My financial mistake Last April, John Harrison marched into a Dubai skyscraper with a cheque for Dh500,000.
Buying a house of pain
Last April, John Harrison marched into a Dubai skyscraper with a cheque for Dh500,000. With no mortgage or financing from the bank, Mr Harrison, a pilot for Emirates Airline, paid a 50 per cent down payment on the Dh1 million villa in Abu Dhabi with cold, hard cash. The cheque represented four years of diligent saving. But the transaction - over in an instant - turned out to be the biggest financial error of his life. "I wasn't a speculator," Mr Harrison says, who wished to keep the local developer anonymous. "I didn't want to flip it a few months down the road. Now, I have sleepless nights and have been sick over this unpleasant business."
Mr Harrison, 44, who agreed to share his story on the condition we change his name, grew up in Zimbabwe and moved to the UAE more than 13 years ago, in 1996. He says he bought the off-plan property last year for his mother, 66, who now lives alone in the troubled African nation. His family's history there dates back to when his grandfather, a soldier, moved to the country with the original "Pioneer Column" ? the British army raised in 1890 to annex part of Southern Rhodesia.
He remembers attending a school "in the bush" as a boy, and the violence surrounding him, such as when a farmer was killed down the road as he played football, or when his cousin died during military service. But Mr Harrison is now eager to bring his family's history in Zimbabwe to an end. "The idea is to pull her out," he explains. "For years, I had been saving money for a rainy day, and the situation in Zimbabwe is untenable. I thought this must be the rainy day."
After the turmoil surrounding the Zimbabwean presidential election in March 2008, he decided he'd seen enough. He began actively looking for a home for his mother. He felt Dubai was too expensive and unpredictable for investment. While there were many budding projects in the UAE to consider, a friend- who works as a property agent in Dubai - suggested he buy into a promising development in Abu Dhabi.
Mr Harrison decided to pounce on the opportunity. But in hindsight, he admits he may have acted too quickly. After dropping off his Dh500,000 cheque, he was assured - in April 2008 - that he'd be issued receipts and a contract in the next couple months, and the villa would be ready by the beginning of 2009. But after two months, with neither in hand, Mr Harrison started to sweat. Phone calls and e-mails to the developer, he says, were greeted with further delays, and at times, silence.
Mr Harrison would eventually receive a receipt in July 2008. But in September, when he came to finally sign a contract, he says he was required to select a different plot of land than what was originally agreed upon, at a higher price. He was charged, he explains, an additional 10 per cent fee for the "extra area" on the plot. He claims he was given no suitable reason for these changes. He was simply told the contract was altered because of building and financial constraints.
Construction delays, he adds, proved equally troublesome. In January 2009, the completion date for the development was pushed back until sometime in 2010. And now, Mr Harrison says, that deadline has been further extended to the fourth quarter of 2011. All of these problems considered, he decided in February 2009 to pull the plug on his investment. He sold the off-plan villa to another investor at a loss of Dh100,000. However, Mr Harrison, who has a wife and three children, aged 16, 14 and 12, says he's learnt a great deal from the experience.
He says he'll be more hesitant about buying property in the UAE, as he feels that - when there were delays in construction and changes to the contract - he had no recourse against the developer, and there was no protection for the consumer. "But I wouldn't put people off entirely," he adds. "There is still good property. I would buy from someone with a reputation to lose, who has depth to their business and experience behind them. As they say, there is proof in the pudding."
He also regrets handing over the cash on the basis of a "reservation agreement" rather than signing a contract. He advises anyone interested in property to never make a "gentlemen's agreement", as he called it, and instead demand a detailed and thorough contract. If there are any delays in signing a contract, treat that as a serious warning sign, and think twice. He says that more than a year ago, prior to the financial downturn, it was much easier to get caught up in the property frenzy - and he was no exception. Buyers, chasing what seemed like a foolproof investment, would find themselves under tremendous pressure to hand over their savings because of the sharp demand for property, often without fully understanding the terms.
Now, he advises prospective buyers to get absolutely everything in writing, remain suspicious and remember that even contractual agreements can be broken. In other words, be your own advocate, and be prepared to defend yourself. And Mr Harrison has followed his own advice. Since his problems with the developer, he has helped establish an investor's group specifically formed to protect their rights and provide support and advice for its members.
While he didn't wish to mention the specifics, the group, with more than 100 members, continues to lobby the developer and push for their rights as investors. As for his mother, while he may bring her to the UAE in the near future, Mr Harrison says the loss has put his savings back a few years. But he knows his biggest financial mistake could have been worse. And there are many others who have suffered a similar fate.
"I have to remain philosophical," he says. "There are others involved with the same company that stand to lose a lot more, or have already lost it. I still have a good job, and I can recover." firstname.lastname@example.org