Checking a Developer: A Due-Diligence List
    Area GuideOctober 19, 20033 min read

    Checking a Developer: A Due-Diligence List

    With dozens of new developers launching projects, buyers need a systematic way to judge them. The questions we ask before recommending any project.

    Chief Economist

    PhD from London School of Economics. David's macroeconomic forecasts have guided institutional investors through three market cycles in the Gulf region.

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    The number of companies selling freehold property in Dubai has grown rapidly. Some are large, government-linked developers with completed communities; others are newly formed companies with a single project. Until formal licensing requirements are in place, buyers must do their own checks. Here is the list we use.

    1. Who is behind the company?

    Identify the shareholders and their track record. Developers backed by established groups or government entities generally have stronger finances and more at stake in their reputation.

    2. Do they own the land?

    Ask for evidence that the developer owns, or has secured rights to, the plot. Projects marketed before land rights are secured carry significantly higher risk.

    3. Are approvals in place?

    Check whether the master developer and the relevant authorities have approved the project. A building permit is a strong sign that the project can proceed.

    4. Who is the contractor?

    • Is the contractor appointed and experienced in buildings of this type?
    • Is the construction contract fixed-price, or exposed to rising costs?
    • Has construction actually started?

    5. How are payments structured?

    Payment plans tied to construction milestones protect buyers better than plans based on fixed dates. Ask how payments are held and whether they are used only for the project.

    6. What happens if things go wrong?

    Read the contract's clauses on delays, changes to specifications, cancellation and refunds. Make sure they are balanced and that compensation for delays is clearly defined.

    7. What have they built before?

    Visit completed projects, speak to residents if possible and look at build quality and management. Past performance is the best indicator of future delivery.

    Our view

    Most of the risk in off-plan buying can be reduced by asking these questions before signing. A good developer will answer them openly. If answers are vague or evasive, that is itself an important answer.

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