Law to protect real estate investors is approved
Manama, June 18, 2014
A new law aimed at protecting investors in large-scale real estate projects has been approved in record time by both chambers of Bahrain's National Assembly.
Parliament yesterday (June 17) approved the bill, which was originally presented by the Shura Council 20 days ago with a view to better regulating multimillion-dinar developments, said a report in the Gulf Daily News (GDN), our sister publication.
Under the law, which has now been referred to His Majesty King Hamad for ratification, anyone embarking on a new project is required to submit complete plans including a start and completion date, designs and artists' impressions and a value estimate for the scheme calculated by an engineering firm and ratified by the Engineering Practices Regulatory Committee.
In addition, they must deposit 20 per cent of the project's value with the Municipalities and Urban Planning Affairs Ministry, have a bank account in the project's name and sign an agreement to waive five per cent of the deposit in the event of future compensation appeals.
Shura Council earlier approved a new amendment to the law banning developers from selling properties "off-plan" without government permission, which was also backed by MPs yesterday.
This amendment aims to prevent a repeat of the Marina West fiasco, in which hundreds of private buyers invested millions in a proposed property development that was never finished.
The new 31-article law is the first legislation of its kind in the region and is designed to protect buyers while boosting investor confidence.
It will force developers to open escrow accounts for each project they are involved in and deposit all of the project's funding, including loans from banks, up front.
Developers of existing projects that have stalled will also be obliged to comply with the law within six months of it being enacted.
In addition, the Municipalities and Urban Planning Affairs Ministry will set up a commission to look into real estate disputes - comprising two judges and senior government officials - and developers who break the law could face jail.
Those caught selling properties off-plan without permission could be jailed for up to a year and fined BD10,000 ($26,393), rising to five years in prison and a BD30,000 fine if the development if found to be a scam.
Government officials, engineers or auditors who sign-off on false projects could also receive the same punishment.
Meanwhile, parliament approved yesterday Shura Council's amendments to the Cassation Court establishment law that would allow people to contest verdicts in all cases, excluding divorce, and referred it to the King for ratification.
MPs also approved a government-drafted mutual taxation agreement with Hungary and referred it to the Shura Council, but rejected a proposed parliamentary bill that would have increased private sector employees' notice periods to three months from the current one.
This bill, which was presented by MP Ali Shamtoot and backed by the Labour Ministry, was originally approved by parliament but will now be scrapped. - TradeArabia News Service