Dubailand contractor mulls legal action over power woes

Triveni claims to have lost $3m after electricity delays pushed back handover date of property
Dubailand contractor mulls legal action over power woes
Arjun is a project within Dubailand, the mega-resort that stalled in the wake of Dubais property crash
By Shane McGinley
Thu 12 Jan 2012 09:25 AM

A Dubailand contractor is mulling legal action against the
resort’s developer in a bid to recoup some AED12.4m ($3m) in losses he claims
to have incurred after power delays to the project.

Triveni Builders and Promoters, the firm behind the La
Fontana di Trevi project in the AED20bn Arjun development, said a row over the
site’s electricity connection had pushed back handover of the property and
forced the company to breach its contract with investors.

 “We are thinking
about arbitration, but we have not started yet. We are negotiating with [developer
Dubai Properties Group] for at least part of our losses,” said CEO Ashok
Galgotia.

Triveni began work on the AED80m residential development in 2008,
but construction stalled after a planned electrical substation on the site was
never built, leaving it without power.

The company was eventually forced to spend some AED500,000 to
run a 5km cable from the development to connect to a Dubai Electricity and
Water substation in nearby DuBiotech.

“The authorities were supposed to set up the power station,
not us,” said Galgotia. “The total amount we are telling them we lost is
AED12.41m. It is for slowdown of the contractor, additional costs of running a
copper cable from the DuBiotech power station to our building and obviously we
have lost rental income for almost 17 months.”

A spokesperson for Dubai Properties Group, the master developer behind Dubailand, did not respond to emails seeking comment.

Triveni is also facing legal action from its own investors,
who saw the handover date for their properties pushed back as the developer
struggled to connect power to the building.

Utility delays in Dubai are increasingly slowing the release
of completed buildings to market, real estate analysts said this week, with
some properties standing empty for more than a year while waiting for water,
electricity and sewage to be connected.

Many investors have struggled to identify who is to blame
for the delay, with developers and utility companies both accusing the other of
failing to keep to schedule, said Matt Green, head of research at property consultancy
CBRE.

“There appears to be slandering on both sides but without
any evidence to say who is in the right and who is in the wrong,” he said. “It
could be that the developer is using that as an excuse not to hand over the
units, especially if they’re lacking the final funds to get their property to
the completion stage, or if they have to make payments to lenders upon
completion.”

Galgotia said DEWA informed them in 2008 it could not supply
power to Arjan until at least 2018, while nearby DuBiotech was scheduled to get
power that year. In response, Mizin – a subsidiary of DPG’s Tatweer – said it
would complete the power station, Galgotia said.

 “[Mizin] had already
showed us an agreement between them and DEWA… [But] they are saying it is the
relevant authority who is supposed to supply the power, so we are all confused
at the moment. We are trying to find out who will compensate us,” he said.

In addition to clarification as to who is responsible for
the delay, Galgotia said the legal costs involved are a major concern.

“Arbitration is very expensive. We could end up spending a
million [dirhams] in terms of arbitrator’s fees,” he said. “We don’t have that
kind of money as we put all our money into the building itself. That is our
issue at the moment.”

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