of the land, and the agreement's execution must be done at RERA. The terms of this agreement can be amended with prior approval from RERA. However, if the developer and the landowner can demonstrate to RERA that they share the same or related ultimate beneficiaries in their corporate structure, RERA may exercise discretion to waive the registration fees.

5. Does the developer have the necessary permits and approvals from Dubai Land Department and RERA to sell off-plan in the relevant project?

For developers intending to sell off-plan units, RERA provides four options currently:

a) Completing 20% of the construction works of the project and then applying to RERA for a no objection certificate to sell off-plan.b) Making a cash deposit of 20% of the construction value of the project into the designated escrow account and subsequently applying to RERA for a no objection certificate to sell off-plan.c) Submitting a bank guarantee to RERA equal to 20% of the construction value and then applying for a no objection certificate to sell off-plan.d) Submitting an application to RERA for a no objection certificate to sell off-plan without meeting the requirements mentioned in options (a), (b), or (c). In this case, the developer must deposit all received funds from third-party sales into the designated escrow account and refrain from withdrawing any money from the account until a minimum of 20% of the construction works has been successfully completed.

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