Emaar Properties PJSC, Dubai’s biggest developer, has banned real estate brokers from reselling its homes before completion to clamp down on a practice that fueled the city’s last property bubble.
Emaar acted after seeing that a number of real estate agents were buying properties with the intention of selling them to their eventual occupants, the company said in a statement today. It has asked brokers not to sell the homes until the completed properties are handed over.
The measure is “aimed at providing more stability to the real estate market and to minimize the adverse impact due to heavy speculative practices,” Emaar said.
Transactions involving unbuilt properties, known as off-plan sales, contributed to a Dubai property bubble that burst in 2008 as contracts were often re-sold at a profit several times before a home was completed. The practice, which virtually stopped after the market crashed, has revived this year as developers seek to finance projects as demand for real estate increases.
Emaar can enforce its ban by withholding no-objection certificates, which a developer must issue before a property deal can be completed. Builders of communities in Dubai tend to manage the facilities after completion and the certificates are required to prove a property is free of liabilities such as service or maintenance charges.
“It’s getting harder and harder for anybody to sell off-plan property,” said Mario Volpi, managing director of Prestige Real Estate in Dubai. The rules are unfair to agents who aren’t trying to flip homes, but “unfortunately a lot of these properties are being bought literally to make money like stock exchanges,” he said.
Individuals who aren’t property brokers can resell off-plan homes by Emaar after they have paid 40 percent of the price, Volpi said.
While Emaar has increasingly relied on rents from shopping malls and other sources of recurring income, the company still gets most of its revenue from real estate development, according to the company’s first-half earnings statement.