#APPROVED: PALM SPRINGS, 19F Res (Palm Jebel Ali)

[fairouza]

Formally announced ???? Somes calls to the Investors.... nothing else, wait and see what they will writing on a piece of paper

[Dubai_Steve]

The revised infrastructure development programme on the Palm Jebel Ali means that building will not start now until 2012, that is 8 years after initial sales of Palm Springs and who knows when completion will be!

[Hanna]

Rera probes buy-back complaints
By Joseph George on Monday, April 14 , 2008


(CRAIG SCAR)




Real estate watchdogs have said they would not hesitate to investigate complaints about developers seeking to buy back unfinished properties from investors.


The warning from Dubai’s Real Estate Regulatory Agency (Rera) came after Damac attempted to shelve plans for the Palm Springs development, prompting an investigation by the agency.


Investors in the Dh300 million waterside project at the Palm Jebel Ali threatened legal action after the developer announced a buy-back programme. Homes in the project were sold more than five years ago but construction has yet to start.


Emirates Business spoke to a number of developers who confirmed they were buying back apartments from investors due to soaring construction costs. The companies – mostly small and inexperienced ones – launched various projects in 2006 but are yet to start work on them.

In the past, developers have bought back flats and then relaunched them at higher prices. But Rera CEO Marwan bin Ghelaita told Emirates Business that the only complaint received so far concerned Damac.

“We have not received any other complaint from investors about developers buying back properties. But if we do, we will definitely investigate the issue,” said bin Ghelaita.


However, several other properties in the emirate, including Al Arefi Marina at Dubai Marina and the A1 Tower at Jumeirah Village South, are reported to have been either put on hold or cancelled. The 50-storey A1 was originally scheduled for completion this year but work has yet to begin.


The increase in building costs is said to be the main reason for the cancellation of projects. Costs in the Gulf have risen by almost 30 per cent over the past year – forcing several small- and medium-sized developers in the UAE to suspend work.


Many projects marketed and sold between 2004 and the first quarter of 2007 for between Dh480 and Dh800 per sq ft are now being sold for Dh1,500.


As a result, projects where construction work is yet to begin or is half-complete have been severely affected, with contractors unable to continue without suffering substantial losses.


A senior sales representative dealing with the 31-storey Al Arefi Marina confirmed to Emirates Business that construction work was on hold, but said the company had yet to decide if it would buy homes back from investors.


“The apartments were sold for Dh800 per sqft but today the rates in Dubai Marina range from Dh1,700 to Dh2,000,” said Mohammed Ali. “We are asking our investors to visit our office and we are working on a solution to the problem. The company has already approached the Land Department.


We have the relevant documents about the increase in construction costs and will show them to our investors.”Officials dismissed speculation the project had been sold to Abu Dhabi-based Iskan. The building was expected to be completed this year, but to date only 18 floors have been built.

A senior sales official at Ali Moosa and Sons Contracting Group – which is developing the A1 Tower – said all transactions had been put on hold until the company applied for an escrow account.

Another official at the company said: “At present we cannot reveal any more details about the progress of the construction.”


Developers who spoke anonymously to Emirates Business said they would not hesitate to buy back properties if they could not cope with rising costs.


“There were several problems that prevented us from starting work on one project,” said a developer operating in Jumeirah Village South. “Although the completion date of the project is 2008, construction is yet to begin there. It just does not make business sense to build something for Dh1,000 per sqft that you have sold for just Dh600.”


An EFG Hermes report said construction cost inflation is being driven high by rising costs of building materials as well as labour.
A serious shortage of labour and raw materials and strong demand as well as the mandatory adoption of green building codes and health and life insurance are likely to increase construction costs in the UAE even further this year.


Over the past year the cost of cement, concrete and rebars has increased by up to 30 per cent. Steel prices have risen dramatically from Dh1,983 per tonne in 2004 to between Dh3,800 and Dh4,000 today.


A severe shortage of cement has led to black market supplies being priced at Dh450 per tonne compared with Dh328 from factories in Ras Al Khaimah – which has put a number of projects under pressure. Similarly, tender returns have risen by almost 15.5 per cent over the past year because of the increase in material costs.


