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UAE. The British government is being asked to help UK investors in Dubai who fear losing millions of dollars in the Emirate's property market.

A group of investors based in the UK have sent a petition to Prime Minister Gordon Brown asking him to intervene in what they claim are "harmful real-estate practices" in the United Arab Emirates.

"We as investors have recently discovered the blatant embezzlement of our money by unscrupulous developers," the petition, cited by Dow Jones, says. The petition was referred by Downing Street to the Foreign Office.

"We have been contacted by individual investors," a spokesperson for the UK Foreign & Commonwealth Office said. "The FCO takes this matter seriously.

A near 50% fall in real estate prices in some parts of Dubai has spurred a rash of increasingly ugly real estate disputes between developers and investors. The industry accounts for about 30% of the Emirate's economy.

The Dubai Land Department estimates that British investors own property worth AED 4.7 billion (US$1.3 billion) in the emirate. British buyers now account for 12% of international property investors in the Emirate, behind Saudis and Indian buyers, according to regional investment bank EFG Hermes.

The Foreign Office spokesperson said that while the British government would advise investors on how to resolve disputes "ultimately this is a legal matter between the interested parties."

Dubai's Real Estate Regulatory Authority, the government watchdog, didn't respond to written questions, but on Thursday said it plans to set up new "real estate communities" to increase transparency.

British national Nick Jasani is one of a group of investors who is lobbying parliamentary representatives to put pressure on Downing Street to intervene in the rising number of disputes on their behalf.

Jasani, who bought a commercial unit from a developer in Dubai's Business Bay district for AED2 million in early 2007, is worried because construction at the project hasn't started, even though he's already paid AED640,000 or 30% of the unit's value. He said the Dubai-based developer is still demanding payment installments even though they're not working on the project.

A letter cited by Dow Jones and sent by a number of individual investors to Members of Parliament states that "even though projects have no hope of going ahead due to the current financial climate, the money [investors] have put down may not be refunded."

Last month, a report by investment bank Morgan Stanley said the United Arab Emirates is delaying or canceling real-estate projects worth more than US$260 billion. An earlier HSBC report said Dubai is delaying or canceling almost 60 projects worth US$75 billion.

Amid growing uncertainty about whether they'll see their money again, investors are organising themselves to take on the emirate's sometimes unscrupulous developers.

"There are certainly a number of investors who seem to have claims with merit. Others simply have been caught out by a falling market and insufficient contractual protection," said Matthew Hooton, head of real estate in the Middle East for law firm Ashurst.

i always thought your money would be save in a escrow account???

+1 on the escrow???

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hack88 wrote:Are you looking for investments that can double your capital in 4 months?
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hehehe you are joking right?? metals prices have gone down. if you want to make money invest in gold and sit on it to keep it warm

how about you check the chart for the last 10 years

rudeboy wrote:i always thought your money would be save in a escrow account???

Regulations in short:

c) Escrow (Trust) Account Law

Law No. 8 of 2007 concerning Escrow Accounts of Real Estate Development applies to developers selling “off plan” units and receiving payments from purchasers or mortgagees against such units. It came into effect on 28 June 2007. Developers of existing off-plan projects with payments still to be made have 6 months to comply with the Law (subject to any extension that may be granted).

Under the Escrow Account Law, the developer must obtain approval from the Land Department to open an escrow account (or escrow accounts) in connection with any off plan sales for a development. A separate escrow account is required for each development.

Escrow accounts for each development must be managed by financial or banking institutions approved by the Land Department (called “Escrow Agents”). It is understood that so far, eight financial institutions, including Emirates Bank and HSBC, are operating as Escrow Agents.

Payments from purchasers must be paid into the relevant development escrow account. If a development is mortgaged to obtain a loan, the loan amount must also be paid into the relevant escrow account.

The Escrow Account Law requires that 5% of the total value of the relevant escrow account be retained by the Escrow Agent after receipt of a certificate of completion in respect of the development. The retained amount must be held by the Escrow Agent for one year after the date on which all units in the development are registered in the names of the relevant purchasers. The retention amount gives purchasers security for the developer’s obligation to rectify any defects in construction that are discovered during that period.

The misuse of escrow account funds or other failure to comply with the Escrow Account Law is punishable by substantial fines.

The Escrow Account Law is a positive step toward increasing consumer confidence in Dubai as purchasers are now safeguarded against any potential misuse by developers of purchase funds paid to them prior to (and for a period after) handover of the completed unit. The Law is administered and enforced by RERA which is further discussed below.