The Government of Ras Al Khaimah yesterday issued a decree making it mandatory for developers wishing to sell off-plan units in real estate development projects to open a guarantee account.

Sheikh Saud bin Saqr Al Qasimi, Crown Prince and Deputy Ruler of Ras Al Khaimah, yesterday issued "Amiri Decree pertaining to creation of 'guarantee accounts for real estate development projects' in the emirate". The decree is on the lines of the trust account rules implemented by the Dubai Government, which is essentially an escrow account.

According to the decree: "The guarantee account will pertain only to real estate developments in the emirate of Ras Al Khaimah. It will be mandatory for developers wishing to sell off-plan units in real estate development projects to apply to Ras Al Khaimah Investment Authority (Rakia) to open a guarantee account in which amounts paid by buyers towards property purchases or by project financing parties will be deposited.

"The decree intends to streamline property purchases in the emirate by bringing in more transparency and would help boost the confidence of real estate investors by securing their interests," said Jihad Quzmar, legal advisor, Government of Ras Al Khaimah.

A RAK Government official told Emirates Business: "The guarantee account is mostly similar to the trust account of Dubai. There may be a few differences, but overall they are similar."

The decree also stated that the Rakia will be the main certifying authority in the set up of the account trustee, which shall be a bank or financial institution. As per the decree, Rakia is also authorised to become itself an account trustee providing guarantee account services.

Emirates Business spoke to developers in Ras Al Khaimah who welcomed the initiative from the government. The developers thought the time was right to regulate the realty sector in Ras Al Khaimah, which is bound to spur investor interest into the emirate.

"We welcome the move and believe it to be a positive step by the government. We believe this will create a great deal of interest towards Ras Al Khaimah.

"We hope to double our own sales volume as a result of the setting up of the trust account in Ras Al Khaimah," according to Frank Khoie, CEO of Khoie Properties.

The guarantee account will ensure developers licensed to carry out real estate development within Ras Al Khaimah to be registered within the Register of Developers to be prepared by Rakia.

The decree stipulates that Ras Al Khaimah developers will not advertise in local or foreign media or participate in exhibitions to promote the sale of off-plan units or properties within Ras Al Khaimah until such time that they obtain a written permit from Rakia.

"Developers must submit a set of documents including the title deed or affection plan of the plot, copy of the contract executed by the master developer and the sub- developer, conceptual designs and layouts approved by Rakia, trade license of the firm and a financial statement authenticated by a certified legal accountant on the revenues and expenses of the project, among others. Any amount of money paid by buyers on off-plan units in Ras Al Khaimah must be deposited in the special account opened in the name of the real estate project with the account trustee. If the developer has more than one project, separate guarantee accounts will be necessary to open for each project." Further, payments will be made to the contractors and suppliers based on the progress of the project and in accordance with the agreement concluded between the developer, contractor and the consultant.

It will be necessary for the account trustee to provide Rakia with statements for the revenues and expenses of the guarantee account on a regular basis. Depositors or their representatives may also examine their account records and obtain copies.

The account trustee has to retain five per cent of the total amount deposited in the account after the developer obtains the completion certificate. The reserved amounts shall not be paid to the developer until the lapse of one year from the date of registration of the units in the names of buyers or unless the developer issues a bank guarantee for the same amount valid for one year.

The registration of the developer in the Register will be cancelled if the developer does not tender the project or award it to contractor within six months from the date of approval to sell off- plan, unless there is an acceptable excuse for the delay.

The decree provides for stiff penalties, including fines not less than Dh100, 000 for those defaulting to behold the provisions of the decree.



RAK Properties excluded from decree



The provisions of the decree shall not apply to RAK Properties (PSC), nor to any other company for which a special decree has been issued.

In 2005, the Government of Ras Al Khaimah issued "decree No18 of 2005, which provides for non-UAE nationals to own freehold title to property in investments areas within Ras Al Khaimah.

The Government of Ras Al Khaimah granted three plots of land comprising a total area of 50 million square feet to RAK Properties, the real estate development company set up by the Ras Al Khaimah Government, for the purpose of development, construction and disposal of freehold title to that land.

Decree No20 was also issued in 2005 which draw up the means by which non-UAE nationals are able to obtain freehold title to land in the investment zones. To do so, purchasers must establish a Ras Al Khaimah free zone company which must be a single purpose vehicle set up to hold title to the relevant property.

Other investment areas in Ras Al Khaimah such as Al Hamra and Rakeen have been granted rights permitting foreign ownership.