Nakheel suspends work on landmark Dubai projects

Trump tower one of several to be delayed in addition to 500 job cuts amid financial crisis.

Dubai-owned real estate developer Nakheel is delaying several of its flagship projects, including the Trump International Hotel and Tower, in addition to axing 500 jobs amid the global financial crisis, the company said late on Sunday.

"Nakheel is delaying long-dated infrastructure work on some of our projects in order to ensure that our business model is aligned to meet market demand," the company said in a statement.

"We have the responsibility to adjust our short term business plans to accommodate the current global environment."

Nakheel said the Frond N villas, Gateway Towers and the Trump tower on the Palm Jumeirah, one of three palm-shaped islands the developer is building off Dubai's coast, would all be delayed.

The company, part of state-owned conglomerate Dubai World, said much of its Waterfront project, a series of man-made islands set to be twice the size of Hong Kong, would also be pushed back.

Nakheel said work would continue on Madinat Al Arab, Venetto, Badra and the Canal District, but areas of the project, including construction of six man-made islands, would be put on hold.

The Universe, a series of man-made islands in the shape of the sun, the moon and the planets that wraps around Nakheel's The World project, has been delayed, the company said, with work restricted to preliminary engineering studies.

On the Palm Jebel Ali, the second largest of the three Palm islands, Nakheel said work on the fond villas and infrastructure for the crescent would continue, while other phases would be delayed.

It did not give details of how long any of its projects would be delayed for.

Nakheel said work on all other projects - which include The World man-made archipelago and Palm Deira, the largest of the Palm islands - would continue as planned.

Earlier on Sunday Nakheel said it had cut 15 percent of its workforce as it scales back projects due to the economic climate.

Nakheel is the latest in a long line of Dubai-based real estate developers to announce layoffs, which includes Damac Holding, Omniyat and Tameer Holding Investment.

Many other developers have relaxed payment plans in a bit to stimulate demand for real estate, which has slowed significantly due to the global financial crisis.

The crisis has hit demand from foreign investors, which make up a large percentage of buyers, while tightening liquidity has made home financing more difficult.

HSBC said in a report earlier this month property prices in Dubai fell four percent between September and October, with the price of villas tumbling 19 percent, the first time prices have fallen in the emirate.

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Posted by: Wajahat Ali Khan

I personally don't think so... Besides global financial crises, one of the main reasons for this bubble to burst is the creation of such an environment where Mr. XYZ, earning AED 30,000pm, could actually buy 4 properties, because all he bothered about was the "first two" installment payments, during which time he could easily flip his investment, make thrice the amount he invested, and go out again, searching for the 5th property, because he was not worried about loosing this money which he made on his last sell, and not his 'own' hard earned money... But again, Mr. XYZ is not the only one to be blamed for... Mr. XYZ could go beyond his means only because no developer/bank/real estate mortgage provider did their due diligence on Mr. XYZ as to how much money he has and how much of loan on a consolidated basis he has taken up, how many credit cards' limits he has burst and how many properties he can own... But once again, these financial institutions are not the only ones to be blamed for... because there was no consolidated control/MIS provided by the Central Bank, on individual basis, which could have given the financial institutions an idea to actually guage how much is Mr. XYZ already indebted and how much more loan can he further get, because there is no information available individual borrowing, which are generally, across the world, provided by Central Banks... So again, the bubble burst of Dubai's property market is an outcome of lack of financial checks/controls by the central authority, which is also the real cause of the recent financial crises and property price decline across the globe... However, I do not feel sad about people who have lost their money in heavy property investment, because this downturn has actually wiped off people like Mr. XYZ...

Posted by: Paul

So Nakheel is shelving 'long-dated infrastructure work'... but is still going to go ahead and build a 1.4km tall tower? Of course the tower will never be built because even if Nakheel has lost the plot, the banks have not and will simply not lend on it. But it highlights that these developers have learned NOTHING. Dubai has more than enough gimmicky luxury projects already - super-tall towers, novelty shaped islands, etc. What it has needed all along, but never got, is investment in boring essentials - sewerage, public transport, as well as in low-cost housing. Why doesn't the government tell these developers to stop wasting time and money with ever more absurd schemes and get down to building things that Dubai actually needs. Then maybe, just maybe, people might regain the confidence to actually view Dubai as somewhere with a secure future, instead of as somewhere with infrastructure of the 3rd world that is at the point of collapse.

Posted by: sid

I am a property owner in the UAE, both finished and under construction. I am very happy with the current situation of all sales being on hold and new projects being delayed/canceled. I think in the long run it will be good for people who are committed to this market and are not here just to flip. This will certainly make for a more sensible Real Estate market environment.

Posted by: Paul King

The Dubai real estate market hitting a brick wall is all down to the global financial crisis! It's nothing to do with the garbage quality of the product or the massively high prices. It's all due to the global financial crisis! What a joke! This correction is due to Mr. Market sobering up!

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