By Shane McGinley
Up to 65 buyers in Al Reem Island project eye arbitration amid stalled construction
Investors in Abu Dhabi’s Tameer Towers plan to begin legal action in December after the developer behind the scheme failed to meet a scheduled delivery date of June 2011, the group’s legal advisor said Tuesday.
Up to 65 buyers in the Al Reem Island project will pursue arbitration against developer Tameer Holding Investment when a clause allowing a six-month delay in delivery expires next month.
Construction on the luxury scheme, which includes five residential towers, a five-star hotel and a canal promenade, stalled this summer, meaning the project is unlikely to meet even the extended December handover date.
“[By] December 2011, legally, Tameer should deliver the whole project,” said Thabit Al Temimi, a legal adviser with Abu Dhabi-based law firm House of Justice. “Even if they start construction, it means nothing. My clients on the 40th floor cannot live in their apartment if it doesn’t exist.
“I am pretty sure we will win the case as it is simply my clients paid and then Tameer stopped developing and did not accomplish [the contractual handover date].”
A spokesperson for Tameer Holding Investment was not available to comment.
Al Reem Island is a residential and commercial project located 600m off the coast of Abu Dhabi. The $30bn project saw its first handovers to residents in April 2010. On completion, the island will eventually be home to around 200,000 people.
The Tameer Towers scheme is the latest in a series of slowdowns in the Abu Dhabi construction market, which last month saw the delay of its planned Louvre and Guggenheim museums.
For developers, many of whom had banked on Abu Dhabi to offset the collapse of Dubai’s property market in late-2008, the stalling of projects in the UAE capital is a source of concern.
“Abu Dhabi is being prudent from a financial point of view but this will have a big impact not only on Abu Dhabi, but Dubai as well,” said Charles Neil, CEO of Landmark Properties.
“This decision will also have a major impact on the construction sector. With fewer people working in Abu Dhabi, rents can expect to weaken and this will impact on Dubai. It will not be good for the real estate sector in both emirates.”
Aldar Properties, Abu Dhabi’s biggest property developer, said earlier this month it would slash its workforce by 24 percent as it seeks to match manpower to a scaled-back construction schedule.
The developer was rescued by a $5.2bn bailout by the Abu Dhabi government this year, after it struggled to stay afloat in the wake of a recession that halved property prices across the UAE.
Investment bank Arqaam Capital warned that Abu Dhabi was likely to see further scaling back of non-essential projects as the emirate moves to reschedule its construction aims.
“I can envisage infrastructure - everything from civil and social infrastructure - being completed and handed over. Things like schools, hospitals, roads, contracts on that nature are likely to go through,” analyst Mohammad Kamal told Arabian Business.
The bank described Abu Dhabi as “fast becoming the worst construction market in the GCC, after Dubai.”
“Cut-throat competition and a scale-down in government plans by 30 percent during the year should have repercussions on backlog and margins on Arabtec and Drake & Scull International,” Kamal warned.
Abu Dhabi, the UAE capital and the fourth-largest oil producer in the Organization of Petroleum Exporting Countries, will continue to have a glut of most types of properties, leading to a further decline in rents and purchase prices, Jones Lang LaSalle said on Oct 16.