UAE off-plan property rules - Can buyers get refund if project gets 'cancelled'?

Investing in an off-plan property in Dubai can be a wise move; however, what happens if the project gets cancelled or abandoned unexpectedly? As a buyer, are you entitled to a refund?

This guide explains how the Dubai government has set certain laws for cancelled off-plan properties, the steps to claim refunds and how buyers can safeguard their investments.

In the UAE, off-plan properties are units sold to investors before construction is finished. Many savvy investors prefer these properties as most tend to appreciate in value once ready for occupancy. In fact, almost all off-plan properties progress smoothly; however, some may face delays or unexpected cancellations.

These issues can occur due to financial issues, regulatory concerns or market downturns.

The Real Estate Regulatory Authority (RERA) plays a crucial role in such cases — this regulatory body protects the interests of homebuyers and determines whether a developer can resume the project or if it needs to be formally cancelled.

Note - Buyers are advised to closely monitor the development’s status through RERA, Dubai Land Department (DLD) or use Oqood to track payments and project progress.

Off-Plan Project Cancellation

If an off-plan development project is labelled ‘Under Cancellation’, RERA evaluates the construction progress, developer’s financial stability and regulatory compliance.

The Dubai Land Department (DLD) handles the refund process if a project is declared officially cancelled.

Legal Framework Governing Refunds

Once the project is officially cancelled, the case is handed over to the Special Tribunal for Liquidation of Cancelled Real Property Projects in Dubai. This tribunal ensures -

• The liquidation process
• The refunds are handed over to the affected buyers
• Just and transparent settlement of related rights

Law No. 8 of 2007

To ensure the financial security and transparency of property investors, the Dubai government in 2007 introduced Law No. 8 of 2007, also known as the Escrow Law.

Under Law No. 8 of 2007, developers must deposit buyer payments into an escrow account. They can withdraw funds as per the progress of the construction and in case of project cancellation, the DLD will ensure all refunds are credited to the buyers.

Refund Conditions

Buyers usually receive off-plan property refunds within one year of contract cancellation or 60 days after resale, whichever comes first.

However, the refund amount depends on the following factors -

(1) If 60-80% of the project is completed, upon project cancellation, the developer can deduct up to 40% of the unit’s value

(2) If less than 60% of the project is completed, the deduction is capped at 25% of the unit’s value as per the sales contract

(3) If no work has commenced, the buyer is obligated to receive a complete refund from the escrow account as per Law No. 8 of 2007

What Are the Next Steps When an Off-plan Project is Cancelled?

Once an off-plan project is declared cancelled, the DLD oversees the refund process through the Real Estate Regulatory Authority (RERA). And as a buyer, these are the steps you can follow to get a refund -

Steps to Protect Your Investments

(1) Choose reputable developers with a strong track record

(2) Verify project registration details (on the Dubai Land Department website)

(3) Initiate all payments to an escrow account

(4) Understand the contract terms, including the refund policies

(5) Keep updated with the construction progress and developer communication

How Benham and Reeves UAE Can Assist You?

Investing in off-plan properties offers solid potential; however, we understand that many of our clients are based overseas. This factor can make it challenging for them to navigate Dubai’s off-plan real estate landscape remotely. As your trusted property advisors, Benham and Reeves UAE offers expert guidance and ensures your investment properties are safe as well as lucrative.

As we work with only top-tier UAE developers, our clientele can carefully choose from a curated selection of high-potential off-plan projects. If you require personalised consultation, get in touch with the property experts at Benham and Reeves UAE.