A UK-based investment firm is offering Dubai investors, burnt by the property downturn and locked into stalled projects, the chance to transfer their deposit to an alternative project in the African island state of Cape Verde.
During the peak of 2008 Dubai attracted queues of eager international investors keen to invest in a long list of glamorous projects and many flipped the units for a quick buck.
As the market overheated, the credit crunch and the global recession led to many buyers been locked into units they could not resell and which had been bought at inflated prices. As investor defaults surged, many projects stalled and prices slumped by as much as 60 percent from their peak.
UK-based real estate firm Assetz International has officially launched the Deposit Rescue Scheme, which is aiming at buyers who were burnt by investments in emerging markets during the heady boom years.
Under the scheme, buyers who have paid deposits for units in projects which have stalled are offered the chance to walk away from their initial investment and transfer it to a project in Cape Verde, a group of islands off the coast of North West Africa.
“We are talking about rescuing people who can get out of their contracts and wish to move over to our scheme,” Stuart Law, chief executive of Assetz, told Arabian Business.
“We will try to accommodate their lost money on our price list with an equivalent unit... We are the developer of that scheme too, so we are able to offer that,” he added.
In order to avail of the transfer, buyers must first prove they have paid a deposit to a Dubai developer and then legally close off their contract with their developer and walk away from the stalled project.
“A buyer would have to get legal advice on how to cancel the contract as if they don’t they are left with the debt and the chance the project may go ahead sometime in the future at the price they agreed to,” Law added.
The alternative project on offer is the Santa M?nica Beach Resort and Spa in Boa Vista in Cape Verde, which is due to start construction in September and handover of units is due to begin in December 2012.
Once investors have transferred the value of their deposit, which is up to a maximum of 25 percent of the value of the original property, they chose a unit in the Cape Verde project of equal value and agree a new payment plan.
While Assertz claims buyers had successfully moved from stalled projects in markets across the world, Dubai-based lawyer Kaashif Basit, whose firm KBH Kaanuun recently helped an Irish couple win a AED1.7m refund from Damac Properties on a delayed Dubai apartment, said exiting a contract in Dubai would prove to be a much more difficult process.
“What developers need is hard cash. With the financing pipeline squeezed and new sales at a standstill, their only source of cash are existing customers which are contractually committed. Therefore, where possible the developer would like to keep existing investors hooked,” Basit said.
He added Dubai developers would be reluctant to allow buyers to exit a project, even if it is delayed long-term, as prices have dropped by nearly 60 percent and their chance of reselling the unit is pretty slim.
In relation to Assertz’s specific scheme, Basit said he believed many Dubai investors who had already been burnt would be reluctant to jump from one emerging market, where they had run into complications, into another equally obscure and untested market.
“In any case the scheme just appears to me to be a marketing stunt where essentially an upfront discount is being offered in exchange for entering into a new commitment which I suspect battle scarred investors would be extremely cautious before entering into,” he said.For all the latest business 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.
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