Troubled developer Nakheel to start selling again on Dubai’s palm island
Dubai developer Nakheel, which ran into financial trouble in 2009 and had to be bailed out by the government, is to start selling properties in its Palm Jumeirah project next month.
It will be the first properties to be sold on the development since the property crash of 2008.
The state controlled company said it will develop around 100 mid priced town houses on the artificial island, alongside the apartments and villas already built there.
‘Not everyone wants a villa or an apartment. There’s demand for town houses on the beach, but we’re being careful not to increase the density on the palm,’ said chairman Ali Rashed Lootah.
The Palm Residence project will test demand for property in a market where prices have plunged by more than 65% since their peak in the middle of 2008.
The real estate slump forced Nakheel to write down the value of its real estate by AED78.6 billion ($21 billion) and prompted the bailout.
Most of the Palm project will be financed by off plan sales, that is sales agreed before construction begins, a method that was common before the property slump and that has been criticised for being responsible for flipping and the price boom that led to the property crash.
Lootah, who declined to comment on the expected cost of the development, said it won’t be financed through bonds or loans from international banks.
Nakheel plans to spend AED1.4 billion this year to complete nine projects across Dubai that were suspended after the property crash, according to an Islamic bond prospectus obtained by Bloomberg News in September. The plan involves completing almost 8,000 properties this year.
‘My main challenge is to deliver to buyers the homes they bought. The banks and the contractors made a lot of money off us during the boom days, but the buyers have been patient and we want to deliver the homes they paid for and dreamed of. That’s my main goal,’ explained Lootah.
Nakheel has settled AED6.6 billion of claims related to property sold in projects that were halted indefinitely, Lootah confirmed.
The buyers have been offered alternative homes in projects nearing completion or credit notes that can be redeemed in five years. Nakheel has about AED3.4 billion of claims left to settle, he added.
Revenue from retail will probably double by 2014, lifted by an additional 3 million square feet of space, Lootah said.
The company reported revenue of AED1.5 billion for the first half and is due to release 2011 results in March.