The Palazzo Versace hotel in Dubai has cut the price of its apartments by half, but there has been no skimping on the fittings.
A high number of defaults has meant several properties in the Dh2 billion (US$544.4 million) development coming back on to the market at a discount, but all the 169 private homes and 213 hotel rooms will still come with furniture and accessories, right down to the $120 drinking glasses, designed by Versace, the Italian designer.
Eighty per cent of the residences were sold before the financial downturn, with buyers from the UK, Russia and around the region among those who jumped at the offer. But many did not follow through with payments, said Soheil Abedian, the managing director of Emirates Sunland Group, the company behind the project.
"More than 50 per cent of [the apartments sold] have not performed," said Mr Abedian, adding that he was in the process of cancelling about 40 contracts through the Real Estate Regulatory Agency. "When these processes are completed Ö we are allowed to sell [them]."
Partly because of these financial problems, construction of the luxurious development on Dubai Creek has slowed and it is still about 12 to 14 months away from completion, having started building in 2007. The main structure of the building is almost finished.
When the apartments first came on the market, prices started at Dh17.7m. Now, a two-bedroom apartment in the Versace property can be had for Dh8.5m, Mr Abedian said. The average price is now Dh4,500 per square foot.
Seven apartments in the Palazzo Versace were sold last year.
"The market is there," said Mr Abedian. "The apartments are selling, but still there is a doubt in off-plan products."
The company has switched from property sales to equity and bank loans to finance completion.
"You cannot defy the laws of gravity and you have to adjust with the market," said Chiheb ben Mahmoud, the senior vice president at Jones Lang LaSalle Hotels Middle East and Africa. He said similar properties worldwide had been "adversely affected by negative market conditions".
Mr Mahmoud said it was an established trend among operators in the luxury properties market, including Four Seasons and Ritz-Carlton, to have private residences incorporated into a hotel. The Armani hotel in the Burj Khalifa also uses this model.
The Palazzo Versace hotel is part of the wider Dubai Properties' development, Culture Village, which has been delayed. Mr Abedian said he was confident, however, that Dubai Properties would soon install basic infrastructure, such as electricity and water.
The Dubai hotel is the second Versace property after the launch of Palazzo Versace Gold Coast in Australia in 2000.
The Dubai hotel is expecting to charge rates in line with luxury properties in the emirate such as the Armani hotel and Mina A'Salam.