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Fri 23 Apr 2010 08:29 AM

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New pay plan for delayed Dubai Lagoon unveiled

EXCLUSIVE: Schon Properties to ask investors to switch to a new payment scheme.

New pay plan for delayed Dubai Lagoon unveiled
DUBAI LAGOON: Buyers of flats in delayed buildings will also be invited to swap into apartment blocks with confirmed completion dates. (Getty Images)

Schon Properties, the developer behind the delayed AED3bn ($817m) Dubai Lagoon project, is to ask investors to switch to a new construction-linked payment scheme, in a bid to fast-track building on its 5.7 million sq ft site.

Buyers of flats in delayed buildings will also be invited to swap into apartment blocks with confirmed completion dates, said Danial Schon, vice president, Schon Properties. The new, RERA-backed payment plan asks investors for an initial 30 percent outlay, followed by a further 10 percent when each of six construction milestones are met. The final 10 percent is handed over on completion. “The principle here is that a buyer won’t pay unless they see work,” Schon said. “If investors want to stick to their original plan they can, so it’s very fair. Our main aim is to expedite delivery.” Of 2,000 buyers, 35 have switched to the new payment scheme, which will be supervised by RERA. The property watchdog will also be tracking the pace of construction. “The reaction [from investors] has been fairly positive,” Schon said. A spokesperson for the Dubai Lagoon investment group was not immediately available for comment. Buyers are currently split across three payments schemes. Around half –or 1,000 buyers – subscribed to a date-based plan that required a payment each quarter. About 600 buyers signed up to a scheme that asked for 50 percent of the unit cost during construction, with the remaining 50 percent paid in monthly installments over a seven-year period after handover. The third scheme followed the same pattern, using a 60-40 split.  Buyers on the seven-year plan will receive an up to 10 percent discount on their repayments if they switch to the new scheme, Schon said. Schon Properties also confirmed that zones 5,6 and 7 in the project – covering 1,708 of the planned 3,826 apartments – had been put on hold. Zones 1,2,3 and 4 are now being prioritised and buyers are being invited to switch to units in these buildings. “Most of our buyers are end-users –they just want their homes. I would say the majority, upwards of 80 percent, are interested in moving their investment. They’re reassured they’re going to get a property rather than waiting,” Schon said, adding the firm will suspend any transfer fees for a three-month period. “Zone 1 will be completed by the end of the year, zone 3 will be the end of next year, and zones 2 and 4 both by the end of 2012.”Dubai Lagoon is currently two years behind schedule. Up to 10 percent of Dubai Lagoon investors have defaulted on their payments in the wake of the emirate’s real estate crash, which saw property prices in some areas halve. “These are people who have paid 15 to 20 percent and would rather walk away than wait,” Schon said. “But most of our buyers are end-users and they did their financial planning." Schon Properties also confirmed that investors will not be offered a refund on their units, and will not receive a price reduction based on the drop in construction costs seen over the last year. “We never sold to unreasonable prices. We were selling at AED900 per ft, although the market was at AED1,500, AED1,600. So the answer is no – because our prices were always below the market, in my opinion,” Schon said. “We can’t facilitate refunds. The priority of our funds is construction, to build the project as soon as possible. We want to deliver this; we’re the biggest loser in any delay. We lose AED1.5m to AED2m for every month we’re delayed.”

frank 9 years ago

The investors-buyers have to be very careful not to fall into the trap fearing loss of their investment by agreeing too quickly to the new payment structure by the developer. The delay of starting new construction by 2 or more years they are going to make at least 30% or more additional profit due to the fact that construction cost went down since 2007 when they sold their properties. They are offering now different properties for the same money with only 10% discount. Real estate value is down by some 50% plus construction costs are down by approx. 30%. Where is the deal for the buyer? I would never agree to those contracts. Would only talk with a lawyer to those sharks.

Najam 9 years ago

First of all in the article it is mentioned that "A spokesperson for the Dubai Lagoon investment group was not immediately available for comment." which is not true because no one contacted us. We would like Arabian Business to contact us to give our feedback. Secondly, the most important thing is to start CONSTRUCTION before asking more money. It's hard to win the confidence back considering the past experiences.

