New rules for Dubai’s private developers

Private developers are now required to put up 50 per cent of the project value in the form of equity bank guarantees. The earlier requirement used to be 20 per cent, developer sources say.

The move, not yet officially confirmed, will curb the number of offplan residential projects launched in the market quite drastically in the months ahead. Also, this will reduce the chances of further new supply of apartments flooding the market and dropping property values.

“We don’t know as yet whether this is being done on a case by case basis, or a blanket requirement expected from all private developers going forward,” said an industry source.

“The 20 per cent guarantee was doing what it was intended to – provide assurance that only developers with the right credentials could launch. But raising that to 50 per cent immediately reduces the chances of private developers to launch new projects”, said a developer.

The funds are placed in escrow and released as the project clears set construction-linked milestones. The authorities by using this method wanted to cut down on the chances of insufficiently funded developers entering and then doing the skip if market conditions tighten and they run out of funds to complete.