Dubailand contractor mulls legal action over power woes

A Dubailand contractor is mulling legal action against the resort’s developer in a bid to recoup some AED12.4m ($3m) in losses he claims to have incurred after power delays to the project.

Triveni Builders and Promoters, the firm behind the La Fontana di Trevi project in the AED20bn Arjun development, said a row over the site’s electricity connection had pushed back handover of the property and forced the company to breach its contract with investors.

 “We are thinking about arbitration, but we have not started yet. We are negotiating with [developer Dubai Properties Group] for at least part of our losses,” said CEO Ashok Galgotia.

Triveni began work on the AED80m residential development in 2008, but construction stalled after a planned electrical substation on the site was never built, leaving it without power.

The company was eventually forced to spend some AED500,000 to run a 5km cable from the development to connect to a Dubai Electricity and Water substation in nearby DuBiotech.

“The authorities were supposed to set up the power station, not us,” said Galgotia. “The total amount we are telling them we lost is AED12.41m. It is for slowdown of the contractor, additional costs of running a copper cable from the DuBiotech power station to our building and obviously we have lost rental income for almost 17 months.”

A spokesperson for Dubai Properties Group, the master developer behind Dubailand, did not respond to emails seeking comment.

Triveni is also facing legal action from its own investors, who saw the handover date for their properties pushed back as the developer struggled to connect power to the building.

Utility delays in Dubai are increasingly slowing the release of completed buildings to market, real estate analysts said this week, with some properties standing empty for more than a year while waiting for water, electricity and sewage to be connected.

Many investors have struggled to identify who is to blame for the delay, with developers and utility companies both accusing the other of failing to keep to schedule, said Matt Green, head of research at property consultancy CBRE.

“There appears to be slandering on both sides but without any evidence to say who is in the right and who is in the wrong,” he said. “It could be that the developer is using that as an excuse not to hand over the units, especially if they’re lacking the final funds to get their property to the completion stage, or if they have to make payments to lenders upon completion.”

Galgotia said DEWA informed them in 2008 it could not supply power to Arjan until at least 2018, while nearby DuBiotech was scheduled to get power that year. In response, Mizin – a subsidiary of DPG’s Tatweer – said it would complete the power station, Galgotia said.

 “[Mizin] had already showed us an agreement between them and DEWA… [But] they are saying it is the relevant authority who is supposed to supply the power, so we are all confused at the moment. We are trying to find out who will compensate us,” he said.

In addition to clarification as to who is responsible for the delay, Galgotia said the legal costs involved are a major concern.

“Arbitration is very expensive. We could end up spending a million [dirhams] in terms of arbitrator’s fees,” he said. “We don’t have that kind of money as we put all our money into the building itself. That is our issue at the moment.”