Dubai plans to resuscitate stalled real estate projects

A scheme by Dubai Land Department aimed at attracting fresh investment to stalled real estate projects has been greeted with skepticism by analysts who warn buyers are unlikely to risk their funds in a still-falling property market. State agency DLD this week signed a deal with Wasl Asset Management Group to identify suspended or offplan projects and offer them for sale or long-term lease to investors. The Tanmia scheme aims to kickstart work on “viable” projects that ground to a halt in the wake of the global financial crisis, said Majida Ali Rashid.“The the recovery of the property sector and protection of the individual or corporate investments are the priorities,” said Rashid, senior director of planning and institutional development at DLD’s real estate arm. “Necessary steps will be taken in regard of the liquidation of project, settlement of rights and legal obstacles and restrictions associated with the project.” The backlog of unfinished projects is a legacy of Dubai’s rapid rise and fall. The emirate had the world’s fastest- growing property market from 2006 to mid-2008 because of rising demand from a growing expatriate workforce and speculation fuelled by borrowing. Prices quadrupled in the six years following the 2002 decision to allow foreign ownership of property in designated areas. 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, CEO of real estate consultancy Colliers Middle East, warned investors would be reluctant to consider offplan 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 offplan 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,” he said. “Even properties from some of the larger, established developers are not moving until such time as they are handed over. “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 Tanmia 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; I meet them all the time… [but] there is a lack of traditional capital. The banks are heavily exposed to real estate, here as well as globally,” he said. “We come in and provide the capital, we work with the contractors to finish [the project] and then we have our sales and marketing team that can resale it once it is completed.” In May, the firm had completed one deal for an AED300m building six months away from completion in Dubai Marina and planned to seek out further opportunities in the emirate.