Imad Al Jamal, vice-president of the UAE Contractors’ association’s higher technical consultative committee, said: “Nobody expected costs to go up so dramatically – the increase has overtaken all our estimates.


“Today it is very difficult to build a quality structure for less than Dh750 per sqft. In 2006 the average cost of construction per sqft stood at less than Dh250. However, today you can only build an average project for about Dh350 per sqft.”


Property consultant Rakhee Desouza said: “Buy-backs have happened several times before. Deposits are handed back and the projects are later relaunched at a higher price.”Strict rules introduced by Rera and the launch of escrow accounts have reined in the erring developers.


But Al Jamal said: “Some developers, however, try to avoid the law by buying back properties. Such a practice should not be encouraged at any cost. Anyway, gone are the days when developers dictated the terms in the market. Today it is the contractors who determine the price of property.”

[FISHY]

Originally Posted by Dubai_Steve

The revised infrastructure development programme on the Palm Jebel Ali means that building will not start now until 2012, that is 8 years after initial sales of Palm Springs and who knows when completion will be!

Can you please tell me where from did you get this information?

[ardi]

All development can start by beginning 2009.

[GoDubai!]

So, what happens in a case like Palm Springs? The developer in this case can, should and investors would say, must, complete the project as specified, but at a loss to itself. DAMAC, with its huge marketing budget, can absorb this loss. But smaller developers would have a difficult time absorbing the cost, although my guess is that in most cases they can but don't want to. If it means slashing all profits, the owner receiving no income and increasing his own personal debt, cutting out all perks--like no vacations for senior staff, etc.--then companies can stay afloat. RERA and investors should attempt to force this on developers who have poorly managed their projects.

[Dubai_Steve]

According to this article not till 2012!

But then the revised infrastructure development programme on the Palm Jebel Ali means that building will not start until 2012, so Damac is perhaps just being realistic about delivery prospects.

http://www.ameinfo.com/153311.html

[Opus 2009]

Originally Posted by Dubai_Steve

According to this article not till 2012!



http://www.ameinfo.com/153311.html

Below is for an email received from Nakheel re Villas on tha Palm Jebel Ali. Perhaps the ameinfo article refers to construction on the crescent.


Construction of villas will commence towards the end of 2008/early 2009 with the first delivery of properties expected in late 2010. Very soon we will be communicating the new payment terms and providing sufficient time to settle the payments.

[Hanna]

Nakheel and Damac end Springs dispute
By Staff Writer on Thursday, April 17 , 2008




A disagreement between developers Nakheel and Damac over the future of the Palms Springs project at The Palm Jebel Ali has been resolved, Dubai Lands Department said on Wednesday.


Damac shelved the scheme amid concerns over the mounting cost of construction materials, as previously reported in Emirates Business. However, following discussions with master developer Nakheel and the watchdog Lands Department, Damac, the region’s biggest private developer, has agreed to complete the project.

Mohammed Thani, development and marketing director at Dubai Lands Department, said Damac had agreed to finish Palm Springs “at the same cost and the same conditions”.

He told Emirates Business the main reason the project was shelved was the rising cost of materials. He refused to reveal other reasons behind the decision.

Sultan Butti bin Mijrin, Director-General of Dubai Lands Department, said in a statement the organisation met representatives of Nakheel and Damac and listened to their points of view in an effort to resolve the issue.

He said major concern was to protect the interests of investors and the reputation of the real estate sector in the emirate.

Bin Mijrin praised Nakheel and Damac’s “continual contributions” to the real estate market to ensure the rights of investors.

[Mistermark]

How do you keep an idiot in suspense? I'll tell you tomorrow.

How do you placate an angry Palm Springs investor? Tell him you WILL build it after all - but you won't be able to start until 2012.

By the time it becomes clear they have no intention of delivering, they will have completed the projects that are still profitable to them and moved on. So Palm Springs will go from the project that threatened to kill their ability to sell the remaining projects to a sideshow.

