The chief executive of a property development firm suspected of cheque fraud has written an e-mail distributed to investors asking for time to repay them after failing to deliver on promised 50 per cent returns on deals for buying apartments. Imran Khan, the chief executive of Al Barakah Investments, persuaded more than 100 investors to make downpayments on units in more than a dozen proposed buildings in Dubai and Ajman. He signed memorandums of understanding (MOUs) promising guaranteed buy-backs with 50 per cent profit after six months and issued post-dated cheques to back up his promises.
Mr Khan, who holds dual Pakistani and Canadian citizenship, is being sought by Dubai police, who suspect him of failing to honour cheques worth Dh14 million (US$3.8m). Investors have formed a committee to find a solution with Mr Khan, but in an e-mail sent on Tuesday he said he could not offer any workable business plan immediately. "I am out of touch with the outside world and the real estate market in Dubai for more than a month now," Mr Khan wrote in the e-mail, a copy of which was obtained by The National. "Due to the above, I am not in a position to make a realistic forecast of the future."
The e-mail was addressed to Mr Khan's accountant and passed on to investors. Al Barakah issued a statement to the media yesterday acknowledging its "inability to honour certain commitments made by us to our investors". Investors have been flocking to Inside Track, the Dubai-based marketing agency of Al Barakah, in the hope of getting settlement on their MOUs signed with Mr Khan. Mr Khan blamed the slowdown in the property market for his financial problems.
"I deeply regret that we are in this unfortunate situation. I never expected the real estate market to come to such a standstill," he wrote. Earlier this year, Al Barakah Investments announced plans to develop projects worth Dh3 billion in three years. Now the status of its 15 projects in Dubai and Ajman is unclear. Al Barakah is registered as an offshore entity with the Ras al Khaimah Free Trade Zone.
One investor estimated that Mr Khan had banked about Dh300m in downpayments before the buyback scheme collapsed. In his e-mail, Mr Khan said the money had been used for the business and that the only way to resolve the situation was either to "get some additional funding to start construction or to make sales a going concern". "Liquidation or a fire sale of the land will not release enough money to satisfy all the MOU investors," he wrote.
Property analysts say that his scheme was bound to collapse because the returns he promised on the deals were untenable. But the dramatic slowdown in property sales and the fall in prices in the past two months have brought things to a head. Mr Khan said he would need "at least a year" to devise a business plan and "repay everyone". "I want to assure everyone that I am committed to finding a solution in this difficult time and to make sure everyone gets back their money," he wrote, adding that he was an "honourable man".
"My intentions are very pure. If I wanted to leave the country I would have gone a long time ago." One of the agents at Inside Track said Mr Khan had paid out the promised returns to some investors before the downturn hit. "People are actually forgetting the fact that there was a point where Imran was fulfilling his commitment. He was doing 50 per cent or more, depending on the market rate, when the market was good and people were happy and accepted it. Now when it rains everybody gets wet," said the agent. "I personally never believed in the buybacks. And I have not got paid for a month."
An officer at the Rashidia police station in Dubai who is dealing with Mr Khan's bounced cheques said Mr Khan was still being sought for questioning. The company appointed a spokesman, Tariq Minhaj, to deal with queries yesterday. He said the company intended to pay investors back gradually as the market improved or offer them a stake in Al Barakah or the opportunity to buy more property at a discounted price. "We will refund people gradually as soon as we get liquid. Right now everything is blocked," Mr Minhaj said.