Dubai investors to get full refund if developers default

Property investors in Dubai will be eligible for cancellation of their contracts and may seek “full” refunds if the real estate developer fails to provide the promised unit or services within a specific timeframe, according to a proposed new Investor Protection Law.

From a delay in handing over of units to a failure to deliver promised facilities as per the sales contract, the proposed law gives property investors in Dubai the right to seek cancellation of their contracts and get “full” refunds.

Under the proposed law, an investor will get the right to cancel the contract and obtain a full refund if the developer has taken more than eight months (beyond the promised handover date) to hand over the unit(s).

Another provision proposes to make it mandatory for the developer to provide all the common facilities promised in the contract at the time of handover.

Therefore, swimming pools, gyms or any other promised facility in the building will have to be ready before officially handing over the keys to the owners.

Failure to do so on the part of the developer will allow the investor to cancel his or her contract and claim refund on investment.

At present, some developers have failed to provide the facilities mentioned in their sales purchase agreements (SPAs) or marketing collateral.

Until now, owners did not have much recourse and could only hope that the facilities would get completed at some point in time.

On the other hand, developers will face fines if the units they promise are not delivered on time, or to agreed specifications.

A proposed provision of the draft law says that if a unit turns out to be 30 per cent smaller than the actual net area in the contract, the investor will have the right to cancel the contract and obtain a full refund.

In case of off-plan sales, the draft proposes to make it mandatory for a developer to get all approvals from the Real Estate Regulatory Agency (Rera) and to register all saleable units with the Dubai Land Department’s Oqood system — the online registration system.

The developer is also obliged to register all contracts with Rera and to provide all information regarding the project’s handover, escrow account, etc.

The draft law mentions that a reservation form will be deemed “void” if the developer has failed to provide the investor with an agreement within 15 days of the signing of the reservation form.

Arabic newspaper Al Bayan quoted Sultan Bin Mejren Director General of Dubai Land Department, earlier this month, saying that the department had completed the finalisation of the draft law on the protection of the real estate investor and it is expected to be implemented by June-end.

 “A lot more, however, can be done to tighten the provisions relating to off plan market.”

Following the global economic slowdown of 2008, there are still hundreds of property projects on hold in Dubai (as of March 31, 2012), but many are likely to see the light of day.

Dubai’s Real Estate Regulatory Agency has been quoted in the planned sovereign bond prospectus as saying that 165 projects have been completed since the beginning of 2009; 291 projects are on hold; 291 projects are likely to be completed in due course, while 29 projects have not yet commenced.

According to the prospectus, Dubai Land Department says that 291 projects are on hold, but that each of them is likely to qualify for either the Tayseer or the Tanmia initiatives that will provide financial and other assistance to such projects and their investors.

Nevertheless, legal experts opine that a remedy to whether or not an investor can claim refund may already exist in the contract that she or he signs with the developer.

In certain contracts, the developers have clearly mentioned the handover date to commence only after completion of the infrastructure work by the master developer. Here, developers can use the “force majeure” clause to justify delays, experts say.

UAE, India fixes double taxation avoidance agreement issues

An amended double taxation avoidance agreement (DTAA) between the UAE and India is likely to plug the loopholes in a previous agreement that enabled tax authorities in India to sometimes unnecessarily go after non-resident businessmen and individuals for alleged tax evasion, say experts.

India and the UAE on Monday signed agreements to amend the double taxation avoidance treaty that will pave the way for greater sharing of tax-related information. The amendments to the treaty were signed during a India-UAE Joint Commission meeting in Abu Dhabi presided over by Minister of Foreign Affairs Shaikh Abdullah Bin Zayed Al Nahyan and his Indian counterpart S.M. Krishna.

The previous DTAA was non-operative in India as individuals residing in the UAE aren't subjected to income tax and, therefore, Indian individuals couldn't furnish proof to the Indian tax authorities of any tax deductions in the UAE.

"The amended DTAA allows for exchange of information about tax matters," Indian ambassador to the UAE, M.K. Lokesh told Gulf News. With the double taxation avoidance treaty being amended, the article on exchange of information has been updated to bring it on par with internationally accepted standards.

This allows for banking information as well as any information without any domestic tax interest to be shared.

Under the Income Tax Act 1961 of India, there are two provisions, Section 90 and Section 91, which provide specific relief to taxpayers to save them from double taxation. Section 90 is for taxpayers who have paid the tax to a country with which India has signed DTAA, while Section 91 provides relief to taxpayers who have paid tax to a country with which India has not signed a DTAA.

When there is a DTAA in place, capital gains arising from the sale of shares are taxable in the country of residence of the shareholder and not in the country of residence of the company whose shares have been sold.

Therefore, a company resident in the UAE selling shares of an Indian company will not pay tax in India. Since there is no capital gains tax in the UAE, the gain will escape all tax.

