Nakheel to start Palm project sales next month

Nakheel, the Dubai developer bailed out by the government in 2009, will start selling townhouses on Palm Jumeirah next month in its first new residential project since the property market crashed in 2008, chairman Ali Rashed Lootah has said.

The state-controlled company will develop mid-range homes on its Palm Jumeirah artificial island, alongside the apartments and villas already built there.

Nakheel, Dubai’s biggest developer by assets, announced a plan to construct 102 townhouses on the island in September.

“Not everyone wants a villa or an apartment,” Lootah said in an interview at his office in Dubai. “There’s demand for townhouses on the beach, but we’re being careful not to increase the density on the palm.”

The Palm Residence project will test demand for property in a market where prices have plunged by more than 65 percent since their mid-2008 peak.

The slump forced Nakheel to write down the value of its real estate by AED78.6bn ($21bn) and prompted the bailout.

Most of the Palm project will be financed by sales agreed before construction begins, a method that was common before the property slump.

Lootah, who declined to comment on the expected cost of the development, said it won’t be financed through bonds or loans from international banks.

Nakheel plans to spend AED1.4bn this year to complete nine projects across Dubai that had been suspended after the property crash, according to an Islamic bond prospectus obtained by Bloomberg News in September.

Nakheel plans to complete 7,982 homes in 2012, the document showed.

“My main challenge is to deliver to buyers the homes they bought,” Lootah said. “The banks and the contractors made a lot of money off us during the boom days, but the buyers have been patient and we want to deliver the homes they paid for and dreamed of. That’s my main goal.”

Nakheel settled AED6.6bn of claims related to property sold in projects that were halted indefinitely, Lootah said.

The buyers have been offered alternative homes in projects nearing completion or credit notes that can be redeemed in five years. Nakheel has about AED3.4bn of claims left to settle, he said.

Revenue from retail will probably double by 2014, lifted by an additional 3 million sq ft of space, Lootah said.

The company reported revenue of AED1.5bn for the first half and is due to release 2011 results in March.

Limitless, the international property developer put under Nakheel’s management in July 2010, has almost restructured a $1.2bn loan, Lootah said.

The company, which halted projects across the world following the crisis, plans to resume work on developments in Moscow and Saudi Arabia, where housing demand is highest, Lootah said.

Before the crisis hit, Limitless was developing Khimki, a villa and low-rise apartment project on 114 hectares to house 14,000 people alongside the Moscow River Canal.

The company’s Al Wasl project in the Saudi Arabian capital, Riyadh, was designed to include more than 50,000 homes as well as offices and retail space on 1,400 hectares, according to the company’s website.