Off-plan properties have long been considered a profitable investment opportunity, especially in a dynamic market like Dubai. With more affordable prices and flexible payment plans, investors can secure properties at a lower cost than completed developments, offering the potential for substantial returns.
However, there may be significant delays or, in rare cases, cancellations. To address these issues and protect investors, the Dubai government has implemented rules and regulations to manage unfinished or cancelled off-plan projects, ensuring greater transparency and accountability in the market.
Here’s an overview of what it means when a project is marked as ‘cancelled’ or ‘under cancellation’ by authorities in Dubai, as well as the associated refund procedures:
In Dubai’s real estate sector, the terms ‘cancelled’ and ‘under cancellation’ refer to property developments that are being reviewed by the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (Rera).
“A project is officially considered ‘cancelled’ when Rera makes a final, reasoned decision to terminate it. This usually occurs due to significant delays, insolvency, or failure to meet regulatory standards. Once cancelled, the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai manages the liquidation process and settlement of related rights,” explained Nikhat Sardar Khan, head of the corporate, DIFC Litigation, and Arbitration Department at Hilal & Associates Advocates & Legal Consultants.
Decree No. (33) of 2020 restructured the committee responsible for unfinished and cancelled real estate projects, renaming it the “Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai and Settlement of Related Rights” (Article 2(b) of Decree No. (33) of 2020).
Nikhat explained, “The term ‘under cancellation’ refers to projects currently being reviewed by Rera for potential cancellation. During this phase, Rera evaluates factors such as project progress, the financial stability of the developer, and compliance with regulatory requirements. The project remains ‘under cancellation’ until Rera decides whether to proceed with cancellation or allow the developer to continue.”
The legal procedures for handling cancelled real estate projects in Dubai are primarily governed by the following laws and decrees:
This decree restructured the committee responsible for unfinished and cancelled real estate projects, renaming it to the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai and Settlement of Related Rights. It also grants the committee powers to liquidate cancelled projects and settle related rights.
This law amends regulations concerning the Interim Real Property Register in Dubai, outlining procedures for developers to refund payments to purchasers when a project is cancelled by Rera.
This law regulates the Guarantee Accounts of Real Estate Development in Dubai. It mandates that developers must refund all amounts received from purchasers if a project is cancelled by a final decision from Rera, in accordance with the law’s provisions.
Dubai Law No. 13 of 2008, amended by Law No. 19 of 2020, specifies that if a real estate project is cancelled by a final decision from Rera, the developer must refund all amounts received from purchasers according to the law’s procedures. The refund obligations of developers under various circumstances are detailed in Article 11 of Dubai Law No. 13 of 2008, as amended, and include the following scenarios:
The remaining amount must be refunded to the purchaser:
The balance must be refunded to the purchaser:
The developer must return all amounts received from purchasers.
Refunds must be processed as outlined in Law No. 8 of 2007.
If no work has started or the project is cancelled, Article 15 of Dubai Law No. 8 of 2007 prioritises refunds to purchasers using funds from the guarantee account. The guarantee account trustee, a DLD-authorised financial institution, manages the process in coordination with the DLD to ensure compliance. Purchasers are refunded from the guarantee account, which is legally protected and dedicated solely to the project. The DLD oversees and approves the refund process to ensure purchasers’ rights are protected.
To request a refund for an unfinished or cancelled real estate project in Dubai, the process is as follows:
The purchaser should file a grievance with the Judicial Committee for Unfinished and Cancelled Real Estate Projects. This grievance should outline the issues with the project and the request for a refund.
The judicial committee will review the grievance, and the committee has the authority to decide on grievances filed by purchasers.
Rera will submit a detailed report on the unfinished or cancelled real estate project to the judicial committee. This report will include information on the project’s status, proposed solutions, and actions taken by the agency (Article 9).
The judicial committee will examine the grievance and Rera’s report. They will issue decisions regarding the grievance, which may include ordering a refund to the purchaser (Article 7).
The decisions, orders, and judgments issued by the judicial committee are final and must be enforced through the courts in Dubai (Article 11).
If the judicial committee orders a refund, the real estate project escrow account trustee or developer will be directed to return the amounts to the purchaser. These decisions are final and cannot be contested through ordinary appeal methods.
By following these steps, a property investor can seek a refund for an unfinished or cancelled real estate project in Dubai.
Buyers in Dubai’s real estate market are protected by laws such as Law No. 8 of 2007 and Law No. 13 of 2008, as amended by Law No. 19 of 2020.
These laws prioritize the rights of purchasers, ensuring that refunds are processed transparently and that funds in guarantee accounts are protected for their benefit.
While delays in resolution may occur, the legal framework is designed to ensure fairness and accountability, offering purchasers a clear process for reclaiming their investments if a project is cancelled.
Purchasers can also initiate legal action, including filing a lawsuit or grievance. This allows the Special Tribunal for Liquidation of Cancelled Real Property Projects to hear grievances filed by purchasers against developers when a project is cancelled.
The tribunal has the authority to determine purchasers’ rights, oversee liquidation processes, and enforce refunds or compensation in accordance with the laws governing cancelled real estate projects.
