Law No.14 strengthens Dubai realty market
Law No.14 strengthens Dubai realty market
The Law No. 14 of August 2008 or the Mortgage Law as
it is more popularly called, signals a strong commitment by the Government of
Dubai to better standardize its real estate sector and, safeguard the rights of lenders as well as buyers. The move is being perceived as a step in the right direction
to clean up the system, bestowing more credibility and sustainability to the
property market and home finance industry. It, in fact, augurs well for serious
investors on the lookout for credible short-term as well as long-term gains,
effectively ending myopic investment patterns and trends initiated by
speculators.
How does Law No. 14 protect investors?
The new law requires mortgages taken out on
properties in Dubai
to be sold by registered financial institutions, and be insured. For an
investor this provision offers protection against general risk.
How does Law No. 14 operate?
Mortgages, like real estate transfers become effective when they are registered at the Land Department, because then, they can be properly regulated and recorded. Law No. 14 stipulates that mortgage contracts be registered with the Dubai Land Department, specifying the following details:
- Value of the property
- Amount of debt
- Term or duration of mortgage
- Names and addresses of the mortgager-borrower and mortgage-lender
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A "mortgagee annotation" is then made to the letter and forms part of the Land Department Register. "If the borrower defaults on his mortgage, the lender must serve him a notarized notice before proceeding to sell the property, by way of public auction after making an application to the execution judge."
Benefits 1) A major advantage of the Mortgage Law is that henceforth real estate borrowing activity will be secure and transparent. Mortgage lenders would obtain priority over unsecured lenders in the case of enforcement. 2) The borrower could delay an enforcement process for a maximum of 60 days if he/she can convince the execution judge that they can discharge the debt within that period and that a sale of the property causes serious damage to the borrower. Both of these conditions must be met to the satisfaction of the execution judge. This protects both lenders, providing them with the power to act quickly on defaulting debt besides offering a safety net for borrowers. We anticipate similar laws by Dubai government in the near future to strengthen its property legal framework. The high fuel prices and resultant GDP growth have generated impressive developmental activity in the region leading to an increased inflow of foreign workers. According to a report by Dubai World's Statistics Department, Dubai's direct foreign trade in 2008 recorded a first-half jump by Dh104.4 billion (around $28.4 billion), to reach Dh296.6 billion (around $80.8 billion), compared to Dh192.2 billion ($52.3 billion) achieved last year during the same period. To accommodate overseas workers, sectors like real estate and construction have to evolve and develop continually; the recent corruption investigations into the operations of leading property developers in the region and the bolstering of immigration rules are a clear indication that the Government is indeed serious about raising standards of legal transparency and residents' rights in the region. |
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