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Palm Springs investors face millions in losses
by This email address is being protected from spam bots, you need Javascript enabled to view it on Monday, 31 March 2008Posted on Sunday, 6 April 2008
Every one involved has to shoulder responsibility
Posted by Makani at 13:50 UAE time
Well: What we see here in Damac fiasco would definitely trigger the medium term correction in the market which is heavily overprized and over hyped…. I have lived in Dubai for 5 years and had worked in real estate sector for one of the local developers for some time and I have seen the way real estate mess started among medium size real estate developers / agents who used all their means to deceive investors… that time when no one was regulated and most of the people have made money in real estate in Dubai at the expense of others…no one is watching them….I feel pity for the investors in Palm Spring…but who are the offenders behind this…. ….Now that Damac, which is relatively bigger player, is involved...This should prompt govt of Dubai to put extra effort in putting a right and effective system in place which would help in protecting interest of every one involved.
I understand the entire following are some way or the other is responsible for this fiasco.
DAMAC: Not protecting investors’ interest by not providing up-to date information to investors in the secondary market about the status of the project.
Delaying the project without being accountable to any one…..
NAKHEEL: Not compelling Damac to disclose the change of facts statement to potential investors on timely basis and just coming up with explanation when the damage has been done…..
RERA: Not having any update on the project status and taking pro-active steps to protect potential investor’s interest….
Not keeping effective watch on the real estate agents / companies who do buying and selling business…some times over selling the properties and playing around with non-sophisticated investors….
INVESTORS: Why they did not do their due diligence on the developer…..did not they know that Damac has only delivered 2 out of 50 projects and is struggling to make sales and often attach valuable prizes with their properties….
Did they were not aware of the risks involved in the buying off-plan property from secondary market….
What kind of representations were made to them by sellers and selling agents
Did they not update themselves on the project status buy visiting Nakheel / Damac office and inquiring on the status of the master project and Palm Spring Project
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Posted on Saturday, 5 April 2008
Signs of Bubble Busting
Posted by ak at 17:24 UAE time
This is the beginning of the bubble busting, and will eventually snowball into a reality check. I am most definitely out of Dubai investments until unless prices go down 30%.
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Posted on Wednesday, 2 April 2008
Palm Springs
Posted by MW at 12:37 UAE time
This is an outrage and Damac are clearly looking to avoid the increased cost of building. I am very keen to join the consortium of those threatening action and would appreciate being contacted by those involved. Property values have tripled in this period of time. The Government needs to get involved to avoid this spreading across the Globe to all property investors.
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Posted on Tuesday, 1 April 2008
Palm Springs
Posted by matthewwuillemin at 23:52 UAE time
Until the real world of real estate takes hold here these things are going to re-occur. I could never understand how someone could re sell some thing on the secondary market that had not even been built yet. Really all that was happening is that folks are novating their contracts. You can do this in the real world but no funds change hands until the final settlement. And then the property may change hands several times in one day... that is how things work in more regulated markets. I believe that there could also be a legal case against the sellers in the secondary market as they have not delivered on the contract that they sold to the unfortunate latest purchasers either.... this is the beginning of the Dubai Sub prime crisis!!
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Palm Springs Mess
Posted by Potential Dubai Resident at 19:55 UAE time
Whilst I feel some sympathy for gullible overseas investors who perhaps did not know what they were getting into, I have little sympathy for those who are driven by pure greed.
If the equivalent of the Wall Street Crash is likely to happen again, Dubai is the most likely location.
I have wanted to live in Dubai for several years, but have been priced out as I have seen properties rocket above London prices. I am sure many potential ex-pats have been, like me, waiting and watching for the inevitable bubble to burst.
I visited Arabian Ranches when it had just been completed and could not understand why it looked like a ghost town, when nothing was apparently left for sale.
Now everybody will think twice about buying in the secondary market. It will take a few months before we see the impact, but once that secondary market shrinks, the carpet baggers will start to pull out of the primary market.
Eventually, we will get back to the situation where people are actually buying properties to live in, hopefully at more realistic prices.
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These are the kind of Developer that Distroy the Market Confidence
Posted by Sam Wahib at 17:47 UAE time
It is amazing to see the effort and amount that Damac spends on ADVERTISING.... while they do NOT spend enough effort on delivering on their promises. Other than 2 buildings in Dubai Marina, I'm not aware any othe project that was delivered out of the 50+ project they sold....In addition, and not a single Damac project has been delayed less than one year.
