Dubai investors shaken by Palm Springs saga

PROJECT AXED: Two-thirds of respondents said news of the Palm Springs cancellation had made them think twice about investing in Dubai.

Potential real estate investors in Dubai have been scared off by news Damac Properties has axed a development on the Palm Jebel Ali, the latest ArabianBusiness.com spot poll has revealed.

The Dubai-based developer cancelled its the much-delayed Palm Springs project, which is yet to be built, five years after launch, citing "redevelopment of the plots".

Investors are now threatening to take Damac to court if it does not reverse its decision and continue with construction.

Damac has offered compensation for the cancellation, but buyers are facing average losses on their investment ranging between 300,000-600,000 dirhams ($81,000-$163,000), one of the project's investors has told ArabianBusiness.com.

The news seems to have reduced confidence in the market, according to the poll.

Two-thirds of respondents said news of the cancellation had made them think twice about buying property off-plan, stating that it had made them "very cautious about the Dubai property market".

Not one respondent said they would still buy off-plan real estate without first checking out the developer, while 33% said they might buy before construction has begun, but that it would depends on the developer and the kind of reputation it had.

Dubai has a massive secondary market for off-plan real estate, with units passing through numerous hands before a development is finally built as investors capitalise on soaring prices in the sector to make quick profits without putting up huge amounts of capital.

Many investors in Palm Springs bought units on the secondary market, meaning from an investor and not directly from the developer, paying up to a 50% premium on the original purchase price.

As the Palm Springs has yet to be built buyers will not have paid the full original purchase price, but will have made downpayments as agreed milestones were reached.

Secondary market buyers will have paid the seller the premium as well as however much of the original purchase price the seller had paid to Damac.

Damac has offered to refund the amount of money investors have put down on their property so far, plus 6% annual interest calculated from the date of each instalment payment, or the option of transferring their investment to another project with a 15% discount off current prices.

Damac said it was not the developer's contractual obligation to refund money that was paid on resales, according to an investor.

Damac threatened with lawsuit after project axed
Investors unhappy with compensation after developer cancels Palm Jebel Ali project.

Palm Springs investors face millions in losses
Furious investors gear up for legal battle with Damac over decision to cancel project.

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USER COMMENTS (1 COMMENTS)

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Damac Double Policy
Posted by M.Iqbal, Sharjah on 2 April 2008 at 22:32 UAE time

Damac has announced a 6% per year compensation for the Palm Spring project. First of all Damac ,should check the contracts which it sends to the buyer, asking to pay 2% per month for the amount delayed by the customer.

Secondly, Damac is not a banking company,which gives interest on the amount.

Third it has bought the land from Nakheel which is worth 4 to 5 times the initial price.

And last but not the least it is starting a precedent which is very dangerous for Dubai, where people had been investing money on Trust and it is the opposite of the vision of Sheikh Mohammad.

RERA ,should not be sitting on this type of complaint, instead it should take a very strong action against DAMAC.

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