In the latest move to help the Dubai real estate sector revive some investor confidence, the government of Dubai has decided to compensate investors who have lost billions of dollars in officially cancelled projects.
Under a decree by Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum, a special legal committee will study disputes related to Dubai real estate projects that were officially cancelled by the Real Estate Regulatory Authority (RERA). The cancelled property projects would be liquidated, and the raised funds will then be used to repay investors hard-hit by the real estate market crash. The powerful new committee will supercede all courts in Dubai and the implementation of relevant court verdicts will be halted for the moment.
During 2009 and 2010, the Emirate’s property markets crashed in the aftermath of global financial crisis. As real estate prices plummeted to less than half their peak values, several investors were forced to abandon projects and quit the business entirely. Even though some of the projects were already in the design stage, their developers fled the Emirate and investors were unable to recover their money.
Data by RERA suggests that between 2009 and 2011, around 217 property projects were cancelled in Dubai. The cancelled projects included a Tiger Woods-branded golf course and a kilometer-high tower by government-backed developer Nakheel.
Since last year, Dubai real estate market has sharply rebounded, and property prices are on the rise again. In the first quarter of 2013, the Dubai real estate sector grew on the back of strong rental demand. As a result, rental prices of both villas and apartments in Dubai were higher compared to the last quart of 2012. Figures of Asteco’s report show that the rental prices for apartments and villas increased by about 21 percent and 19 percent, respectively, during the first quarter of 2013.
Property prices in Dubai have also been well supported by a steady growth in population and an increasing number of job opportunities for expatriates. The influx of population has correspondingly pushed rental and sale prices in Dubai higher.