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Tue 20 Dec 2011 10:27 AM

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Shoreline fallout to take toll on property prices, rents

Dispute over access to beach clubs could have wider impact on real estate investment

Shoreline fallout to take toll on property prices, rents
Palm Jumeirah is Nakheels flagship development

The escalating row between Nakheel and homeowners on the developer’s Shoreline project will tarnish rental values and property prices in the luxury Palm Jumeirah scheme, said analysts.

The state-owned company on Sunday moved to ban hundreds of residents from using the beach, pool and gyms in their buildings in the first stage of a plan to charge for access to the facilities.

Analysts warned the move could see landlords struggle to rent out their beach-front properties and would push down the price value of apartments in the development.

“If that is the course they’re going to go down then it could have a negative impact on their signature apartments,” said Matthew Green, head of research at property consultancy CBRE.

“The attractiveness of being on the Palm is a lot to do with location and the facilities, so if that is taken away, then beyond having a sea view and a nice apartment people are definitely missing out on things which are most probably being offered elsewhere.

“We may start to see a bit of migration away from the development if Nakheel do start taking a tough stance on these facilities,” he said.

Nakheel declined to comment on the dispute.

Furious Palm residents were informed on Sunday that they could be arrested if they attempted to enter the beach clubs, after Nakheel moved to ban tenants living in apartments with outstanding service fees.

The developer has been embroiled in a dispute with buyers for months, over its plan to ask owners to pay up to AED12,000 a year to access Shoreline’s pools, gyms and beach. Owners argue they own the facilities and many have withheld maintenance fees as the row rages on.

Dubai’s Land Department this month asked owners to pay outstanding service charges into an escrow account it had established, and not to Nakheel, as it moves to determine who holds ownership of Shoreline’s common property.

A number of tenants in the development told Arabian Business on Monday they had paid a premium for Shoreline’s beachfront access and planned to leave as soon as their lease expired.

One tenant, who had recently signed a fresh year-long lease, said he had offered his landlord AED10,000 to break the contract and move out.

“I’m paying a 30 percent premium to stay here. If I can’t access the beach clubs I might as well move to Jumeirah Lake Towers or Dubai Marina for significantly less,” he said. “Even if I pay to break my contract, I’m still saving money.”

The annual rent of a one-bedroom apartment on Palm Jumeirah was AED90,000 in the third quarter, Asteco reported earlier this month.

One homeowner in a comment to Arabian Business said he believed the dispute would wipe 20 percent off the value of his property. “A Palm Jumeirah apartment with no pool, gym, or playground. It does however back on Nakheel's beach club. Great.”

Buyers waging war on Nakheel’s attempt to privatise the facilities say they are waiting for a decision from Dubai’s real estate watchdog, RERA, on the ownership of common facilities.

 “It is very awkward right now. We are waiting for [RERA] to do something. They are realizing the enormity of the situation,” said one owner, who asked not to be named.

“We are hoping that they rule in our favor. What we are saying is simply that Nakheel is in contravention of the main contract which is the sales and purchase agreement, and also advertising that encourages people to buy.

“But it’s a terrible situation, and it’s very bad for Dubai. A lot of the residents on the Palm are expatriates and they will compare this to their home countries.”

Article continues on next page…

Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley.

But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch.

The government has made efforts to attract fresh investment in recent months, including the launch of a $1bn real estate fund to buy up assets in struggling property market. But Green warned the outcome of the Shoreline spat could hurt future foreign investment.

 “From a market perspective, we must start to see more sway given to investors and end users,” he said. “If decisions keep going with the developer and the developer is seen as untouchable then that sends out completely the wrong message to investors and gives absolutely no encouragement for people to get back into the market. If investors are not being sufficiently protected, then that creates a risk market.”

Last month, Nakheel’s chairman said the firm was legally permitted to privatise the beach clubs for its apartments, and that it didn’t expect tenants to be happy with its decision. He also said he did not see the move damaging Nakheel’s reputation internationally.

“I cannot make everybody happy,” said Ali Lootah. “They should read their contract. We checked legally, we went to RERA. We abide by the law and we respect the law.”

