must take action to decide the future of real estate projects that have halted
in the wake of the financial crash, analysts said, as cash-poor developers stall
to avoid refunding investors.
government must intervene to write-off projects unlikely to be built to allow
investors to claim back their money or secure units in other developments, said
analyst Matthew Green.
“I think from a government perspective they are looking at
ways to limit any further oversupply coming into the market, but obviously get
behind the projects deemed to be important,” said Green, head of research and
consultancy at CB Richard Ellis.
“At a higher level they have got to be taking a strategic
view thinking that the actual potential impact of the downturn on the economy
is still huge.”
he warned developers that sold off-plan units before the roll-out of escrow
accounts in 2007 may have spent funds, making them reluctant to cancel their projects
and risk refunds.
“Developers have clearly gone off and put money into other
projects. There may well be a couple of holes in the balance sheet where money
for these projects would be, had the escrow law been in place at that point,”
“For a number of developers they are going to be scratching
heads trying to work out exactly where they are going to be generating these
Dubai said this month it had cancelled 217 property projects
as of May 31, after the global financial crisis dried up project financing and
saw house prices fall more than 60 percent.
data, compiled by local firm Screampoint Property Observer, showed more than
250 real estate projects in Dubai were suspended after the emirate’s property bubble
burst in late-2008, representing billions of dollars in investment.
Nakheel, the developer behind Dubai’s offshore palm-shaped islands, has 107 projects
on hold, comprising 40 percent of the stalled developments, the data showed.
Properties Group, the developer behind Jumeirah Beach Residence, has 42
projects on hold, while Dubai Holding subsidiary Mizin has suspended work on 36
encouraging to have… an actual list of projects that are now officially labeled
as being ‘on-hold’,” said John Davis, regional CEO of consultancy firm Colliers
International. “This type of information takes all the speculation and rumour
mongering out of the market.”
said in March it was reviewing the financial viability of about 90,000
properties due to be delivered over the next five years and up to 500
individual projects may be axed.
Dubai Land Department earlier this year unveiled a financing
scheme for developer and end-user funding, which offers competitive loans to projects
that are at least 60 percent complete.
The scheme, which is backed by seven mainstream banks and Islamic
lenders, is part of a push to complete Dubai’s most prominent real estate
developments and bolster investor sentiment.
London-based consultancy Knight Frank said last week that
Dubai’s real estate market had seen house prices rise 2.1 percent since
October, with a modest 0.6 percent increase in Q1.
“The Middle East provides an improving picture,” said Liam
Bailey, head of residential research at Knight Frank. “Dubai has seen price
growth regain positive territory in the last six months and the consensus is
that the market is stabilising following the volatility observed in 2008-2010.”
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