The Dubai Land Department has stepped in to broker a deal between investors and the developer of a stalled housing project, as the emirate's property regulators move to break the deadlock in the distressed offplan development market. The department acted on March 1 to make a new offer to buyers at Beachfront Living on behalf of Omniyat Properties, one of Dubai's larger developers. A group of buyers had been lobbying for the project to be cancelled.
The offer, which has a deadline of March 20, included a reduction in the price to Dh2,100 (US$579.95) per square foot and an increase in the size of apartments. Some of the apartments were sold in June 2008 for more than Dh4,400 per sq ft. Buyers also have to pay an additional 20 per cent instalment on the purchase price. Ludmila Yamalova, an American lawyer who has advised several buyers on their options, said the offer was "absurd" because the project's future was uncertain. The plot of land where Beachfront Living would be built is located in the Waterfront, the sprawling Nakheel master-planned area near the Palm Jebel Ali in the south of Dubai that has stalled.
The Waterfront is officially on hold while Nakheel's parent company, Dubai World, attempts to restructure $26 billion of debt. Last month, all that could be seen at the Beachfront Living site was a fenced-off piece of flattened land and there was no indication of any construction work taking place. "Most of the buyers want this project cancelled," Ms Yamalova said. "This is a one-sided offer. The Land Department is acting for the developer, not the buyers. That's not the way they are supposed to be acting."
Ms Yamalova also questioned the Dh2,100 per sq ft figure as not accurately reflecting the market for homes in the area. "You can buy a finished apartment on the Palm for Dh700 per square foot," she said. Omniyat Properties said its "commitment to Beachfront Living remains strong" and it had "no plans to cancel the project". "Work continues on site," a spokeswoman said. "Initial excavation is complete. Omniyat obtained a [notification of construction] for shoring work from Nakheel in October 2009 and shoring work is currently under way.
"We have written confirmation from the master developer, Nakheel, that all necessary infrastructure will be provided in line with the development programme." Omniyat said it was "working closely with the Real Estate Regulatory Authority and Dubai Land Department to offer every customer a solution tailored to his or her needs, while considering our responsibility to clients whose commitment and ability to pay out their investment remains as strong as our own".
About 15 per cent of buyers have taken deals to shift their investments to other Omniyat projects that are further along in construction, the company said. Beachfront Living was never officially launched for sales, but the company sold more than 200 apartments in a "pre-sale" and collected Dh314.7 million, according to an official review of the project's escrow account by Caliber Middle East, an accounting firm that works with the property regulators.
Of that money and other funds Omniyat invested in the project, the company spent Dh237m on land payments and Dh101.6m on marketing expenses, according to the Caliber review. Just Dh738,866 was spent on construction. firstname.lastname@example.org