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Deyaar takes steps to reduce defaults

One of the UAE's largest developers will unveil a series of measures to help reduce the risk of property defaults.

DUBAI // Deyaar Development will unveil measures to help reduce the risk of property defaults, including full refunds on two of its projects. The measures are part of a strategy to help the firm, Dubai's second largest property developer, survive the economic slowdown. They also include reducing prices for properties that have already been sold. Markus Giebel, the company's chief executive, said the measures would be announced next Tuesday. "There are a couple of projects where we'll give 100 per cent of the money back and a couple where we will have other incentives, which also includes cash back," Mr Giebel said, declining to say whether the full refunds were for projects to be closed down. "This is just one little step of it." Deyaar last month said it planned to offer some buyers the option of swapping their purchases for other property so the company could phase out several projects. In January, it put all unsold projects on hold. The company is also extending payment schedules to be more consistent with construction deadlines. "It is part of the medicine we will give to our clients so they will be stabilised and hopefully the default rate will be as low as possible," said Mr Giebel. "It is in our best interest to keep the default rate low. We have to assist our customers." Mr Giebel said the current market was more about stabilising than selling, and firms needed to be more focused on their customers. "Before, you would just sign a subscription form but wouldn't talk or interact with the customer," he said. "Now to make the change we need to know our customers." Mr Giebel said Deyaar's new strategy would be introduced over the next six months, after which it might consider mergers. Rumours of a possible merger with Union Properties began late last year, although both firms have denied they have been in talks. Simon Azzam, the chief executive of Union Properties, told The National this month he would welcome a merger "if the partner brought a genuine advantage to the company's overall business operations". Mr Giebel said today: "If you merge a strong balance sheet with a weaker one it will stabilise both companies. "It would be good for increasing shareholder value and for stabilising Dubai. If we all go down, Dubai will go down. But there are other solutions; merging isn't the only one." Mr Giebel said none of the company's customers had defaulted, mainly because Deyaar had been assisting those struggling to meet payment schedules. He said the company had enough cash to meet its commitments and expected to be profitable this year, despite the downturn. Its net profit for the fourth quarter of last year was Dh343 million (US$93.3m), compared with Dh216m for the same period in 2007. Property prices in Dubai have fallen by as much as 50 per cent in some developments since the financial crisis took hold. "We believe that 2009 is the year of the bottom and in 2010 the recovery will start," Mr Giebel said. Deyaar said last month it would deliver 1,300 units across seven projects this year. Those scheduled for delivery include Citadel, a commercial tower, and Hamilton Residency, a residential tower, both in Business Bay; and Madison Residency in the Technology, E-Commerce and Media Free Zone. Others include Coral Residence, Jade Residence, Sapphire Residence and Ruby Residence, all at Dubai Silicon Oasis. agiuffrida@thenational.ae

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