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    Jo Hopworth on Justice For Natalie – Na…
    Mariam on Criminal Complaint filed in Ge…
    Martin Kraeter on ACI Dubai Funds filed bankrupt…
    Independent Observer on Iranian’s lawsuit reveals roya…
    Rado on DubaiTouristen landen schnell…
    Dubai Citizen on Al Fajer Properties Case…
    Dane on Outlook in concrete- Dubai Wor…
    jamesl fayad on RERA Dubai – Dubai Prope…
    Jacques on Malika Karoum finally arrested…
    James Brown on ACI – Alternative Capita…
    Journalist on Al Fajer Properties-500 Invest…
    ron oakeley on ACI – Alternative Capita…
    Benson Fu on Shahram Zadeh against Al Fajer…
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    • Criminal Complaint filed against Al Fajer Properties Sheikh Maktoum
      Criminal Complaint filed in Germany against Sheikh Maktoum Hasher Maktoum Juma Al Maktoum CEO of Dubai Developer Al Fajer Properties The Dubai Sheikh who mislead and extort a German Couple  Germany – Dubai 2011 A German elderly couple , today 80 + 50 years old who have been Dubai Tourists since a decade, bought in 2005 an apartment at Nakheel´s Dubai Residen […]
    • UAE: Human Rights Blogger, Sorbonne Lecturer Charged With ‘Humiliating' Officials
      source Human Rights Watch www.hrw.org (Beirut) - The United Arab Emirates attorney general should immediately drop all charges against five pro-democracy activists to halt their trial, Human Rights Watch said today. The charges of "humiliating" top officials relate solely to the defendants' peaceful use of speech to criticize the UAE governmen […]
    • Nakheel Dubai Sunland Case
      June 5, 2011After 21 hearings, Chris O'Donnell, the Australian chief executive of Dubai's major developer, Nakheel, came to the defence of his former colleagues Matthew Joyce and Marcus Lee. Mr Joyce and Mr Lee are accused of profiting from the sale of land that had been earmarked for a colossal high-rise development, which was to include the futur […]
    • Dubai Nakheel CEO decided to leave the company
      Dubai June 7, 2011 Nakheel said on Wednesday that its CEO Chris O'Donnell had left the company "after completing his contract terms". O'Donnell, an Australian who joined the developer in 2006, said he had decided to leave Nakheel following five years spent with the company, the statement added. O'Donnell has overseen a traumatic time […]
    • Owner of Dubai Developer Damac Hussain Sajwani files case against Egypt corruption ruling
      Dubai property developer Damac said on Tuesday it had filed an international arbitration case against Egypt over a land dispute and the conviction of its chairman and owner, Hussain Sajwani.A Cairo court last week sentenced Sajwani in his absence to jail and ordered him to pay a $40.5 million fine in connection with his 2006 purchase of land at Egypt's […]
    • Dubai Palm Jumeriah - Investors plan to take legal action
      Investors in Dubai Palm Jumeirah’s Golden Mile complex will this week serve the developer behind the project with a legal ultimatum to hand over their units or issue them with a refund.Up to ten investors in the luxury complex plan to issue Souq Residences with legal notice in a bid to force a resolution to a dispute that has been ongoing for more than a yea […]
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Investors stuck in cul-de-sac

Posted by 7starsdubai on December 30, 2008


Last Updated: December 29. 2008 7:24PM UAE.

Restrictions on bank lending have slowed property transactions and sent prices downwards, creating a market of cash-strapped investors with money clogged up in property.

There was a time when sales agents, flush with business from the off-plan sector, had no trouble shifting property that was yet to be built. But with buyers now scarce, their books are filled instead with hundreds of properties that buyers can no longer afford.
Today, thousands of investors, from professional speculators to those simply wanting a home in which to live, are left trying to find a way out of contracts they have signed.
But developers with a commitment to building hundreds of apartments are not making it easy for them.

A regulation issued by the Dubai Land Department last month required that off-plan buyers who wanted to stop their payments must cancel their contract and forfeit 30 per cent of the total value of the property, which has made it harder for buyers to walk away unscathed from deals.

“People are struggling massively to get out of contracts and get as much money back as they can without paying any more. But still, if a developer has to sell 300 units and suddenly half the buyers pull out, even though it can get the units back, they’re still unsaleable,” said Martin Nield, the founder of Property People, a Dubai-based sales agency which has about 700 off-plan properties on its books.

