Up to 500 real estate projects facing axe: RERA

The number of real estate developments in Dubai facing cancellation this year has risen from 300 to 500, the emirate’s property watchdog said.

The projects and their backers are being assessed for financial viability and a list of the terminated developments will be released “very soon”, the chief executive of RERA said.

“We have finished the technical review, site visits have already been done, so we know what stage the projects are at and the strength of the contractor. Now we’re waiting for the financial audit to finish,” Marwan bin Ghalaita told Arabian Business.

“We will release the names [of the cancelled projects] very soon.”

Dubai property transactions increased by 20 percent in the first quarter of 2011, compared to the same period a year earlier, Ghalaita said. Some 10,552 transactions took place, with a value of AED30bn.

Dubai’s property sector was hit hard by the downturn, with billions of dollars worth of projects put on hold or cancelled after real estate prices fell more than 60 percent from their peak.

Speculators caught with multiple properties and little chance to turn a profit fled the market and defaulted on purchases, while other buyers continued to honor their contracts, often paying installments even after work was halted in the aftermath of the crisis.

About half of real estate projects in Dubai were cancelled or suspended after the market collapse.

Ghalaita said in March that 220 projects were going ahead this year, but that RERA was still mulling fresh project cancellations in a bid to control supply.

Under the watchdog’s new scheme to curb new supply in Dubai’s glutted marketplace, any property projects deemed economically unfeasible will face termination between now and 2016.

“Our real estate sector is moving towards better planning. We want to make sure that our real estate sector is sustainable,” Ghalaita said. “The last two years we have spent a lot of time cleaning up after what happened before. Then everybody was busy counting how much money they were making, that’s why nobody was planning real estate.”

Looking forward, the emirate will keep a tight rein on any offplan projects in a bid to avoid the speculator-driven property bubble created after 2006.

“Offplan sales are becoming very regulated. It is still happening, but we are not seeing as many transactions,” he said. “Any new project that comes online will be part of a complete community, with infrastructure, healthcare and amenities; this is the new trend that’s coming to Dubai.”