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Lukewarm reaction to sell stalled Dubai projects off plan

The DLD has signed a deal with Wasl Asset Management Group to identify suspended or off plan projects and offer them for sale or long term lease to real estate investors.

The scheme aims to kick start work on viable projects that ground to a halt in the wake of the global financial crisis, said Majida Ali Rashid, senior director planning at the DLD.

‘The recovery of the property sector and protection of the individual or corporate investments are the priorities. Necessary steps will be taken in regard of the liquidation of project, settlement of rights and legal obstacles and restrictions associated with the project,’ he explained.

The backlog of unfinished projects is a legacy of the emirate’s property market’s boom and bust which has seen residential real estate prices fall by up to 60% since the peak of the market at the end of 2008.

With the onset of the global financial crisis more than half of developments in the city were scrapped or halted as project finance dried up and developers ran out of cash.

John Davis, chief executive officer of real estate consultancy Colliers Middle East, believes that property investors would be reluctant to consider off plan or incomplete projects in an already unstable property market.

‘This trepidation has arisen due to the number of buyers having been promised the delivery or handover of their investments or homes which has either been delayed or in some cases hasn’t materialised at all,’ he said.

Tom Bunker, investment sales consultant at Dubai’s Better Homes, said there had been zero interest among investors in off plan units since the onset of the city’s property collapse. ‘No one is interested in paying for any property that has not been handed over as yet. Even properties from some of the larger, established developers are not moving until such time as they are handed over,’ he said.

‘While I believe trying to revive those projects put on hold could have some merit, there are a multitude of issues that must first be resolved with these projects and I would want to see how these are sorted before I get optimistic about investors coming in,’ he added.
The scheme is not the first of its type to be announced. A small number of investors have moved to buy up stalled developments at low prices, in a bid to take advantage of falling construction costs and low interest rates to complete and sell on the project.

In May, Dubai based businessman Kabir Mulchandani launched property venture SKA1, to invest in projects deemed but viable but in need of bridging capital to meet their complete date.

‘There are a lot of good projects out there and a lot of quality developers but there is a lack of traditional capital. The banks are heavily exposed to real estate, here as well as globally. We come in and provide the capital, we work with the contractors to finish and then we have our sales and marketing team that can resale it once it is completed,’ he said.

But even projects that are being built are suffering with delays. The latest is the Infinity Tower, Dubai’s tallest, twisted skyscraper, whose completion date has now been pushed back to December 2012. It was initially supposed to be finished in 2008.