I can not imagine a project that was supposed to be completed in 2007, just gets cancelled NOW (after the completion date). These investor must have paid in 2004, now they will just get 6% interest while they could have got 200% to 300% return if they would have invested these sums in any other project in Dubai
When you deal with such developer you should look carefully at the contract, and make sure that you are covered with proper compensation should this happen to you
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Update facts
Posted by Ilyas at 17:00 UAE time
No one apart from Damac is really in the wrong here, Lee talks about who should be sued, the only ones who have gone back on anything are Damac. The have been given a Plot by Nakheel, but they will obviouly get a lot more money by selling it afresh then re designing and leaving it with the original investors.
I think most people cant grasp the simple con that is being carried out here - Nakheel have redesigned but have delivered on there side of giving plots - Damac want to make more money by selling at new prices so are trying t cancel peoples contracts.
One thing about unavoidable delays but completely cancelling investors contracts and offering 6% per annum so then can then sell at 300% of the orginal price that is a con...........
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Damac and the fun and games
Posted by Mike H at 16:53 UAE time
Damac have been selling off plan now for 5 years. They must surely have sold 60 plus developments. In that period they have handed over 2 buildings if my memory serves me. It seems to me that its all about taking in the cash that they can and skirting around the deliverables with excuses like this. Before the escrow was introduced what was happening to all that money?
Hmmm interesting.
I wonder how their developments in Egypt and Jordan are faring. Maybe Palm Springs is financing those.
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Palm Springs Mess
Posted by Lee at 15:18 UAE time
Wow! Lots of opinions on this one!!! I feel for the investors, end users, speculators, etc. who will not be receiving their property. And for those who were secondary buyers, well, these buyers could lose big time depending on the premiums they paid. But who should be sued or held accountable?
-Should Damac sue Nakheel as one of the Palm Springs investors suggested? I guess they could but then Damac would never receive another plot in any Nakheel development ever again. I would be surprised if any Middle East master developers would ever want to work with Damac. Is Damac going to risk that??? I don't think so.
-And who is to say when Nakheel told Damac? I think we need Nakheel to "clear the air" and come forward with the facts on this plot and their communications/dealings with Damac.
-Should previous owner's be sued for their premiums? Who is to say they were not "tipped off" to problems and told to sell by Damac executives? I bought a property in JLT and a year later one of the representatives told me how late the project would be and that the finishes were going to be rubbish. He recommended I sell if I could which I did. If you think buyers are not gettings "tips" for when to buy or sell in this market you are being naive.
Is anyone really surprised this happened? If anything I am surprised it took this long for it to happen. Developers are buying plots and less than a year later they are selling flats off plan, sometimes before master developer's complete the infrastructure works. This was bound to happen. My wife and I bought a flat in 2005 only to have the building completely redesigned in 2006. We ended up with a flat on a lower floor because that was all that was left for us. I knew then the whole real estate game in Dubai was going to be risky until the government introduced laws to regulate the "monkey business". But at the end of the day, this is still the wild frontier. There may be Escrow accounts, but where are the penalties for projects handed over 1, 2 or 3 years late?
Who knows how this will turn out.....but I am going to sit back and watch the entertainment!
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The Damac fiasco
Posted by Plam Springs Investor at 14:05 UAE time
"As stated before in this thread; sit back and watch and enjoy." Kieran
What about the first rule of good government, of regulating the real estate industry? I'm sure you wouldn't be sitting back and enjoying things if your local Wimpy builder did the same to you if they felt their profit margin had become too small to make it worthwhile to deliver the property you had purchased several years ago....
"The Dubai Real Estate is like a gambling table, you speculate & invest. The chances of making it big is high but if you lose, you do not blame the casino, you blame your self." The Thinker
You have a very poor opinion of Dubai - simply a huge gambling place billing itself as being run along Islamic principles. The Sheikh of Dubai paints a very different picture of Dubai...
"Don't you people who speculate on a value of something that is not happening see that you too pump up the bubble a little too much, and are really helping the same developers whom you want to sue now?"
You do not seem to understand the simple fact that Damac have renegaded on the contracts given to investors not because of any property bubble, but SIMPLY TO STEAL MONEY THAT RIGHTFULLY BELONGS TO INVESTORS. It is not as if they do not have money to pay compensation at current market rates, or do not have a plot on the Palm Jebel Ali to build the Palm Springs project.
