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Dubai Property Investors In Off-Plan Nightmare
August 14, 2009Article by Ray Withers
Off-plan investors in Dubai property are failing to pay developers following a huge drop in property prices since they signed up for their apartments and villas.Many buyers are in negative equity as the price they are paying was fixed on the purchase contract but values have plummeted by more than 50% since the ink dried on the agreements.Now, the homes are worth less than the finance secured against them.
One developer, Al Fara’a Properties, claimed about 30% of investors has failed to make scheduled payments.
Natasha Gangaramani, an Al Fara’a Properties director, said: “Anywhere between 25% and 30% of people are coming in saying ‘I can’t pay right now, can I extend, or do something about it, or consolidate my portfolio’.”
“We are seeing cases of defaults, and sometimes they are customers who come from a very good background.”
The company fears many speculators who were banking on making a profit from a rising market will not back out of deals and take the loss rather than pay up for the apartments and hold a larger loss.Investors see property prices still have some way to fall in Dubai and may take years to catch up to their 2007 peak levels, and meanwhile they have to fund a mortgage while the property is in negative equity.
Al Fara’a is the development arm of the Al Fara’a Group that trades in many construction-related business sectors, and is looking to expand in to Qatar and Saudi Arabia, Gangaramani said. The company currently has six projects in Dubai and Abu Dhabi. One Al Fara’a investor said: “We stopped payments on some ongoing projects that we invested in simply because we need and deserve to get a discount. The price of steel and concrete has been cut by 40% from their peak last year.
“The developers jacked up the prices when construction materials were expensive. They need to lower the prices and offer new contracts to investors who are willing to keep up their payments.”Other Dubai investors have complained to the Real Estate Regulatory Authority about Dubai Properties.Buyers and the firm are squabbling over final payments for the Executive Towers development.
The company is demanding final payments for buyers even though it has not given them their apartments.
The final payment was contingent on hand-over, according to a letter sent out to buyers in June.
Dubai Properties says the keys haven’t been given to buyers because it is phasing handovers.
Buyers, on the other hand, say that the project is having a hard time.