Second Dubai property project scuttled

Calcutta News.Net
Monday 31st March, 2008

A new luxury resort development, sold-out to investors five years ago, will never be built.

Damac Properties, the biggest private developer in Dubai, has cancelled the Palm Springs project, a 25-storey residential and resort development, planned for the Jebel Ali Palm.

Investors bought the 1, 2 and 3 bedroom apartments, in the project commencing in late 2003. Damac said the property, when completed, would be managed by a five-star hotel operator.

The absolute beachfront property was to have provided sea views from all apartments. With resort facilities, and the opportunity to put units in the hotel pool, the project was so popular the original selling prices almost doubled within a year.

Damac however pushed ahead with building other projects, and announcing new ones across several Gulf countries. It remained tight-lipped about Palm Springs. Buyers received scant, and vague information about when the project was proceeding.

Now after five years Damac, having had the use of the funds from the sell-off, is now saying it won't proceed and the original investors, or those than have bought on the resale market, have a choice of getting their original price back plus 6% per annum interest, or transferring their investment to another Damac property at a 15% discount.

Some buyers however have paid huge premiums on the resale market, and to accept the Damac offer will leave them substantially out-of-pocket.

Damac says it has no choice as the Jebel Ali Palm has been reconfigured and the plot it was to build on will now not take the original development.

'Damac Properties has been advised that the master development of Palm Jebel Ali has been redesigned and the Palm Springs plot will not be delivered. Due to redevelopment of the plots, the building forming the Palm Springs development cannot be situated on the re-allocated plot and, as a result, the Palm Springs project has been cancelled,' Hussain Sajwani, the Chairman of Damac Holdings, said in a statement.

It is somewhat incredulous such an event could be taking place five years after plans were put in place, and the property was marketed.

A more likely event is that construction costs have sky-rocketed since 2003, and the project based on the original prices that Damac contracted for, are now unviable.

The news of the Palm Springs demise comes hot on the heels of the failure of the Alareifi tower at Dubai Marina.

As we reported Sunday, construction of the luxury 35 storey residential Areifi Marina tower at the prestigious Dubai Marina has been halted.

Major Saudi Arabian developer, Alareifi, pulled the plug on the 379-apartment project midway through construction. Investors in the property are being told Alareifi cannot complete the project.

The Alareifi Marina is a unique development in Dubai in that whilst with other projects, off-the-plan buyers pay instalments in accordance with the staging of construction, Alareifi buyers paid the full price of the apartments upfront. In return for this they received discounted prices.

Dubai authorities in recent months have stepped in to regulate off-the-plan instalment payments by insisting developers open escrow accounts and deposit all funds into those accounts. The developers are then only permitted to draw on those funds for authorised construction works.

The Alareifi sales however, marketed through Khalid S. Al-areifi & Partner Real Estate, and the Palm Springs project, were all completed prior to this new regulation.

On Monday stocks on the Dubai stock exchange fell almost 3%, their biggest one-day fall in two months. The decline was led by the city's biggest property developer, Emaar Properties, which shed 3.95%.

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