AMERICAN IN KUWAIT 9 years ago

First time, shame on the builder. SEcond time shame on me. Does anyone believe this ?

damien 9 years ago

"Most of our buyers are end users and did their financial planning!!"... how are you meant to plan for a property that gets delivered 4 years (or more) late. To have the developer say that investors who bought as early as 2005 and must wait until 2012 to receive units "will not be offered a refund!" is a statement fuelled with greed and a total lack of consideration. I would imagine every investor worth their salt will be taking this "Joke" of a developer to court and as there is a high court precedent already I would bet my dollar the investor would win. SCVHON are offering units in zones which are to be completed sooner! yes they are and they are asking for a higher price per square foot, only offering larger units and a completely new payment plan which requires immediate cash. Schon properties are not offering any value to the investor and I for one would not consider ANY of their rediculous offerings.

Madjedi 9 years ago

Buyers should know that the purpose of RERA backed payment plan is to address the situation of default of developers. RERA plan would give developers unlimited time to complete their project without being ever in default ! It is interesting that some developers, Cayan for one in connection to Infinity project, are using RERA payment plan to accelerate (!) the agreed revised payment plan and to remove obligation to deliver their project upon the previously agreed revised completion time ! Parviz

jose 9 years ago

i suffered a lot, emotionally, physically, i invested my little savings to this developer and look what they did with my money. enough is enough.

peter 9 years ago

what about the costs people have to pay until they get their property? these 2-4 years they have to life somewhere and to pay rent. money that could have gone towards the payment of their own property!!!! and if schön says that they sold at aed 900 when the market was at aed 1500, who believes this? and why should waiting cost them aed2m a month? they are working with the money they got from offplan buyers!!! so they make huge amount of money at the moment on the financial market!!! this is a typical story for dubai, and this will kill dubai in a long run. nobody will trust in dubai anymore. at least, i don't and never will again!!! fairness is different...

rizkhan 9 years ago

I would like to bring this to your kind attention that I have suffered 4 frustrating years with a developer in dubai, which started out with a very attractive payment plan back in 2006. I am sure that you are very well aware of Schon Properties (Town Centre Management) and their project Dubai Lagoon. I purchased an off-plan unit in Dubai Lagoon in Jan, 2006, through Schon’s appointed agent Better Homes. I was offered the attractive 50 / 50 scheme under which I would pay 40% of the amount in equal installments, then 10% on hand over, and the remaining 50% within 5 years from handover. I have a “Ownership Agreement” which was registered and counter-signed by Dubai Investment Park. As per this agreement, I have made the 40% payments on due dates. For the first 2 years, the developer built absolute nothing, citing issues with Dubai Municipality, RTA, contractors, etc. After these 4 years, all that exists on the site are 6 incomplete structures, and a bunch of ditches. The building or zone which suppose to have my apartment has not even commence the construction. If we look at another project in the same area “Ritaj”, which started much later than Dubai Lagoon, has now completed even the handover of its Phase 1, while Phase 2 is about to be completed this year, as per media reports. What Schon Properties has demonstrated very clearly in the past 4 years is their unwillingness to build anything on the site. Recently they have also said that some of the Zones in the project will not be built for now, and will be built in future when there is demand. The incomplete structures built by Schon simply exist to show the authorities that the project is on-going, and to avoid any attempts for cancellation. Please note that the incomplete structures of eight buildings are reflecting hardly the 8% of the whole project. As per my understanding of Article 11, Law (9) of 2009, when the developer does not start building a project for such long periods, while the investor has fulfilled all contractual obligations, you have the authority to cancel the project and the investor has the right to a full refund.

Zain 9 years ago

I have been a customer of Schon for a long time now and to be honest am very pleased with this article. Firstly, i am happy that at least i have a developer to turn too and though no one can deny the share of delays Dubai Lagoon has been faced with, at least they are around and not sitting quietly during turbulent times like this! Different initiatives (Some good some not so good) but at least they show intent to coninue which is more than i can say for some of my other investments ... everyone's comments are tooo negative in my opinion and we need to give them a chance, we dont have a choice, if we dont give them a choice we loose either way and if we give them a chance and they continue working then i can continue my side too for payments

Gulamabbas Khalfan 9 years ago

A lot of us are hurt badly due to the arrogance of the developers where we have invested our hard earned money. They have been making the most out of our investments whilse we are loosing daily as we cannot get our units on time and still have to pay rents and also pay for the installments. It is really sad that such developers are off the hook and RERA which is suppossed to be established to facilitate the investors does not take any action to initiate the grievences of the 1000's of investors who run around the various authourities in total vain. I am of the opinion that such developers deserve punitive measures by the authorities and have to refund the investors in full so that we can at least invest with a sound and completed project. Finally i would like to say that May The Lord Almighty give our leaders a long and healthy Life and they will probably find us all a suitable solution to relieve our pains. Ameen