Nakheel offer casts doubt on project

Angela Giuffrida

• Last Updated: November 05. 2009 11:32PM UAE / November 5. 2009 7:32PM GMT

The future of the vast reclaimed island is now in doubt. Courtesy Nakheel

Nakheel has offered investors in the stalled Palm Jebel Ali development alternative homes on other projects, casting further uncertainty over the future of the vast reclaimed island.

Some Dubai developers have encouraged home buyers on struggling projects to transfer their deposits to other developments that are nearer completion.

People who bought waterfront villas on Palm Jebel Ali, where prices have tumbled by about 45 per cent from their peak in the third quarter of last year, are now being asked to transfer their investments to projects that include Al Furjan and Jumeirah Heights, which are both under construction.

But the move has been criticised by investors, who expected to move into their new homes last year.

“Nakheel has called investors and given them this option,” said Saqib Iqbal, who bought a villa in the development in 2006.

“But most investors would like them to complete Palm Jebel Ali. People have paid premiums on top of what they paid originally, it’s a disaster to be asked to move somewhere else.”

Palm Jebel Ali was the second artificial island project to be launched by Nakheel and was designed to accommodate up to 250,000 people and add 70km of beachfront to the emirate.

“Further work on Palm Jebel Ali has been delayed until market conditions allow recommencement of these phases of the development, and customers are being given a range of options within the wider Nakheel portfolio to transfer their investment,” said Nakheel.

In an letter sent to Marwan bin Ghalita, the chief executive of the Dubai Real Estate Regulatory Authority (RERA), investors said: “This is not what was sold to us. The apartments being offered are much smaller, with no beachfront or private pool, and are at a much higher price.”

The investors, most of whom have paid 30 per cent towards their purchase, have called on Nakheel to instead resume construction of Palm Jebel Ali, register their plots with the Dubai Land Department and officially agree to link further payments with construction milestones.

While land reclamation on the development, the second of Nakheel’s Palm island trilogy, is complete, infrastructure work was stalled late last year. Construction has yet to start on 1,300 villas originally planned on the development.

Palm Jebel Ali buyers were told in January the handover date had been delayed by four years from the original completion date of June last year. The move prompted 400 buyers to petition the developer to reschedule their payment plans. A revised payment plan agreed in conjunction with RERA stipulated their next instalment would not be due until the end of the year, while the balance would be linked to stages in construction thereafter.

However, while buyers have stopped making payments, they have not yet received an official notice from Nakheel of a new payment plan, said Mr Iqbal.

Palm Jebel Ali was originally launched in 2003 and the first serious delays on the project started to emerge four years later, when the design of the island was changed.

The global financial crisis, which hit Dubai in October last year, was a further blow to the development as speculators withdrew from the market. Other Nakheel projects, including Trump International Hotel and Tower, the Nakheel Harbour and Tower development, have also been put on hold.

Nakheel must repay a US$3.52 billion (Dh12.92bn) debt, which comes due next month.



agiuffrida@thenational.ae