Cancelled Projects in Dubai

14 Mar 2022

Over the course of time, we have all thought about investing in real estate and purchasing that dream home. Some of us are lucky to accomplish that aim in the first shot; while some of us are not. Dubai is a real estate haven for investors from across the globe who usher into the region to invest in the Emirate’s lucrative real estate options. However, investors are also prone to fall into certain predicaments in the event the developer(s) are not able to finance their construction or fall into any other financial or legal issues. In the Emirate of Dubai, the Real Estate Regulatory Authority (the RERA) has the authority to decide on the revocation (cancellation) of a real estate project as per the Dubai Law Number 13 of 2008 (as amended by Dubai Law Number 9 of 2009) regulating the Interim Real Estate Register in the Emirate of Dubai. The RERA can cancel a project after obtaining a reasoned technical report in certain scenarios (explained below) as listed down in article 23 of the Executive Council Resolution Number 6 of 2010 (the Resolution): –

  1. Without any valid reason, the developer fails to initiate the works (development) after obtaining all requisite approvals
  2. the developer commits any of the offences mentioned in article 16 of Dubai Law Number 8 of 2007 regarding Escrow Accounts of Real Estate Development
  3. the RERA finds that the developer has no intention of developing the project
  4. there is a contractual breach by the sub-developer to the Master Developer and that results in the revocation of the plot of land where the development was supposed to take place
  5. if the plot of land is affected due to any planning or amendments by competent authorities
  6. gross negligence causing failure on part of the developer to complete the project
  7. developer expresses that they do not wish to develop the project
  8. the developer is bankrupt or
  9. other scenarios as determined by RERA.


Procedural Overview

STAGE 1: Analysis by the RERA as to whether any particular project falls under any of the scenarios mentioned above. 


STAGE 2: The developer should be notified of the decision of the RERA and is provided with a period of seven (7) working days to appeal (in writing citing the reasons for objection) such a decision. 


STAGE 3: RERA will carefully review the appeal submissions by the developer and issue its decision within seven (7) working days from such date of appeal. 


STAGE 4: In the event, RERA decides to accept such an appeal, it will list down the conditions that the developer should meet in order to proceed with the development. 

On the other hand, if RERA decides to reject the appeal, it will proceed with the project cancellation procedures as laid down in the statutes. 

Article 25 of the Resolution states that the RERA should then prepare a technical report citing the reason for cancelling the project, once the appeal by the developer is rejected (if such appeal has been filed). Thereafter, the RERA should notify the developer of its decision by registered mail or email and appoint an auditor to analyze the financial aspect of the project. The developer would bear the cost for this certified auditor, who will validate the amounts paid by the buyers into the escrow accounts and calculate the total expenses incurred in the project. The auditor will also request the escrow agent to transfer the amounts paid by the buyers within a period of fourteen (14) days from the decision of RERA to cancel the project. 

However, many times there could be adverse situations in the event the project does not have sufficient funds to refund to the buyers. In such situations, the developer must refund the total amounts received from the investors before sixty (60) days from the date of cancellation of the project. It is pertinent to note that RERA may also extend this period for any valid reasons. Subsequently, the RERA is conferred with the authority to take all requisite steps to safeguard the interests of the buyers and may also transfer the matter to a competent authority (explained below), in case the developer fails to refund the amount within the above mentioned period. 


The Cancelled Projects Committee

In 2013, the HH Sheikh Mohammed Bin Rashid Al Maktoum (the Vice President and Prime Minister of the United Arab Emirates; and Ruler of Dubai) issued a decree to the set up of a committee to aid investors who have invested in cancelled real estate projects in the Emirate. The Decree 21 of 2013 (herein referred to as the Decree) came into force for actively managing cases filed by investors in cancelled projects in Dubai. Accordingly, the Real Estate Cancelled Projects Committee (the Committee) was established to ensure that the investors were repaid for the amounts that have been invested in any particular cancelled real estate project. The Committee primarily aims to liquidate cancelled projects in the Emirate of Dubai. 

The Decree clearly mentions the specific matters in which the Committee (which would comprise at least three judges) would have absolute jurisdiction. It is clear that the Committee would not have jurisdiction in real estate disputes between developers and buyers in projects that are not cancelled. The Committee is conferred with the authority to appoint experts to understand the cash flow, asset value, escrow account statements, etc. of the cancelled projects. Buyers who have invested funds in projects (which have been declared as cancelled) in Dubai can approach the Committee with the help of top lawyers in Dubai to file their claims with the Committee. Accordingly, the Committee will look into the matter, and liquidate the project itself. The Committee would then identify and analyze the number of investors who have filed the case and the allocation of funds accordingly. The Committee may also hand over the (uncompleted) project to another developer in the event that such developer wishes to acquire and continue the development. Fotis’ real estate lawyers in Dubai have substantial knowledge and extensive experience in similar matters.