nabil_8

DAMAC property collapse on Palm Jebel Ali - Construction Week Article attached.

lionheart

The headline is misleading as only the deal appears to have collapsed rather than the property itself. Mind you, the article is barely legible so I may have missed something.

W10

It's been in the media extensively for the past few weeks. Investors are about to sue.

lionheart

So why have they pulled out of the deal?

Robbies

From what I understand...

DAMAC are stating that due to a change in layout of plots etc (or something along those lines) on PJA, that the project is no longer possible.

From investors side, they claim that this is a convenient excuse to avoid building something that due to increased labour costs is now far less profitable than it was before.

Problem area is that DAMAC (from memory) are offering investors the money paid to date + 6% as a refund (since cancelling the project - the article mentions 10% 'incentive' last Sept to sell back before any changes were planned), as this is what they *could* have got in a bak account. However, lets look at those who bought resale off an initial investory. The premium they paid would not be covered by 6% as that was paid to the initial investory so they are effectively out of pocket.

Not a good situation to be in, and I guess it is one of the gambles with purchasing off plan.

Eeyore

I think I read something a week or so back on another forum about someone who'd done just that - bought a resale apartment in this development, and who is now likely to lose a lot of money.

W10

The headline fits the story perfectly, and reading the article I understood the issue perfectly too.

captainflack

I suspect there is more to this story than they are letting on.

The international credit markets have seized up, and everything in Dubai is funded by credit somewhere down the line. I would not be at all surprised if the cost issue is not just labour costs, but the cost of the finance for this project.

I do wonder about the health of the domestic banks in the UAE. Most people here are expats, nobody with any reasonable amount of savings does it with a local bank, you stick it in a bank you trust in blighty or switzerland or whatever, but no one would put it all in ADCB or Mashreq. But plenty of expats have borrowed millions of dirhams from the local banks here. So their balance sheets must look more lopsided than a one-legged hunch back with a side parting. They must be plugging the gap on the money markets, which is not a good place to be. Ask Northern Rock.

Of course there is nothing to worry about because Dubai is bullet proof and everything is based on sound fundamentals, everyone is in the market for the long term and not just buying property with the intention of flipping it before it is built like in the USA two years ago

Norm_uk

Anyone here for more than six months would be mad to keep surplus cash in a local bank. The Isle of Man is the best bet - at least there is some compensation from the government if the bank goes under.

...and they don't freeze your account if the wrong number plate hits you from behind on shk zayed rd

N.

lionheart

Has that happened to you then? My boss finally decided to buy a property in the UK rather than Dubai simply because he was afraid of getting deported and lose access to his investment if he was caught drinking without a licence or whatever.

Norm_uk

Not happened to me personaly but I know of several people who have..."Issues" due to things like traffic accidents, business transactions and of course the booze. It's just common sense not to keep all your spare dosh in a sharia zone...we're in a country where kissing your girlfriend in public can land you a fine and jail term, a country where I can get in trouble for moving in with my girlfriend or saying something untoward about the prominent beliefs or culture - do people really think that because they have shiny towers that their banks and investments are transparent and well managed?

Your boss is being a bit too cautious though and should speak to someone like me about getting an interest only mortgage in UAE to reduce his liability and have enough left over to get something in the UK too

N.

Border Reiver

I agree with Norm, it is all about spreading the risk. I wouldn't want all of my (small) property portfolio in the UK at the moment either!

IndieG

You are sooooo right.

It is just a matter of time - you'll see 'a slight downturn' (as the local media will euphemistically term it)....... Oh but of course the Govt will bail out every expat investor who loses any money...yes sir.....no doubt there

Look what happened to UBS - at least it did'nt collapse and was able to raise some capital after writing down/losing billions....lets see that happening here

captainflack

When you see these DAMAC investors taking a bath, you realise the kinds of risks people are exposed to here.

I mean, imagine someone signs up for this great scheme in 2003. They put down (say) 500k AED on an apartment in Jebel Ali Palm. The next year it has gone up to 750k! Bonus! So they sell it to person B who sits for a couple of years and sells it at 1.2M AED. Nice profit for something that has not been built.

This chap, person C, keeps it for another couple of years and then seeing it is now worth 2M AED, sells it to someone else, who we will call sucker D.

Sucker D cannot wait for the thing to be built. That 2M is going to turn into a 3M pile of gold coins just as soon as it's up and he can sell it on.

But wait... he's just got a shock letter from DAMAC. The project is cancelled! DAMAC is going to refund the money plus 6% per year interest. Unfortunately, only on what *they were paid*. So sucker D is going to be lucky to get 600k AED or so, after he has shelled out 2M AED.

And of course, DAMAC has cancelled a project and now has a nice plot of land on the Jebel Ali Palm. Hmmm, let me think. What could they do??? Got it! Let's build a big block of flats (rather like the one we cancelled in fact) and sell it to even more suckers for today's going rate!

Of course in blighty you'd head straight to the high courts and you'd get DAMAC's backside roasted until they cover you for the loss that their breach of contract has cost you.

But this is Dubai and sucker D will get diddly squat if he's lucky, and 100 lashes for complaining too loudly if not.

Hubris is normally followed soon after by Nemesis isn't it? Welcome to Dubai suckers!

IndieG

CF - Have you tried freelancing as a reporter for Dubai's Property Weekly? May be I'd read that magazine then!