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Developer calls on UAE banks to resume lending
A high profile Dubai developer has called on banks in the UAE to resume lending as soon as possible in a bid to restore confidence to the struggling real estate market.
Danial Schon, vice president, Schon Properties which came under fire from investors last year after long delays to its flagship Dubai Lagoon development, said he hoped to see banks take action in the next six months.
Schon, who believes the correction in the Dubai property market will last until June or July, said: “People are losing jobs, visas are being cancelled, traffic has decreased. Banks have a major role to play in building confidence. My worry is that banks will act later rather than sooner.
"If they do this and come in 2010 instead of this year, this will be bad for the real estate industry.”
He added in an interview with Arabian Property: “The major thing I see happening over the next six months is banks will start to give mortgages again. Their job is to give end-user financing to residents. Mortgages are such an important function of the real estate cycle.
"Here, there are excessively high mortgages and they are very limited and there is a lack of mortgage flexibility – this market has been running on cash which can only last so long.”
Schon Properties’ Dubai Lagoon project has come in for criticism after the seven billion sq ft development, to consist of 49 buildings and around 4,000 apartments, saw completion dates slip from December 2007 to 2011.
Schon said one reason for the delay was the plan by the Roads and Transport Authority to build a six-lane highway in close proximity to the development.
After months of negotiation, Schon Properties eventually gave up 10 metres of land to the transport authority.
The Dubai Lagoon concept is about affordability and Schon added: “In Dubai, real demand from end-users was for affordable living. If you see the percentage of affordable property compared to high-end, luxury developments, it’s 10 percent affordable housing and 90 percent luxury and luxury developers are the ones taking the hit.”
However, Schon said he believes Dubai will recover quicker than other places.
“It’s a very dynamic place and now is the time you’ll find out who the true believers in our city are and those who only speculate,” he said.
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Comments 1-10 of 10
Posted by IRWIN on 1 March 2009 at 17:48 UAE time
i really agreed with all above comments and would like to add one thing that these type of all developers should be fined by goverment and their accounts should be audited bt indepedent auditors to enable to assess where all these money from customers has gone.(May be in personal accounts of directors).
Posted by Rima, dubai, UAE on 1 March 2009 at 11:42 UAE time
Blaming one party for the crisis which the property market is facing now will only aggregate the problem. It takes two to tango: Banks need to be a bit more flexible, and developers on the other hand need to stop acting like ostriches and digging their heads in the sand, assuming that someone else(banks, governments,etc..) should solve the property market problems. There is an immediate need for price adjustment by developers - they can not simply expect investors to pay for units which are priced more than double their actual value...and still delay projects forever...get real... the confidence in developers is on the ground..do something about it
Posted by Hossam, Dubai, UAE on 28 February 2009 at 14:25 UAE time
Waht did developers did and doing now ? And what did Banks did and doing now :
Banks :
1- Was lending money up to 95%
2- Is Lending money now up to 80%
3- Saving our money from bankruptcy
While Developers :
1- Was increasing price every week ( Sky is the limit )
2- Never started the work
3- DELAYS , DELAYS , DELAYS
My precious advice to you from a well experienced IT business man " Deal with the market with the way it is and not the way you wish to be "
my 2 cents
Posted by YAL, Dubai, UAE on 28 February 2009 at 11:55 UAE time
When foolish men have a bumper crop, they borrow against next year's presumed bumper crop and build bigger barns and buy more acres. They envision owning the whole county! With weather just a little less favorable, they lose their whole farm, for they cannot afford to service the debt.
Please !! it didnt rain money from the sky in the banks ! It is us depositors hard earned money you want to further risk in the real estate bubble
Posted by abdul jaleel damudi, dubai, uae on 28 February 2009 at 11:03 UAE time
UAE FOLLOWS USA BLINDLY.WHAT HAAPENS IN USA SAME HAPPEN IN DUBAI.EVERY ONE IS UNDER HUGE DEBT IN USA. SAME THING HERE. ALL LOCALS HAVE HUGE LOAN TO BANKS. EVERYONE IS LOAN BORN. AND THIS LAON CULTURE SLUMS THE ECONOMY.. EVERY WEEK ONE BANK CLOSING IN USA.
Posted by Alaa Sharif on 28 February 2009 at 02:21 UAE time
Developers should start to decrease prices so that banks and people can afford buying those insanly expensive apartments. How can 1 bedroom apartment in Dubai be more expensive than 2 apartments in New York city!!
Now they ask the banks to solve the problem and provide financing...the problem originated because housing market is very expensive!!
Posted by Khalid on 27 February 2009 at 23:17 UAE time
Everyone who commented on this article made more sense than Mr. Schon, "Shut up and build" was spot on. before such "Developers" tell others what to do to fix this mess that we have found ourselves in i suggest they they stop asking for payments from end users before approval are acquired and start treating us as human beings and not con targets. i have paid 55% of a property that hasnt gotten approvals yet. second meet your deadlines or postpose payments. Third reduce your prices to earthly figures and not astronomical ones. It serves these developers right to be BANKRUPT now because of the cons they have pulled for the past 10 yrs. "Developers" need to realize that our lack of confidence does not only come from the current economic climate but mainly from our lack of trust and faith in these clowns that proudly label themselves CEO's of "Reputed Developers". seriously Schon deadline 2007 moved to 2011 and if i miss a payment by a week you have your team of so called real estate experts stalking me to get money.
we are sick and tired of all of you please leave the country ASAP and let the real builders of Dubai keep the ship afloat. We have built this city with our money and our 8-5 jobs.
thanks for reading
Posted by SR on 27 February 2009 at 16:48 UAE time
Well said Mart, absolutely right! If any Bank is going to even consider lending in the real estate sector at this time, they have to be out of their minds!
Get real Mr. Schon; if you have started your projects without having adequate back-up financial resources, better to pack your bags.
Remember, banks are not lending their money, it's depositers money.
Posted by Mart on 27 February 2009 at 15:55 UAE time
Its very easy for a real estate developer to ask that other people risk their money lending it into a crashing market just. Its easy to argue how other people should risk their money.
If it was his money, I very much doubt he's be lending it out to people to buy a rapidly depreciating asset.
The banks could of course respond that he should cut his prices, and make sure that he finishes his developments on time.
Banks won't start lending until property prices are stabilized. And that isn't going to happen until prices are back down to reality. We've quite a way to go! Developers who pocket large deposits and then fail to complete building on time just add to the general lack of faith in Dubai's market.
Posted by debbie, Dubai, United Arab Emirates on 27 February 2009 at 15:20 UAE time
schon should stop telling what other companies or people should do and just shut up and do his job which was to build. i am sure by now he should have realized that construction is not a little boy's fantasy game but requires maturity, seriousness and sensibility.