Which is why, if I was an investor in this project, I'd want them to put today's value of my property into an escrow account, to be released only when and if they deliver the completed apartment... I'd also want, upfront, the rent from now until delivery.

[Hanna]

The problem with off-plan projects
By Peter Cooper on Tuesday, April 15 , 2008


The economic forces stacking up to push UAE house prices higher and higher are enormous at the moment. It is the complete reverse of the picture in many developed countries right now where housing bubbles created by ultra-low interest rates are bursting.
The exact opposite is happening in the UAE. First, competition among local mortgage lenders and falling US base rates are lowering the cost of housing finance from previously high levels.
Secondly, the supply of completed property is insufficient as contractors cannot build fast enough and existing owners are not selling.
Thirdly the UAE economy is undergoing a huge boom thanks to record oil prices, and activity in all areas is expanding rapidly causing a massive increase in demand for accommodation from a surging population.
And finally house prices are low by global standards because freehold for foreigners is new, and property still offers an excellent return for investors with yields of eight per cent to 10 per cent.

The authorities say the pressure will come off rising rents later this year as many new projects are completed and this could cool price increases. But to date all new supply in the market has been quickly absorbed.
Commentators said the same six months ago about the delivery of the 6,500 apartments in the Jumeirah Beach Residence and the even larger International City from Nakheel. Yet it is more difficult than ever to find completed property in Dubai today.

This brings us to the latest revelations about the cancellation of certain off-plan projects in Dubai. The cancellation of the Palm Springs apartment project on the Palm Jebel Ali has angered buyers who are being offered their money back with interest or an apartment on another Damac project at a 15 per cent discount.
The problem is that many owners bought in the second-hand market and face a loss on the original price and therefore have little practical alternative but to switch to another development.
Damac may actually be doing them a favour as the infrastructure of the Palm Jebel Ali is now not scheduled for completion until 2012, when presumably construction could finally begin.
However, some off-plan buyers on other schemes have apparently been handed their money back simply because rising construction costs have made the project unprofitable to the developer. In a few cases the developer has reportedly then gone on to re-launch the project at higher prices.
At least, there is some justification in terms of rising construction costs. Over the past year, the price of cement and steel rebar has gone up by 30 per cent.
Units that sold for Dh600 per square feet now cost Dh1,000 per sq ft to build. But does that mean a sale can be abandoned? What about the sale contract? This is the sort of market abuse the new Real Estate Regulatory Authority and compulsory escrow or trust accounts for off-plan monies are designed to tackle.
And it is going to be interesting to see whether a developer can be forced to proceed with a project in the knowledge that a loss will be made. If this does not happen, and the phenomenon of withdrawing off-plan schemes from the market becomes more common, then this is going to add yet another upward pressure to house prices.
For then the rising cost of construction is going to be fully reflected in the cost of apartments. And this will reduce the supply chain and increase demand for those units actually available, forcing prices up.
Indeed, agents are already counselling people, who are worried about buying off-plan, to look at the second-hand market. A switch in buyer interest from the off-plan sector towards completed property will put further pressure on the dwindling supply of available units.
It is quite notable in the hefty property advertising publications that the same units are often repeated in many adverts and that completed units in many finished developments are in short supply.
An alternative to buying a completed home is to purchase an off-plan scheme that is already under construction. For then you will have a better idea of the likely completion date, and that the unit will be completed.


It is much harder when you buy something where the developer has not yet broken ground, or is promising to in the near future. But that is also why off-plan units generally sell at a good discount to the finished product, as part of the development risk is off-loaded on to the buyer. However, whether it is also reasonable to expect off-plan apartment buyers to take a risk that their apartment will never be built is now under the microscope.

[Hanna]

by Rob Corder on Wednesday, 16 April 2008


Prepayment for any products or services has always warranted a discount. Pay for a flight or hotel room up front, and you expect to get a cheaper price.

Business-to-business transactions invite even deeper discounts for companies prepared to stump up cash in advance.

The reason is simple: prepayment means positive cash flow, which can be worth a considerable percentage of any transaction.

Buying property off plan is the ultimate prepayment scheme and, like all others, it comes with a discount. The reason for the discount is two-fold. First, the developer selling property benefits from positive cash flow. In some cases, sufficient property can be sold to completely finance the building project.