The reasons why people have tied up their money in property vary widely. There are the professional speculators, who presumably came to the market with enough financial backing to withstand losses. Or there are those who liked making money out of property, but who could not really afford the downside when market forces became unfavourable.

Many of these buyers started small, according to Mr Nield.
“They would buy a couple of homes and make maybe Dh1.5 million (US$408,000) out of them, then buy a couple more and make another Dh1.5m, but would then get greedy and buy an entire floor of apartments.”

Mr Nield cites one couple who, having previously flipped property within months and made a small fortune, bought a floor of apartments.

The couple, from the UK, has now paid 20 per cent towards about Dh3.4m in properties. But they failed to meet the deadline for their third instalment earlier this month and now stand to lose everything. If they do not pay, their contracts will be cancelled, with no money returned.

“Even if you beg, steal and borrow from family and friends, you might be able to scrape the money together, but what happens when the next instalment comes?” said Mr Nield.

There are also people now striving to get out of contracts for property where construction has either been slow or has not even started.
Many have ploughed their life savings into off-plan property to avoid soaring rents and to live in their own home.

Setbacks have plagued developers in Dubai, even before the global financial crisis hit last summer.

Take Dubai Lagoons, a residential project by Schon Properties, which launched in 2005. The 48-building development, planned to be for “affordable housing”, underwent a redesign. By the time construction began late last year, construction costs had risen so much that the contractor could no longer afford to build inside the original budget, leading the company to walk off the site in May this year.

Even though a new contractor has been appointed and work is expected to be finished in early 2011, investors who have lost faith in the project have been trying to get their money back.

In August, the company told investors that only those who had bought before early 2006 would be granted a refund.

“We asked for a refund or to have our payment put on hold [until construction resumes], but this was refused,” said one buyer, who asked not to be named.
The situation is now worse because of the economic slowdown.

Aisha Mohammed invested her life savings for an apartment in the project, which sold for Dh600 per square foot when launched.

She has been trying to cancel her contract since January. “To date, almost every month I have been told funds will be returned to me, but I have received nothing yet,” she said.

Investors in the long-delayed Ivory Tower, a residential project launched in 2005 by Sokook Investments, face a similar dilemma.

The project was delayed while the developer awaited the approval of a building permit from the master-developer, TECOM. Although a foundations contractor, Piling Tech, was recently hired, buyers are not convinced their homes will be built and are particularly upset that even if they are, it will be at least two years late.

One investor, who asked not to be named, has paid Dh100,000 towards his studio apartment. “This might not be much for speculators who invest millions, but it’s too much for a small investor. I have spoken to three different lawyers and all of them say something else, nobody knows the exact amount of money an investor can get back.”
Widespread redundancies are now creating another breed of property losers: those who have bought property which, with no job and bleak prospects, they can no longer afford. Nor do they have buyers.

“A friend who bought a home in Dubai Sports City was made redundant from his Dh30,000-a-month job,” says Mr Nield. “The company gave him one month’s notice in the company apartment, so not only does he have to find Dh11,000 a month for rent, he can’t afford the Sports City home and can’t sell it.”

Property lawyers have seen a rise in the number of disputes between investors and developers since the market slowed.

Many cases are being dealt with by Dubai’s recently established Property Court. But consumer protection law is still a grey area, particularly for those who bought property before the introduction last year of the Escrow law by the Dubai Real Estate Regulatory Authority (RERA).

Developers are now obliged to set up an Escrow account into which money from buyers is paid and used solely for construction.

Although plans for a consumer protection law that will better protect investors from misleading marketing by developers are in the pipeline, there is still a lack of protection for those who have money tied up in stalled projects.

The financial crisis should lead to the creation of more robust consumer protection laws, according to Niall O’Toole, a partner with the law firm, Clyde and Co.
“The last few months have shown that the UAE is part of the world economy and the more certainty the legal process can provide investors in times of financial uncertainty, the better,” he said.

“Emerging economies like the UAE are now going to be more competitive in attracting inward investment. A more transparent and certain legal system will be a selling point for the country.”

While the introduction of a regulatory body such as RERA and the Escrow law have provided investors with some relief, there should be stiff penalties for developers of long-delayed projects, said Mr Nield.

“At what point should somebody step in and say to the developer they either cancel it and give people their money back, or get on and build it? There should be massive penalties for the developers because they’ve had all this cash for so long.”



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