Nakheel is to start work on its first major Dubai building project since the onset of the economic downturn, with a town house development on the Palm Jumeirah replacing plans to berth the QE2 ocean liner off the man-made island.
"The QE2 will be placed in a much better location," said Ali Rashid Lootah, the chairman of Nakheel. "The Government of Dubai is developing an up-to-date modern cruise terminal. That will be a better environment. It will stay in Dubai. The QE2 is part of Dubai."
He confirmed the ocean linerwould no longer go to the Palm Jumeirah and would remain in the Port Rashid area of Dubai, where it is currently berthed. Istithmar World bought the QE2 for US$100 million (Dh367.2m) from Cunard in June 2007. The plan was to refurbish it and set up as a luxury hotel berthed at Palm Jumeirah as part of a marina development and pier, which would include shops, cafes and restaurants.
The 102 beachfront town houses are to be located off the "trunk" of the Palm Jumeirah.
The announcement came as much of the development on the island remains unfinished, with dozens of hotels and shops originally planned.
The cost of the new development has not yet been disclosed.
The town house development that would replace the original plan would take more than 18 months to complete, a spokesman for Nakheel said.
"The priority for the Palm should be to develop more facilities to support the people that are already there," said Craig Plumb, the head of research for the Middle East and North Africa region at Jones Lang LaSalle. "They need to move forward with the retail projects that they've already got planned for the Palm. There is obviously some of those projects that are pretty much completed, but they're not occupied." He said how well the houses would sell would depend on investor confidence in the completion of the homes and the service charges that accompanied them.
"In terms of town houses, that sounds like a very sensible idea because the other thing that the Palm needs is a bit more affordable [property] - it's not going to be cheap, but it's presumably going to be more affordable than the villas - so that's increasing the spread of prices on the Palm," Mr Plumb said.
Mr Lootah confirmed that some of the land used as collateral for its $1.31 billion Islamic bond, or sukuk, was seabed.
"The valuation was done by a reputable international firm and accepted by the trade creditors," he said.
"If [there was] any doubt, the lenders would stop us. They wouldn't accept it."
Segments of the property market in Dubai have been boosted by the Arab Spring as investors have looked for a "haven" in which to buy homes.
* additional reporting by Kevin Brass