REAL ESTATE REGULATORY AGENCY AUDITS
Real estate is a property either in the form of land or in the form of land with improvements attached to it (building). Real estate is emerging as one of the fastest growing industries in the United Arab Emirates (UAE). As a result real estate industry is now being recognized as one of the major contributors to the UAE’s national economy. However, there are certain rules and regulations which the entities operating in the real estate industry must comply with in order to continue their real estate operations within the UAE, especially the entities that are doing real estate business in the emirate of Dubai. Today, we will discuss the rules and requirements that are applicable on real estate businesses in Dubai in detail.
Real Estate Regulatory Agency – RERA is the regulatory arm of the Dubai Land Department and is the one that establishes rules and regulations for the real estate sector in the Emirate of Dubai. RERA requires all real estate developers and projects registered with it to be audited according to the provisions of all the applicable rules and regulations. Only the audit firms approved by RERA are eligible for carrying out audit of registered real estate developers and projects in Dubai.
Push Digits is a RERA approved audit firm that is well-known for performing quality audits all across the UAE. At Push Digits Chartered Accountants, we have qualified audit and accounting professionals that have years of experience of auditing businesses operating in the real estate sector. Our team of audit professionals have extensive knowledge about the rules and regulations that are applicable to the businesses operating in the real estate industry and therefore we can help you in identifying and highlighting your weaknesses/ problems as well as recommending strategies and solutions to address the identified weaknesses/ problems.
Audit Requirement for Real Estate Developers
The government agency, requires all the registered developers to open and maintain an ESCROW account as well as appoint an auditor that appears on the list of RERA approved auditors for carrying out an audit as well as submitting a report on the status of the existing real estate projects. RERA also requires developers registered with it to submit an audit report with regards to all the projects that have been completed on an annual basis. The aforementioned requirements are an integral part of the strategy adopted by the agency for boosting the adoption of good governance measures by entities operating in the real estate industry in Dubai.
Further, the agency requires all the registered real estate developers to submit a cash flow audit report after a time period of six months. Fines will be imposed on developers that fail in meeting the six months’ deadline.
These audits help real estate developers in attaining confidence of their customers as reports resulting from the said audits will provide confidence to the potential buyers that developers are not hiding anything from them or anyone else.
Audit Requirement for Jointly Owned Real Properties / Owners Associations and Master Communities
The agency considers every owner of a unit of property in the emirate of Dubai to be part of Jointly Owned Property managers (JOP)/ Owners Association. The JOP/ Association requires all the owners to properly maintain all the property units they own.
Audit of master communities and JOP/ Owners Association is basically the audit of charges that are received from the communities and associations members’. The aforementioned charges include a master community charge for keeping assets that are commonly used by the entire community in good shape and condition, for example, trash cans, street lights, tunnels, etc. These charges also include an Owners Association charge that is related with the maintenance and usage of assets that are used by two or more units such as corridors, boilers, chillers, lifts, etc.
Initially, all the service charges, to be received from members, are calculated on the basis of budgeted costs but subsequently these are set on the basis of the financial results of the previous year. The facility management firms or teams provide maintenance services to the owner of a property unit against a fixed charged that is calculated using a pre-determined rate.
We at Push Digits perform stringent tests and checks while conducting audit of the accounting books of JOP/ Owners Association to ensure that investments and interests of the owners are not at any kind of risk. Any irregularity found during the process of audit are reported directly to the owners/ members of the associations and communities. Our audit team not only check expenditures but we also examine the receipts which an association or a community receives from its members. We also assist stakeholders of an association/ community in having a detailed and thorough look at the financials in addition to ensuring that the figures and information presented in the financial statements are as transparent as possible and there is nothing that is being hidden from the owners or other stakeholders.
Basic Rules and Regulations that Apply to the Real Estate Sector
The basic rules and regulations that are applicable to the developers in the Emirate of Dubai are mentioned as follows:
- The regulatory arm of Dubai Land Department requires all the registered property developers as well as JOP/ Owners Associations to submit certified financials containing budgeted cost and revenues of its real estate projects for the ESCROW account opening.
- RERA has the right to monitor the activities of real estate developers and JOP/ Owners Associations. It also has the right to audit the books of Owners Associations and developers.
- RERA requires ESCROW agents to keep and maintain proper record of income and expenditures of all its ESCROW accounts. RERA can require the gents to share any type of information for it to be examined and audited by a registered auditor, if considered necessary.
- If RERA decides on cancelling any real estate project then in such a scenario the government agency will be required to appoint a RERA registered auditor that will examine the financials of that project, the receipts deposited into the ESCROW account and all the expenses of the project. This kind of audit is known as Handover Audit.
Types of RERA Audits
Audits of real estate businesses have been classified into three main categories which are as follows:
- Financial Audit
- Operational Audit
- Compliance Audit
A financial audit includes the following:
- Checking the supporting evidences of the total funds received from different financial institutions for the execution of the ongoing projects.
- Examining total cash receipts from customers and the total number of property units cancelled and sold.
- Checking all the payments that have been made during the ordinary course of business such as land cost, registration fee, etc.
- Examining advances issued to third parties or employees either in cash or in the form of a financial instrument.
- Examining retention money which should be equal to 5 per cent of total funds received.
An operational audit mainly includes the examination of the business environment in which an entity carry out its business operations.
A compliance audit basically involves review and verification of real estate developers’ activities to make sure that they complying with all the rules and regulations that apply to the real estate business.
Why Push Digits Chartered Accountants?
Our firm is well-known for performing real estate audits for various real estate businesses operating within the UAE. We have years of experience in developing innovative and unique business strategies, identifying and highlighting different real estate issues, and providing solutions to address the identified and highlighted issues.
Push Digits Chartered Accountants is a RERA approved auditor that is eligible for providing quality audit services to Owners Associations, communities as well as real estate developers in the Emirate of Dubai.
At Push Digits, we possess a team that consists of highly qualified and experienced professionals that have performed multiple audits of a number of prominent real estate enterprises operating within Dubai. In addition, our team has up-to-date knowledge about the rules and regulations and the audit requirements that are applicable on real estate businesses. The aim of our team is to provide all our clients with reports that give them a true and fair view of their financials and operations. We tend to achieve this aim of ours by checking each and every aspect of our client entity’s finance and operations as well as ensuring that the entity is complying with all the relevant rules and regulations. We also help some of our major clients in maintaining their books in accordance with the applicable rules and regulations.
Our services for real estate developers and projects include the following:
- Management accounting
- Ensure compliance with service entity requirements
- Ensure compliance with applicable tax laws
- Ensure trust account compliance
- Performing audit of the ESCROW account
- Master community audit
- Internal Audit
- Audit of service charges
- Unit balance verification
- Special Levy reviews
- Budget reviews for communities and associations
- Mollak services