By Shane McGinley
Dubai developer offered 70% cash upfront or 100% over three years to buyers in stalled project
Investors in Dubai’s stalled Palm Springs project have rejected an offer of a partial refund on the properties from developer Damac, branding the solution “unsatisfactory”.
Buyers on the Palm Jebel Ali project, who have waited eight years for construction to begin, said an offer of a 70 percent refund of their deposit upfront, or 25 percent immediately followed by a further 25 percent annually for the next three years, was unacceptable.
“The offer of Damac to return 70 percent of deposits paid eight years ago as compensation for their inability to respect their contractual obligations is unsatisfactory to the group and discussions are ongoing,” an investor, who asked to remain anonymous, told Arabian Business.
“The 100 percent refund option paid over three years has also been offered and is also unsatisfactory. Damac previously offered refunds to investors with interest at 10 percent per annum when the design of Palm Jebel Ali was changed in 2006.”
Discussions between the investor group and Damac restarted in July, after UK buyers said they would picket a promotion being carried out by the developer at luxury London store, Harrods.
The investors planned to lobby outside the Qatar-owned store, carry placards and hand out leaflets to shoppers headlined ‘I would not buy from Damac again’.
Following last-minute discussions with Damac officials, the protest was called off.
The developer has said it is committed to continuing negotiations to secure a solution.
"We are working very hard with Palm Springs investors to bring closure to this issue," Niall McLoughlin, senior vice president of corporate communication, told Arabian Business.
Announced during Dubai’s real estate boom, Palm Springs was designed to be a 25-storey beachfront development located on the Nakheel-owned Palm Jebel Ali island.
The offshore island stalled in the wake of the emirate’s real estate crash and is now designated by Nakheel as a “long-term project”.
In March, the developer began offering its investors the option of a long-term refund or the chance to move to another Nakheel-backed Dubai development.
Damac had attempted to cancel the Palm Springs project in 2008, but the move was fought by investors through a series of demonstrations and meetings in the UK and Dubai, and the threat of legal action.
Damac later agreed to reinstate the development, and wrote to investors earlier this year to say it was in discussions with Nakheel, and a decision on Palm Springs would be made in December.
Investors have urged Damac to move the project to an unsold plot of land on Palm Jumeirah or another similar waterfront location in Dubai, or to give a full refund to buyers.
DAMAC should give full refund to all buyers / investors. In fact, buyers should be paid interest as well, as a DAMAC account ( with buyers money ) would have earned interest.
If above is not possible from DAMAC, then DAMAC should consider seriously moving the project onshore on Palm Jumeirah or another waterfront location.
what about other developers IFA hotels and resorts are also not going ahead with their projects in Palm Jumeirah.
50% amount paid and it is 3 yrs.
i think returning 70% as a refund from Damac is a better deal than Emaar gives!! im not saying thats its fair,offcourse its not,but with Emaar you get a credit note for 5 years and you have 2 options with the credit note,either you buy any property they have left which is above the market price by atleast 30% or a credit note that you discount for cash and you get 60% of your refund at max!!
so which Deal is better??
Damac have said that Palm Springs will not be built. Nakheel and Emaar say their developments are on hold, but if investors wish to have an option of a refund then they can offer credit notes. There is a big difference.
you are missing the point Omar.
Why should anyone accept less than they are entitled to? How is that any choice at all? Pay people what they are owed. Simple.
Don't hide behind 6 of this and half a dozen of that. All it means is that people are not getting what they are entitled to and some companies are taking advantage.
I think it would be reasonable for investors to get full refund with interest as DAMAC have had this cash for over seven years in Escrow Accounts.
I aslo checked RERA's website and it seems that Palm Springs is still going ahead.
Very clever of Damac to offload more investors. They know good times will come and they will make more in the long run.
I would suggest to agree for the refund offer immediately with a nominal interest (2 or 3% above LIBOR/EIBOR). This is the time all in this earth requires cash/money. At the same time the investors should weigh the reasons for stalling such a project which was beyond the control of DAMAC also. Think wisely and re-invest the money received in this best times to reap your maximum benefits. Do not wait for the lost interest, even if your right compromising on it and closing the deal immediately would definitely earn you more rewards. I am not favouring DAMAC but an investor in Dubai who lost the capital with no hopes for the future.
Damac should at least return the money that was physically paid in advance by buyers against the project and offer some kind of interest.
In other parts of the world the regulator would step in and make them do it, and in environments where that happens, property investors come back time after time. It is not only Damac's reputation at stake here but that of the Dubai property market.
Where are RERA in all this? Yet again RERA seem to be failing to get involved & protect investors. Simple fact, if the project is not going ahead then they owe the investors a 100% refund asap, no ifs or buts, the question of how DAMAC get that refund to those investors is up to Damac but a business contract is a business contract & damac have more than failed to deliver, no wonder there is no confidence in the Dubai property market. There is NO protection for investors & developers are being allowed to get away with it. You don't go to a shop and buy a Chair (which will be delivered in a weeks time) for the chair to never be delivered but you are told you only get 70% of the purchase price refunded.
The cost for an owner candidate is more than the 30% hair cut. It is also the time this money spent in DAMAC accounts and all the lost opportunities for the investor to use this money in another business opportunity. This without considering all the moral damages and the stress for all investors.