Emirates City Forum

Arra open to project cancellation if necessary

By Parag Deulgaonkar on 11/3/2009

Ajman Real Estate Regulatory Agency (Arra) may consider transferring a project to another developer for completion if the original developer has absconded, provided all the parties accept the option, a top government official said.

"Although this is not such a simple decision, we will take a step that is conducive to protecting investors' money. If by doing so we can help both the investor and developer alike, we will do it," Arra Director-General Omar Al Barguthi told Emirates Business.

Asked when Ajman plans to introduce regulations for project cancellations, Al Barguthi said: "Cancellation of a project is not an easy decision. However, the decision to scrap a project can be taken only if it serves the interests of all parties concerned."

Even though failure to open escrow account is a clear violation of the provisions of the Emiri Decree, Arra has extended the deadline in certain cases considering the current situation and the global financial downturn.

What happens to developers who have launched projects before Arra's establishment and have subsequently failed to register with the agency?

All developers should comply with the Emiri Decree No. (8) /2008 and its amendments. Arra will be looking into each case separately and tackle each issue on a case-by-case basis.

Arra has already recommended to Ajman Government to establish a dispute committee that would be entrusted to resolve real estate disputes. The committee is expected to be set up by the end of the year.

The Emiri decree is very clear in this regard. Property developers who failed to register with Arra are not allowed to operate in Ajman, and we shall resort to all possible methods to ensure the law is applied.

Are more developers likely to complete registration by year end?

Yes, developers who started the registration process and could not manage to complete it for reasons beyond their control are expected to complete the registration process.

If a developer starts construction and then abandons it, what action can investors take?

A committee representing Arra, the other developer and investors can be set up to evaluate the situation and stand on the reasons why the work has stopped, and take an action that serves the interests of all parties.

Will Arra transfer the development to some other developer?

Although this is not such a simple decision, we will take a step that is conducive to protecting investors' money. If by doing so we can help both the investor and developer alike, we will do it. Transferring the development to another developer is also an option provided that this option is accepted by all parties concerned.

What punitive measures have you initiated against developers who have failed to open escrow accounts? Any deadline set for them?

Failing to open an escrow account is a clear violation of the provisions of the Emiri Decree. Nevertheless, due to the current situation and the global financial downturn, resulting in a lack of cash flow, deadline has been extended in some cases.

When are you planning to come out a law on cancellation of a project? What major changes will it bring to the market?

Currently, we are looking into each case separately, where we evaluate the situation of the developer, his project and the actual progress on the project as well as the customers' payments made so far.

Cancellation of a project is not an easy decision. However, the decision to scrap a project can be taken only if it serves the interests of all parties concerned.

How many complaints do you receive on a daily basis and what is the major issue concerning investors?

Nature of complaints differs from one investor to another. For example, employees who invested in real estate and lost their jobs usually demand cancellation of their reservations and money back.

Investors languishing under financial burdens are also among the investors who visit Arra's customer service to register their complaints. Delay in construction are some other complaints investors make.

Are you stipulating any action against master developers who have failed to hand over land to sub- developers?

Part of Arra's responsibilities is to make sure provisions of the Emiri Decree are transparently enforced. Master developers who fail to hand over the plots to sub-developers will be held accountable unless acceptable reason for such an act is provided.

Do you believe there will be mergers of master developers in Ajman?

Absolutely. Arra co-ordinates with master and sub- developers. We study all proposals on a case-by-case- basis. Naturally, following the financial meltdown, mergers between small and even giant companies has become a common practice.

As a matter of fact, Arra has on different occasions called for mergers between small developers in Ajman. Therefore, we welcome amalgamation and encourage it among developers.