By Martin Morris
CEO indicates easy payment plans may not always be available for customers.
Deyaar Development expects customer defaults in the ''high single digits'' across its projects, as the real estate downturn in Dubai continues.CEO Markus Giebel told Bloomberg in a telephone interview, late Tuesday, that the developer has a ''substantial amount'' of customers on plans that allow struggling home buyers to delay payments.
''There will be a certain period of time we can still do easy payment plans and assist our customers,'' Giebel said. ''But we believe within this year there will probably be a time we can’t continue these plans anymore and we will see the first customers in default situation.''
Back in May Giebel told Arabian Business in an interview at the World Economic Forum in Jordan that he saw Dubai real estate bottoming out in the second half of this year, but added that the company would shift its focus from the UAE to emerging markets next year.
''We think the bottom will be reached in one year, faster than in any other crisis. The reason for this acceleration is government intervention,'' he said, adding that this would be achieved in the third or fourth quarter of this year.
On June 17, meanwhile, Deyaar formally cancelled its Enclave project in Dubai after making a full refund to all investors.
The development was to have been the first residential development at Dubai's International Media Production Zone (IMPZ) and would have included homes, retail space, large play areas and swimming pools, according to the company's website.
This is the first time UAE/Dubai face a crises of this type, so it won't easy to predict when it will happen. This is a learning process that will take long time to finish as the learning curve in this case is very low. Also don't forget that the US economy, the root cause of the problem, is not going to recover easily as we there are talks about a third stimulation package coming before the end of this year. Also the dollar is deep debt (we are getting in fact 50 cent for each dollar we accept, as other nations, in exchange of services and products sold to the US) and there tendency and initial talks about shifting to a common global currency replacing the paper dollar. No positive signs at both local and global levels to support any prediction about bottoming and recovery. Anything else is just another wishful thinking.
Defaults are a natural sequence of an economy collapsing and then correcting. The mistakes of the past have to be paid for. If debt based bubble illusions was your tickle, you're probably going to lose your shirt or at least part of it. I doubt if any of these developers held investors arms behind their backs whilst signing on the dotted line. They were motivated by the crazy & unrealistic returns being offered. Now the mistakes must be paid for and greed is being quickly replaced by thrift. We have much further to travel on the road to ruin before anything appearing like a recovery will be reached.