Secondly, there is risk involved for the buyer, and this is built into the price.

The early days of the Dubai real estate boom, when non-Emiratis were first allowed to buy property, was a time of extreme risk. The legal system had not even been changed before developers were selling forms of ownership.

I can recall people being given contracts all but scribbled on the back of a fag packet that promised the bearer that they would own a certain property when the law allowed them to do so.

His Highness Sheikh Mohammed, who was Dubai's Crown Prince at the time, had given his word the law would change, and for early investors - typically buying from government-owned developers - that word was good enough.

These early investors were right. They took the risk and netted massive rewards. Villas selling for $1.5 million when Palm Island was first announced are now being advertised for closer to $15 million.

The developers also won. Dubai government-owned Nakheel's business was almost entirely founded on the cash generated from selling the first Palm Island properties off plan. Emaar, also partially owned by the Dubai government, had earlier pulled the same trick with the city's first freehold developments for expats: Emirates Hills and Emirates Lakes.

Fast-forward six years and, while the law has been considerably tightened regarding foreign ownership, new risks have emerged in the off plan market.

Several tiers of operators have emerged. Developers such as Nakheel and Emaar have been upgraded to master developers. Smaller developers, some of which have become giants in their own right, buy plots from the master developers on which to build their own skyscrapers or villa complexes.

Investors or private home buyers can buy from master developers, sub developers, or real estate brokers that buy and sell ownership rights in the same way as futures traders sell ownership of coffee beans.

And the vast majority of speculators have as much intention of ending up holding keys to a home as traders intend to own tonnes of coffee beans. They are buying and selling paper, not property.

This house or cards has been underpinned by real estate values running ahead of the cost of building property, and the willingness of people to pay ever-higher prices for it.

But these foundations are being attacked from several directions.

Construction costs rose at about twice the rate of inflation in 2007, up around 20% according to research from international consultancy EC Harris. The price of steel reinforcement rose by 46% and structural steel gained 38%, while cement prices ended the year 30% higher.

The cost of steel in the UAE has continued to soar - up 35 percent since the start of the year. And there are shortages of many raw materials used in construction, causing costly delays to projects.

Staff costs are rising due to inflation and competition for workers. Gulf currencies, which are pegged to the US dollar, are weakening. The Indian rupee, the Euro and the British pound are all strengthening, making the GCC a less attractive place to work for citizens of countries that typically provide all the labour for the construction industry.

Money is also getting more expensive in the wake of the global credit crunch. Central banks across the Gulf have been cutting base rates in line with cuts at the US Federal Reserve, but these rates have not been passed on to businesses as banks shy away from making risky loans.

Selling bonds - effectively borrowing from the private sector and wealthy individuals - has become common to finance projects. But confidence is ebbing away and these bonds will need to offer higher and higher guaranteed rates of return to attract buyers. The money to developers is again more expensive.

But the bunker buster that could blow the foundations of the off plan market apart is consumer confidence. Until last month, investors were unconcerned about holding the ownership rights to a property that would be built in the future.

Supply was low, demand was high, and real estate prices looked like going up forever.

But now there are stories that properties will not be built. There are stories that developers would rather compensate people holding ownership rights, than build the properties that they have bought.

Damac Properties' Palm Springs development was the first cancelled project to break into the open. The shockwaves were felt as far away as London, where investors threatened to sue the developer unless the properties they had paid for were built.

Palm Springs should have been completed by the end of last year, but Damac postponed construction of the homes, and finally cancelled it completely in March. They offered to buy back the ownership rights to the properties at a premium of 6 percent per annum for every year since investors bought it.

An investment of $1 million when the project was launched five years previously would only be bought back for $1.33 million - hardly the return that the rest of the Dubai property boom was delivering over that period.

Damac claimed the cancellation was due to planning changes imposed on it by Nakheel, the master developer of Palm Jebel Ali on which Palm Springs was due to sit. Nakheel denies responsibility.