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Ajay 8 years ago

Never mind Palmists, you are welcome to join us commeners at open beach near Burj Al Arab, while it is still open.

leo50 8 years ago

just another example of a couldnt care less attitude to consumers/customers. Take it or leave it..If you dont like it, just leave...How many businesses are like this in dubai now? It did not used to be like this.

A Palm Jumeirah Tenant/Victim 8 years ago

This is such an ongoing outrage + is doing SO much damage to Dubai's international reputation with investors. I cannot imagine how ANYONE will be naive enough to buy Dubai property in 2012, when one of the flagship developments are treating their residents in this way.

I live have lived for many years in the shoreline apartments and was just about to move from tenant to owner in 2012, but with the terrible Nakheel outrage, I have changed all plans and will never buy a property in Dubai unless we see a massive turnaround in residents rights.

Can anyone get this dispute in front of the top leadership of this Emirate ASAP? They have real vision and can surely see that this land-grab by Nakheel is doing 100 times as much harm to Dubai as the relatively small money Nakheel is raising by force out of the residents who genuinely believed they had beach clubs as part of their properties (and have documents to prove it).

Palmdweller 8 years ago

So people who HAVE paid their service fees are not being denied access to the facilities ?........ Don't see what all the fuss is about!

Chris 8 years ago

Having been a supporter of the people who live on the Palm, I have no sympathy when maintemance fees have not been paid. Maintenance fees are different to the purported and disgusting club membership fees that are being mooted even though these areas are clearly owned by purcahsers according to their documentation.
Any one who has not paid maintenance fees whould be banned from access to their residence. Maintenance fees provide the cleanliness and amenity of each area. Tenants are warned to request proof of fees having been paid in any development as they may find themselves blocked from access and entry in the future to their homes.

David 8 years ago

Like any country, there are good and bad points about living here but this is so ridiculously damaging to Dubai and the UAE that someone higher up MUST step in and change Nakheel's direction.

keenObzerver 8 years ago

To Palmdweller and Chris

Most shoreline owners have withheld their service fees as a means of objection to Nakheels claim to the common property, they cant have it both ways. Nakheel either owns the common area, so has no right asking the residents to pay service fees that include maintaining the pools and Gyms which Nakh. plans open to non residents for a fee.
Or Nakheel does not own the common area, so it needs to make an official statement and end this bitter feud, and the owners would be happy to pay the service fees for THEIR property.
RERA is aware of this, and has asked owners to pay service fees to an escrow account held be RERA and not to Nakheel until the issue is legally settled .
The Tenants on the other hand are very unhappy since their rent contracts clearly mentions access to the beach and pool, and they are suffering because of the owners and Nakheel

Shoreline Expat 8 years ago

What Nakheel is doing is an outrage and will get international repercussion, however, I doubt that this willbe impactful for the price of Shoreline properties, pretty much the opposite.
This type of situation of greedy devlopers exist all over the place and the Shoreline is the first development to have it exposed and confornted. Therefore, also must be the first to have it resolved.
The Palm Shoreline have:
- an organized Owners association,
- their own auditors,
- a reputable local law firm on their side,
- and a strong representation with RERA and the Land Department.
Which other development have the things that organized in Dubai??
It's noisy now but if RERA/ LD rule it fairly Shoreline will be the best place to own as they have an organization at owner's level that no other development has in Dubai. Problems like this are still due to pop up in all other places people say would be moving to.

RaOne 8 years ago

Nakheel's chairman says he can't make everybody happy... thats right and he sure will not make his prospective customers more willing to purchase any of his future projects.

Nakheel's attitude is don't give a damn to those who had already purchased their past projects, but their treatment with them will guide new customers.

This incident again highlights the importance of reading and knowing well the legal contracts and not just speculation when buying.

Anshul Purohit 8 years ago

Due to Nakheel initative to increase fees and implementation of other wrongly decisions, many tenants and owners now believe that the developer is just ensuring to remove the luxuriousness of the property. I would say that the name 'Nakheel' cannot be trusted.