By Sarah Townsend
Developer's chief exec defends payment policy; says it forces buyers to be serious about transactions
Asking investors to pay upfront in postdated cheques has “worked wonders” for property developer Nakheel, according to its chief executive.
It means the company is not “riddled with bad debts”, according to Sanjay Manchanda.
7Days newspaper quoted Manchanda as admitting that forcing property investors to pay the full purchase price of their villas upfront is often criticised.
But he said it shows investors are serious about the transaction.
Manchanda said: “We adopted certain measures for which we are being criticised until now. When we launched our projects we said anybody who buys our product will have to pay the entire purchase price in postdated cheques. One side of the business is that this is going to be a deterrent because of current laws on bounced cheques.
“The other is if customers are serious they will put their money where their mouth is. We were probably the only developer who went selling projects where people were writing postdated cheques.
“It’s worked wonders. We don’t have bad debts. We can’t afford them. This is the need of the hour.”
Manchanda also insisted Nakheel and rival property developer Emaar are “complementary” to each other. “We have a role to play in the vision of His Highness. It’s no point saying I can do a better job and spend on resources. We didn’t have those resources.
“But the things we did were never done in the past.”
Manchanda was speaking with aspiring entrepreneurs at Impact Hub’s Disruptive CEOs seminar series in Dubai, according to 7Days.
He told delegates the lowest point for Nakheel was when the row broke out over unpaid service charges at the prestigious Marina Residence development on the Palm.
The developer claimed property owners owed it AED15 million ($4.1 million) in unpaid charges and drained all six swimming pools at the development in response.
“[The lowest point was] probably the day everyone accused me of causing a lot of hardship and mayhem in Marina Residences over service charges,” Manchanda said. “People were up in arms and nobody realised that for four years we were not in a position to really take good care of the services.
“We had service providers performing but if you don’t pay them on time, no matter how much you persuade them, the quality of service will go down. We did admit that we have our [work] cut out.
“But I was very upset when some of the owners, not realising that we have a colossal amount of outstanding service charges, had the audacity to come and say ‘you are cheating’. I did call the media into my office and explained, and said ‘next time get your facts straight’.”
He added: “We are in a fiduciary capacity as an asset manager. If you’re living in an apartment there is a service charge. If you don’t pay and your neighbour has paid, the neighbour is going to be disgruntled. The root cause is the owners themselves. Why shoot the messenger? You just have got to pay the charges. That’s the law of the land.”For all the latest real estate news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
ofcourse....when payments are not linked to milestones but dates it will work wonder for Nakheel. even if they don't deliver they can continue encashing the payments.
Serious buyers should only invest when payments are linked to milestones and with clause of interest payments on delays.
Yes, the Post dated cheques work wonders for Nakeel, but the play worst tool to deteriorate UAE economy. Companies understand every buyer as Investor, whereas there are a lot of genuine buyers, who is doing jobs and don't understand PDC impact. They booked one property for himself in 2007-08, not for business. Then Real Estate bubble burst, and project stopped/delayed till today, and developer is putting PDC every month to fix buyers either in Bars or out of UAE. The impact is real time example of me, Who didnot visit UAE since 6 years, any business/travel related to UAE avoided, and how much that impacted to UAE economy, please make a survey. Up to UAE will not fix the rule, and legal system to decide PDC versus delivery of Goods/services, many genuine people will away from UAE.
It is not PDC but market that is working wonders. If market is down again to the extent that happened earlier, buyer will choose again to run away PDC or no PDC.
I also agree with other comments that payment must be linked to progress milestone. Why a developer need to be paid if work is not progressing? Secondly, for fairness of the deal, interest penalty plus compensation for liquidated damages should be included in the relevant laws. Unilateral contracts should be illegal and DLD should play its part to ensure that SPA is not unilateral and favours the developer.
My Cheques are cashed in time by Nakheel but handover in Jumeirah Park originally scheduled for 2014 has not happened yet. I do not even get a delay notice required by the contract or an update as to when the handover is going to take place.
Wonder in delivering is what you should be proud of and not
forcing investors to pay by post dated cheques.
What a pity the Postdated cheques didn't make Nakheel serious about their developments. An archaic system of payment for archaic quality real estate.
How nice would it be if Nakheel would show the same attitude towards it customers while delivering projects on time, while placing projects on hold and not returning money back, while fulfilling promises...
I have an evidence of positive change in attitude of Nakheel.
The project of Al Furjan 2 is an example.
It seems that the project is delayed. Accordingly, the payment schedule has been revised by Nakheel to delay all theinstallments of payment by six months. While the revision to the payment schedule is appreciated, Nakheel is also expected to provide revised forecast date for handover to enable buyer to plan its relevant matters accordingly.
anyone who bought a Nakheel property some years ago has my sympathy...anyone who buys anything from them now and then is upset two years from now when nothing has been delivered has zero sympathy...everyone knows their reputation now... they arent going to change while people keep giving them money...