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Palm Springs
Posted by theshadow at 13:51 UAE time
It may not be criminal but it's shady as you can imagine. Not only DAMAC are to blame though, the real estate industry here is equally guilty of distorting reality in their efforts to get people to buy buy buy.
I just don't see how this works though - surely if a developer announces a development and offers it for sale they're obligated to deliver the project as advertised?
If not, that says a lot about the maturity of the real estate industry here and the type of people it has attracted. I'd rather spend my hard-earned money elsewhere on something solid instead of a coloured, computer rendered bubble that might burst at any given moment for no valid reason.
It really is ludicrous.
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Facts
Posted by Ilyas at 12:18 UAE time
Some people dont seem to understand what this is about. Nothing to do with volatile markets, because if the value had gone down that is something the Investors understand, nothing to do with workmanship, oversupply blah blah.
Damac have used investors money to buy the plot, and then when the price goes through the roof they want to renege on the their committments and sell it for more.
People posting on here talking about falling markets and all the rest this simply is nothing to do with the issue, investors paid for something on Palm Jebel Ali and thats what they should get. Not some shoddy excuse about a redesign.
AND if the price had collapsed ofcourse Damac would then have said to the investors to buy in a redesigned palm springs, just so happens they have seen an opportunity to make more money buy selling them afresh.
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First Rule of Investment
Posted by Kieran at 10:57 UAE time
Only fools think that high returns are not the reward for high risks...
These investors can persue this claim but they need to risk having the world know they were either gullible enough to think this was a guaranteed return or thought they were party to some nefarious deal whereby their returns were guaranteed unless, of course, DAMAC or their agents gave them assurances that there would be a massive return, thereby, through that assurance, underwriting the risk.
However, that may well indeed be the case. UAE sales agents (and there are so many of them these days) with their hyperbolic talk about massive returns and guaranteed investments may be advised to have their lawyers double check their publicity material and make sure their staff are trained well or this lawsuit and future ones could start to cascade down the property-boom feeding chain eating the weak.
The authorities have recently, and rather belatedly, been taking steps to regulate these sales and are to be applauded for that but, unfortunately, a lot of things were said and done pre-regulation, that might come back to haunt the market.
That coupled with the fact that there is a huge amount of property just now coming to completetion so the builders must be praying that their new owners are too ill educated or naiive to spot the shoddy workmanship and poor finishing prevalent in the region and launch a tidal wave of warranty claims for repairs and bringing properties up to the standard portrayed in the sales publicity. There is no evidence to suggest that most of the developers actually have the kind of solid, cash, foundations and secured credit lines to survive any major turbulence in this market, let alone to go paying out compensation back to burnt investors or aggrieved owners.
Caveat Emptor and nowhere is this truer than buying "off plan".
As stated before in this thread; sit back and watch and enjoy.
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Who's to blame?
Posted by The Thinker at 10:31 UAE time
Well, who is to be blamed, is it DAMAC who just promotes but never forces a investor to buy or is it the investors pouring in millions without seeing a brick on ground.
There a very true old saying, 'SEEING IS BELIEVING' & there is a counter line that says that only the risk takers reach the top (but for the risk takers, it can be rewarding or a dive in the dump while the believers would have lost a good opportunity if it was really good later).
The Dubai Real Estate is like a gambling table, you speculate & invest. The chances of making it big is high but if you loose, you do not blame the casino, you blame your self. After all, before & after investing, you believed in speculation (until DAMAC's announcement) and took a very strategic decision.
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Palm Springs mess
Posted by George at 09:45 UAE time
Well ...
If Nakheel redesigned the plots, then Damac should have either informed the investors in time, or sue/ask for compensation/alternative plot(s) of the same properties from Nakheel now.
While I can feel sorry for the original investors, the ones asking for the compensation of the secondary sales are obviously not entitled to any refund beyond the original price and any interest that the developer is accepting. Their risk - as long as they thought that the value is going up, they kept quiet, right? - and their loss. They would be happy if the project went through and they had 100% returns on the investment.
And, I really fail to see how a flat that is never going to be built can be valued, let alone worth millions??? Don't you people who speculate on a value of something that is not happening see that you too pump up the bubble a little too much, and are really helping the same developers whom you want to sue now? Compound greed ... great!
Let's kick back and watch ... the game is on ...
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