Who in Dubai doesn’t want to know what Marwan bin Ghalaita, CEO of RERA, knows? RERA is the emirate’s real estate watchdog, and bin Ghalaita then has the power to give the thumbs up or thumbs down to any building within city limits. There are many thousands of investors in Dubai who hang on his every utterance.
He greets Arabian Business affably in an office full of flowers – it was his birthday the previous day – and is keen to answer our questions. He’s been the boss for three years, he says, and he’s busy training up 3,000 real estate agents to make sure the cowboys who populated the market during the boom can never return. “Over my dead body,” he booms with a laugh.
And now he wants to hear our questions.
“How can investors get their money back?” we ask.
He furrows his brow. “That is a very easy question. I thought you said these would be difficult questions?”
And then we’re off, into a full description of the trials and challenges that face a regulator.... what follows is an edited transcript.Cancellations and escrow accounts
How many projects have you cancelled in 2010?
We have already cancelled 115 [projects]. They never started, those are the cancelled projects. 115. Those people got their refund, and everything is ok. Hallas. Because the driving force of those projects is not there anymore. As per law if a development did not start within six months without any reason or justification, as per law I need to cancel it, to protect the investors’ money. So here we are segregating. 2009, you cannot do this exercise. But now, the end of 2010, I have a clear picture of all of the projects here in Dubai. Because you know we came late and we inherited so many projects that nobody knows about in Dubai. Now it is clear on my dashboard, to see what project will go ahead, which project is in ICU, which project is in the emergency room, which project is fine. And this is the way we will classify projects here in Dubai. Green, emergency, ICU, dead. This is the way we have worked for the whole of 2010.You are going to start cancelling projects?
We already did. I told you, 115 were cancelled. Other projects are being cancelled.
But those 115 were projects that hadn’t started. How many projects that have started have you cancelled? Is it less than ten?
Started? Less than ten… But it is in the process. It is in the process of evaluating and cancelling. It is in the process. It is in the process of cancelling.
Soon there will be more cancelled?
Yes, in the process.
Because on some projects, nothing is happening after three years, and the investors want their money back, but they can’t get it?
Yes, but as I told you – we have a law. The law is saying ‘Marwan, if this project, all the commitment of Dubai government has been done for him - all the infrastructure is ready, all the design has been approved, everything - and this nasty developer is not starting, cancel him to protect the investors' money.’ This is what the law is saying, and this is the way we are segregating the project. We are looking at why this project did not start.
So in 2011 will we see a lot of cancellations?
You will see a lot of cancellations for projects that have no benefit for Dubai or for the investor… But look at it this way – cancelling a project is very easy in my hands. But imagine what is going to happen if I cancel a project with 500 investors. What is going to happen?They get their money back from the escrow accounts?
If the projects started before escrow accounts? Some of the projects started before escrow accounts [were introduced]. Some of the investors will have invested before the beginning of 2007.
Then they are in big trouble, those investors?
That is what I am telling you. Cancelling a project is easy for Marwan. But I always think about the investor, what are they going to do? Imagine yourself as a regulator, in this situation. Cancelling a project is going to be music to your ears, because cancelling projects means reducing supply. Reducing supply is good for the real estate market. So cancelling a project is my wish. But I don’t cancel for the sake of cancellation.
But if you know the developer has run away, and is never coming back?
Then what I do – if I cancel? Where I will throw the problem? If I cancel a project that started? Where am I going to throw all the 500 investors? To the court.
Their money is gone?
The money is there. It is there. You have two situations. Either the project started within the escrow account regulation, so part of the money is in escrow. Or a project started before the escrow account regulation, so supposedly the money is all gone for the land. And the land is an asset itself. Yes, it has depreciated, but there is an asset. Then it is going to be a decision of the investors - when to sell. Do we sell now, or do we sell when the market will pick up, or do we wait for the regulator to find the solutions?
And this why I am telling you cancelling is the easy process, but in the Land Department we took on our shoulders all those burdens. Because all those investors trusted Dubai, and Dubai did deliver - infrastructure, metro, very fantastic building, registration, rules and regulation - but some of the developer did not play it right. So let us lean with the investors, because some investors, they don’t have that much knowledge about real estate, so let us support the investor now.
How? By getting their money back if their money is in an escrow account, because we started the escrow account to protect their money. Yes, it was a late stage, but it is there.
When we started the escrow account, in the first few months I used to have AED7 billion in my escrow account. AED 7 billion. Imagine how much I will have if it had started from the beginning. I will be the wealthiest agency in the world, I think. So if there is money in the escrow account, I am giving their money [back], without law case, without hassle, without delay.
Then, number two, is to find options for them. And options for the real estate investor is not easy. Why? I have been in this seat for three years. Sometimes I get an investor; he is telling me “Marwan, I need my money back.” I say, ok, where is your money? He says “In an escrow account.” I say “ok, fine, go the legal department where they will process it for you quickly.”
And this is what is happening, this is reality. In the same project, another guy will walk in and I will say “you need your money back?” And he will say “no, I need my real estate. I trust this city, I bought it for my children.” This is another criteria. Another guy will say: “I need my real estate but I need to reduce my payment.”
So everybody has his own personal issues.
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