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Discuss this article (11 Comments)Developer says 30% of investors are struggling to pay
by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 12 August 2009
zoomINVESTOR ISSUES: Up to 30 percent of investors in Al Fara'a projects are behind with payments. (Getty Images)
Around one in three Al Fara’a Properties investors are behind with payments, the developer has said.
Natasha Gangaramani, director of Al Fara’a Properties, told Arabian Business: “Anywhere between 25 percent and 30 percent 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,” she added.
Property investors in the UAE who have bought off-plan are struggling to pay developers amid a sharp economic downturn.
Faced with plummeting prices, many are in negative equity where the value of a home is less than debts owed on the property.
Al Fara’a,the development arm of the Al Fara’a Group, which has operations in everything from construction to cement mixing, is looking to expand its portfolio regionally into Qatar and Saudi Arabia, Gangaramani said.
The developer is currently in talks with companies in those countries, but she declined to say who.
The company currently has 6 projects in Dubai and Abu Dhabi. Its developments in Dubai are located in Jumeirah Village South, downtown Jebel Ali and Maritime City.
Al Fara’a Group is based in Al Ain, and has offices in Dubai and Abu Dhabi and employs around 18,000 staff, including labourers.
READERS' COMMENTS
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Increasing Expat population is only solution
Posted by kumsan, Dubai, UAE on Thursday 13 August 2009 at 18:45 UAE time
Global recession did hit Dubai.... but I do not think this is the only cause. 'Global' was not true for Dubai when Dubai was booming since early 2001. because that time others were developing moderately but Dubai was leaping !
It is the Rental market in Dubai that drove 'Real Estate' market. ;because, in Dubai very few Expats were motivated enough to buy property for themselves to live in.
With little rights to non-citizens, majority of Expats were never interested in buying a home for their own (i.e. long term stay).
If earlier formula (Rental income) did work.... why not to rejuvenate same again with Government regulations.... Govt must encourage increase in Dubai Population thru various incentives.
Posted by kumsan, Dubai, UAE on Thursday 13 August 2009 at 18:45 UAE time
Global recession did hit Dubai.... but I do not think this is the only cause. 'Global' was not true for Dubai when Dubai was booming since early 2001. because that time others were developing moderately but Dubai was leaping !
It is the Rental market in Dubai that drove 'Real Estate' market. ;because, in Dubai very few Expats were motivated enough to buy property for themselves to live in.
With little rights to non-citizens, majority of Expats were never interested in buying a home for their own (i.e. long term stay).
If earlier formula (Rental income) did work.... why not to rejuvenate same again with Government regulations.... Govt must encourage increase in Dubai Population thru various incentives.
The problem
Posted by Nick, Dubai, UAE on Thursday 13 August 2009 at 14:17 UAE time
The problem is that there are one or two good buyers (ie those which can make their payments) in every project. However, the remainder are the speculators who had no means to complete the purchase and were gambling on being able to sell the property on. This gamble has failed and they are looking for ways to get out of paying. The problem is for those who do have the capacity to pay - they have lost confidence in the market and are worried that if they do pay and their property is not completed, that the system will not adequately protect them.
Whilst monies in Dubai go into escrow, much of the escrow money has gone to master developers as land payments and therefore there is no money to undertake the development or to return to the investors. Developers are hoping that their investors will cut their losses and can be terminated.
It is the people who invested in the future of dubai ie those who bought to live and expected a product who i feel some sympathy for. However, any lawyer would have told them that the contracts were one sided, there was little consumer protection and that the risks were high. Statements from those in power indicating "no risk", "the market will never go down" were ill advised or worse, grossly negligent.
What is needed is an investigation into each developer, a full audit of what has been done to date, who has an interest in seeing the buildings built and some gov't intervention. I hope we will see this so that this great city can prosper once more and that future investments can be made with a clear understanding of the regime and the risks.
Posted by Nick, Dubai, UAE on Thursday 13 August 2009 at 14:17 UAE time
The problem is that there are one or two good buyers (ie those which can make their payments) in every project. However, the remainder are the speculators who had no means to complete the purchase and were gambling on being able to sell the property on. This gamble has failed and they are looking for ways to get out of paying. The problem is for those who do have the capacity to pay - they have lost confidence in the market and are worried that if they do pay and their property is not completed, that the system will not adequately protect them.
Whilst monies in Dubai go into escrow, much of the escrow money has gone to master developers as land payments and therefore there is no money to undertake the development or to return to the investors. Developers are hoping that their investors will cut their losses and can be terminated.
It is the people who invested in the future of dubai ie those who bought to live and expected a product who i feel some sympathy for. However, any lawyer would have told them that the contracts were one sided, there was little consumer protection and that the risks were high. Statements from those in power indicating "no risk", "the market will never go down" were ill advised or worse, grossly negligent.
What is needed is an investigation into each developer, a full audit of what has been done to date, who has an interest in seeing the buildings built and some gov't intervention. I hope we will see this so that this great city can prosper once more and that future investments can be made with a clear understanding of the regime and the risks.
Developers adjusting prices down???
Posted by HBO, Dubai, UAE on Thursday 13 August 2009 at 11:43 UAE time
Don't dream my friends, they will just not do it...Would investors would had adjusted prices up when they were selling at at much higher prices thatn those bought from the developers??? Of course not, be realistic, that will never happen, better concentrate in pressing developers to link payments to contruction progress and just make sure construction is actually started and completed one day, getting that only will be GOOD ENOUGH....
Posted by HBO, Dubai, UAE on Thursday 13 August 2009 at 11:43 UAE time
Don't dream my friends, they will just not do it...Would investors would had adjusted prices up when they were selling at at much higher prices thatn those bought from the developers??? Of course not, be realistic, that will never happen, better concentrate in pressing developers to link payments to contruction progress and just make sure construction is actually started and completed one day, getting that only will be GOOD ENOUGH....
Dear Peter
Posted by Jesus of Dubai on Thursday 13 August 2009 at 10:11 UAE time
I think "how business works" was thrown out the door last september.
Come to think of it, it was never let in. I think it was due to the change in the visa policy on home purchases (-:
Fact is, you take what you can here. This goes all the way from government owned entities like Nakheel, to Babu who just lowered the fee for cleaning my car from 250 to 100 Dhs a month. Sweet!
Posted by Jesus of Dubai on Thursday 13 August 2009 at 10:11 UAE time
I think "how business works" was thrown out the door last september.
Come to think of it, it was never let in. I think it was due to the change in the visa policy on home purchases (-:
Fact is, you take what you can here. This goes all the way from government owned entities like Nakheel, to Babu who just lowered the fee for cleaning my car from 250 to 100 Dhs a month. Sweet!
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