Dubai state-developer Nakheel announced that it has broken groundat its off-plan Palma Residences townhouse project on the Palm Jumeirah in the first half of
April 2012, claiming that it will deliver the units in eighteen months time. This is the first new project that the company has announced since the effects of the
global financial crisis tore the heart out of the Dubai property boom from the end of 2008 onwards.
Since then Nakheel has been forced to restructure US$ 16.1 billion in debt pushing its creditors to agree to heavily reduced interest rates and repayment periods
extending out to between 5 and 8 years. The company is also still entrenched in a number of high value courts cases in the United Arab Emirates (UAE), involving
a variety of its earlier projects.
At a press conference held in April 2012, the firm announced that 30 of the 102 Palma Residences units to be built have already been sold off-plan, with another
tranche of 30 buyers evaluating the product. The final-payment value of townhouses sold to date beside the lapping waters of the Arabian Gulf, according to Nakheel
chairman Ali Rashid Lootah, was 223 million Dirhams (US$ 60.8 million), an average of two million dollars each.
The off-plan sales approach is remarkable, considering the reputation that the Dubai market has gained in terms of developments unlikely to ever get built, with
others classified as seemingly permanently on hold by theemirateAAEs Real Estate Regulatory Authority (RERA). Nakheel itself hasalso been frequently in the less
complimentary side of the worldwide news during the first quarter of the year.
Firstly there was the master developerAAEs attempt to privatise and make formerly free access beach clubs chargeable to Palm Jumeirah residents. Owners had
previously paid millions for their properties on the basis that these clubs were considered part of the common areas. Then there was a forum-published revolt, against
the level of service charges imposed at its developments post handover to owners.
The beach club issue was followed swiftly by a running battle with owners at the Shoreline Apartments, also on the Palm Jumeirah, over non-payment of service
fees. Many disputed the validity of the developers argument as a result of outstanding maintenance problems and in a number of cases where Nakheel records were
completely incorrect. This latter spat involved lockouts of homeowners and their tenants from facilities like gymnasiums, guarded by extra security, with even the
threat of closure of access to apartments. A confrontation eventually arbitrated and pacified by RERA, but one handed on to embryonic homeownersAAE associations
as a direct interface with Nakheel.
Therefore off-plan sales of a new project, coming off the back of previous events seems all the more improbable as a business strategy, it would be interesting to see
exactly how many foreign expatriate investors were among the first wave of thirty buyers? Wealthy Dubai nationals supporting the emirateAAEs recovery one could perhaps
understand, especially as this is NakheelAAEs first new project since the local property marketplace crashed at the end of 2008.
Nevertheless, Chairman Lootah believes the initial investments to be a signal of improving sentiment, when he says, that he sees the number of sales on the
Mediterranean style townhouse project as a "sign of trust". However, many property analysts see this more as a serious test of demand, in a Dubai market which has
shed between 65 and 70 per cent in value since its 2008 peak.
Copyright Andy McTiernan. All rights reserved.
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