Thursday, December 22, 2005

Real estate buyer beware :: Khaleej Times
Industry watchdog :: Dubai market has "holes in the system"

Quote:
DUBAI — The hard line approach adopted by many real estate developers to buyers failing to keep up payment instalments, even on projects where they fail to meet the pre-sale completion date, is upsetting not only buyers but the entire real estate industry.

The problem is magnified for those investors who have bought properties from the large developers including Emaar and Nakheel.

Emaar is the world's largest property company and Nakheel is one of the leading developers in the region with investments of $12 billion in local real estate projects. Other large developers are also said to have adopted a zero-tolerance stance towards payment arrears.
. . .
If buyers fail to pay these fees, the developer cancels the contract immediately without refunding any of the paid instalments and refusing to negotiate a new instalment package.

This happens even if the developer has failed to meet the completion date as agreed with the buyer at the outset. Consequently, many small investors are stretched financially trying to meet the repayment terms.

This may be because they struggle to meet ongoing and unplanned accommodation costs or because they are speculative investors who fail to derive rental income from the property when expected.
To protect their reputation for being firm on collections, Emaar and Nakheel need to be tough.

But perceptions also matter. The perception is that Emaar and Nakheel shift all the risk of completion delays onto the buyer without being clear with the buyer that that is what the contract says. Do they want that reputation too?

Completion delays come with the business of construction, even with the best of intentions. A good contract will make it clear to buyers what happens when there are delays.

UPDATE. I wonder if this article is representative?: 7DAYS - Should a 2 million dirham villa look like this?

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