"Making it easier for investors across globe to buy Indian equities could be one way of bridging the [fiscal] gap and DTAA will prompt more investment flows,

Tenancy contract must for sponsoring family in UAE

A top official at the Ministry of Interior has warned that no leniency will be given to those who don't produce a tenancy contract under their own name when seeking to sponsor family members on their own residency visas.

Major General Nasser Al Awadi Al Menhali, acting Assistant Undersecretary of the Ministry of Interior for Naturalisation and Residency, told Gulf News yesterday expatriates need to have a proper accommodation with a valid tenancy contract under their own name to be able to sponsor their family members.

The clarification by Maj Gen Al Menhali comes after some expatriates said they were not aware of the rules.

One Dubai resident said he wanted to sponsor his family but that his application was rejected because he used to live in shared accommodation with his brother.

The Indian man said the residency department in Dubai had asked him to submit a tenancy contract under his own name and that he would not be able to sponsor his wife and children without one.

"This is not a new rule as it was implemented a few years ago, but people are still ignorant to such rules and are surprised when they are asked to submit tenancy contracts under their name to sponsor their families," said Maj Gen Al Menhali.

"Applicants across the country must produce a copy of their tenancy contract to prove their eligibility to sponsor a family so as to ensure they can actually afford to give their families a decent living space," he added.

‘Rejected'

Maj Gen Al Menhali said those who live in shared accommodation and have a tenancy contract which is not under their own name will not have applications to sponsor their families accepted.

"We have to ensure that whoever applies for a residence visa for his or her family must have suitable and proper accommodation available for them and their families," he said.

Maj Gen Al Menhali said it was not necessary for applicants seeking to sponsor families to produce tenancy contracts from the same emirate. The tenancy contract can be from any other emirate, but should be under the sponsor's name only.

He said in 2008 the Ministry of Interior announced the rule. It was introduced to ensure that applicants who wished to sponsor their families had proper accommodation and that the sponsor could really support his or her family. "The contract should either be in the name of the sponsor or in the name of the company where he or she works," he said.

"The application will be rejected if a big family lives in a studio apartment," he said.

He added that those who wanted to bring their families on a visit visa were not required to present a tenancy contract with the application.

Payday to come early -Salaries credited to employee accounts much quicker in Dubai

Salaries will be credited to employee accounts much quicker with the roll-out of the UAE Funds Transfer System (FTS) on April 14, replacing the slower Swift system, said a banking industry expert.

"FTS is a huge step forward with quicker salary transfer being a key benefit for individuals," said Rajesh Mohan, Head of Banking and Finance, Unity Infotech, a Dubai-based banking software developer.

FTS, mandated by UAE Central Bank, works as a real-time gross settlement system. It is dovetailed with the International Bank Account Number (IBAN) adopted by the UAE in November 2011.

Meanwhile, banks have started notifying customers to start using the 23-digit IBAN starting with "AE" in applying for any dirham-denominated funds transfer within the country.

"Customers will definitely benefit with speed, and lower standardised fees," Imam Elias, member of the FTS project team with Noor Islamic Bank, told XPRESS. "Earlier, banks used to charge between Dh100 and Dh225 from customers who transfer funds within the UAE. Now it's been standardised to Dh25 with FTS. Some banks used to charge customers for payment of employee salaries, now the salaries will also be transferred for free through FTS."

But there's a catch: If the IBAN does not match as per the beneficiary's bank records, the beneficiary name and other details will not be validated and the transfer will be stalled, according to an Emirates NBD notice sent to customers.Except for credit cards, all payments in dirhams within the UAE must use IBAN, the Central Bank said. And with exchange houses joining the FTS loop, customers will be able to move money within the UAE even beyond the banking hours, as long as they can find an open FTS-link exchange.

Unity's system is used by a dozen local banks and eight exchange houses. Mohan said over 20 money exchange houses are already part of FTS. "Any funds transfer transaction before 3pm will be processed the same day, but beyond that, it will be credited the next day."

With the much slower Swift system, it used to take two to three days for fund transfer transactions to be processed, as it was routed to servers outside the UAE.

"There are a lot of institutions, especially in the free zones, that are not on the Wages Protection System (WPS)," said Mohan. To avoid delays or rejection of fund transfers, bulk transactions must now use the IBAN prescribed by the FTS when the system kicks in from next week.

The Central Bank adopted IBAN in November 2011 to trace transactions using a 23-digit number system. It is used for remittances of salaries through UAE's WPS, which allowed the government to monitor private sector workers' wages since September 2009. Swift will be used for international fund transfers and non-dirham local transactions, the Central Bank said.

Magnitude 8.9 quake hits Indonesia, Tsunami warning issued

Massive earthquake measuring 8.9 on the Richter scale rocked Indonesia on Wednesday afternoon. Indonesia's geophysical agency issued tsunami warning following the quake whose epicentre was in Aceh. The Pacific Tsunami Warning Centre issued Indian Ocean-wide tsunami warning.

Tremors were also felt in Kolkata, Chennai, Bangalore, Kochi, Thiruvananthapuram, Patna and several other cities on the eastern coast of India.