It is possible that Damac has fallen into a negative equity trap where the revenue it raised from the sale off plan of the Palm Springs development is no longer sufficient to build the project at a profit.

Five years on from the launch of Palm Springs, it is cheaper to buy back the ownership rights at 33 percent more than they sold them for than to build the properties.

UAE daily Emirates Business on Tuesday unearthed two other developers that claim to be in a similar situation. Al Arefi Marina at Dubai Marina and the A1 Tower at Jumeirah Village South, have been put on hold or cancelled, according to the paper, although the developers responsible for the projects have not made the decision on whether to buy back ownership rights, or continue to build what might be loss-making towers.

If buy-backs become common, billions could be wiped off the value of ownership rights overnight. Owners would be faced with a terrifying choice: sell at a discount rate back to the developer - perhaps 30 percent below today's values - or press for the development to be completed, which might bankrupt the developer leaving the owner with nothing.

The rising costs afflicting the construction and development industries show no signs of abating. The only release valve might be a sharp economic slowdown, which would be as likely to send weaker developers bust as spiralling inflation.

The risks therefore are growing, while the potential rewards are shrinking in buying property off plan. The attraction of prepayment is vanishing for buyers, while becoming ever more critical to the survival of sellers.

The days of multi-billion projects being sold off-plan within hours of their launch could be over. Expect buyers to show considerably more caution in the future.

[fairouza]

http://www.business24-7.ae/cs/articl...eadlineID=5606

Richard says

Dear Developer (from the smallest upwards)of Dubai, May we remind you that we, the investors from Europe, have still to bear 30% losses by the currency convertion (Euro/AED) from today to the original purchase dates 2004-2006. What you are going to do cannot be called "buying back". Buying back means: You have to pay investors the actual market price from today if you wish to call your practice "buying back" If we remeber right, we bought and invested in apartments, villas or units of buildings, not in your companies. If your calculation has failed, we the investors are not the ones who have to understand that your profit is not the one that you once thought. To shift every risk now to the former investors is not the way how it works in global economy.

Jeff says
With Real Estate prices falling 30 percent in the last year from Europe to California (with New York being the only major exception) how long can the desire to live in the Middle East continue? Having lived through a few Real Estate bubbles in Miami there is an economic max before people move on. I have properties in Miami that were over $2 million US a year ago and can be picked up for less than $1 million.

more comments:

http://www.arabianbusiness.com/51659...-as-costs-soar

[Salameer]

Palm Springs project now back on track
Dubai's Land Department has successfully mediated a dispute between property developer Damac and investors in the Palm Springs project in Jebel Ali, according to Sultan Bin Butti Bin Mejrin, director general of the Land Department. The project, which was launched five years ago, is now back on track and will be developed in keeping with the original investor contracts and Damac's contract with Nakheel, master-developer of the Palm Jebel Ali. Bin Mejrin said the Land Department intervened to protect both investors' interests and Dubai's reputation in the property market, reported Gulf News.

This has to be great News for Investors in Dubai.

[joobn]

im sure Damac is getting a big back-hander from the government or someone important to make sure that the project goes ahead.

[234sale]

Interview with RERA about DAMAC

[dubaigreen]

This really reads as a SOAP. Where there is a bubble, the greed is kicking in. I even have to correct myself now and than, it looks like the end of the 90´s, when everyone was saying, "the only way is up" and many companies took profit from the greed. I still think that it is quite controlled in Dubai, only Damac seems to ride the greed wave. I am warned, no Damac for me.

[234sale]

Its not Greed...

It's rampant inflation causing developers not to keep their promises without occuring a loss.

If you buy a development that can not finished it will have no value.

If you have a quality completed property your going to do very well.

[taxi201]

Has anyone had the formal communication from Damac yet, about the project being back on track?

[margaretwsj]

Hello -- I'm also interested in hearing about investors' response from Damac. I am writing a story about the Dubai real estate industry for my newspaper, The Wall Street Journal. Damac is looking to roll out ad and sales campaigns in America soon, and I'm trying to find out if investors are satisfied with their conflict resolution. Can anyone help me? write me privately at margaret.coker@wsj.com or respond here on this forum. Thanks!