Diary of a distressed property investor, Part III

Diary of a distressed property investor, Part III

My next installment payment has been pushed back by two months. But I’m still in trouble.

January 20, 2009 10:27 by Dana El Baltaji

We know property investors are struggling, and for the most part, we know why. But what most us don’t know are the everyday struggles they’re going through. One investor agreed to write a journal of her experiences for Kipp. We asked her to be ruthless: she obliged.

We’ve withheld her name for legal reasons.

Click here to read Diary of a distressed property investor, Part I

Click here to read Diary of a distressed property investor, Part II

After a few weeks of calling my developer and the Real Estate Regulator Authority (RERA), I have finally figured out my legal rights: since I do not have the developer’s promise for financing in writing, no amount of litigation will get me out of the contract without a substantial loss. Furthermore, the contract I signed does not state that the company has been approved by a bank.

Here’s the deal: Because of Rera’s regulation – which prevents developers from asking for more than 20 percent of the unit price until they begin construction and forces them to base their payment plans on the constructions’ progress – I don’t have to shell out any more money until the developer builds 40 percent of the structure (I have already paid 30 percent of the property’s value). The only problem is that the regulation is not a law, so companies aren’t forced to comply with it. However, according to the CEO of Rera, Marwan bin Ghalita, it is in developers’ best interests to keep Rera on their side. Apparently, Rera has been sending letters to developers about the regulation since November 2008.

Interesting. I don’t think my developer got the message. They either employ a troupe of illiterate jokers, or the letters from Rera weren’t clear; my developer seems to think that because they’ve broken ground, they have a right to continue with their payment plan.

Sure, they lied about the construction date (the sales manager insisted that they began construction in August 2008, even though they had the ground breaking ceremony two weeks ago), but they insist that they’re “right on track” now and that “everything is going to be ok.”

For 10 days, I tried to negotiate a new payment plan with them, but they kept fending me off. I was being pushed to my mental limit. I told myself that if one more person tried to pacify my worries with a “don’t worry about it. Your money is safe with us” comment, I was ready to let my inner devil come out.

Unfortunately, they gave me the spiel, so I unleashed the beast.

Pages: 1 2

Tags: Dubai, property, Real Estate Regulatory Authority, RERA

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8 Comments

jay on January 21, 2009 12:03 am

dear distressed investor,

please mail me my address is j.jaytee.t@googlemail.com – will explain why

regds
Peter Heydenrych on January 21, 2009 8:08 am

This gives me more insight and understanding of regulations, rights, the law and the machinations of builders than anything I’ve read in the mainstream press. Great job.
Tino on January 21, 2009 9:01 am

Thanks for doing this – gives the rest of the world valuable insight. Sorry that it’s so financially painful for you.
Ben on January 21, 2009 4:32 pm

Dear distressed investor,

Thanks for sharing what you are going through with the rest of us; it is a real eye opener especially the part about the Rera regulations not actually being law. I really hope things work out for you and you don’t end up losing money.

Cheers
Ben
owen on January 21, 2009 4:43 pm

Sounds like a common problem… sadly.

JUst one point, you mention that RERA said you could walk away with 70% of your money paid so far, yet they announced before xmas that investors would have to pay 30% of the TOTAL property price, not the deposit amount? Which is correct?!
mithun on January 21, 2009 9:31 pm

You said :

>>>>>>>>>>>
If by some miracle my developer manages to build enough of the structure to demand the next installment, and they havenâ€™t been approved by a bank yet, Iâ€™ll have no choice but to break the contract
<<<<<<<<<<<<

This could happen to any builder, I mean many customers to could do this to builders … i.e. break contracts

So a lot of builders are also going to be in trouble and further delay or default of deliveries

The ones who have paid money or continue to pay and try to get possession of an apartment, say to live in it, are going to be at the wrong end of the stick due to defaults

Looks like the market is in for some surprises

regards
mithun
Noor on January 22, 2009 7:49 am

Hi,

what a sad story you got there.. But this proves only one thing and we should put this right on face of the builders… not all property investors are nice enough to be fooled by people like those who want to rip off money the easy way.

They should know that RERA is around to stop all their illegal activites.
Concerned on January 22, 2009 9:04 am

Isn’t is concerning that a regulation that the REAL ESTATE REGULATORY AUTHORITY (RERA) issues is not made law immediately or even taken seriously by these developers?

Personally i think the establishment of RERA is an extremely positive move for this market, however they require more power to ensure their regulations are enforced swiftly and penalties are harsh to those not complying (not matter who owns the development company). In saying this RERA should also provide more training to the developer regarding these regulations other than “letters”.

How is this property industry ever going to be regulated if what currently happens in this market remains the case – anyone can be a “developer” and do what they please – if the one thing comes out of this “financial crisis” is that all shoddy developers go bust and stop doing what they are not qualified to do it will be worth it and if it teaches people (“investors”) to research their purchase more and ensure what they are buying is true and correct with a LONG TERM outlook then it will be win:win.