x Abu Dhabi, UAEThursday 27 July 2017

Bahrain investors in sue threat

Buyers in a stalled residential development in Bahrain are threatening to sue the developer.

Investors in a US$150 million (Dh550.9m) property dispute in Bahrain are threatening to sue, calling for the return of their money or guarantees the project will be built.

Construction stalled last year on Marina West, a $700m project located on the west coast of the country, about a 15-minute drive from the capital, Manama.

Hundreds of investors in the project from around the world claim the project developers have stopped communicating with them after the announced completion date of last month was missed.

The investors are threatening to sue the developers if the issues are not resolved.

In an unusual turn, the investors petitioned Sheikh Salman bin Hamad Al Khalifa, Crown Prince of Bahrain, claiming the delays were "hurting hundreds of investors, families and Bahrain banks that have lent to buyers".

"The failure to complete the project is also destroying confidence in local business practices and the Bahrain property sector," the petition said.

The conflict may set a precedent for the handling of property complaints in the kingdom.

While the UAE is also dealing with problems caused by delayed and cancelled projects, it is a relatively new phenomenon in Bahrain.

"Bahrain was three or four years behind Dubai in the cycle," said Mike Williams, the senior director for CB Richard Ellis (CBRE) in Bahrain. "We haven't really been through this process, it's never happened before."

Construction on several projects has stalled after off-plan sales came to a "grinding halt" in 2008, CBRE said in a recent report.

"Whilst developers have sought to reassure buyers and investors that the construction of their home is still in progress, it is difficult to disguise the lack of activity taking place on some of the highly visible, half-built and distinctly lonely looking building projects dotted around the kingdom," CBRE reported.

More than 10,600 residential units are expected to be built in Bahrain by 2016, said Ammr Donia, a senior surveyor with Cluttons in Bahrain. But demand has been low in the past year.

Many developers have tried to maintain prices, which average between 1,200 dinars (Dh11,690) and 1,600 dinars a square metre for an apartment in a top development.

"The market has been stagnant," Mr Donia said.

"There is definitely an imbalance between supply and demand."

Marina West is one of several projects in Bahrain that were offered in recent years to foreign buyers as well as Bahrainis. The development is planned to be a collection of 10 residential towers with 1,168 apartments.

It was originally scheduled to open in 2009 but construction stalled early last year. There were reports that contractors were not being paid.

In May, Mahmood Janahi, the chief executive of Marina West, announced the company was in negotiations with potential investors.

"We are determined to bring the project to completion," Mr Janahi said at the time.

"We will announce the results, which will hopefully give a fresh impetus to the project and this will serve the project as well as ensure full resumption of work immediately." But buyers say there has been no progress since.

Mr Janahi could not be reached for comment.

There was no response on the phone number listed for the project's sales office.

In the petition, buyers said they wanted an audit of the project's finances and "an agreement that satisfies the homebuyers".

The group has taken the dispute public, sending regular updates to the local press. "For the sake of Bahrain's reputation as a safe and friendly investment centre in the Gulf, we sincerely hope the government will intervene as appropriate to ensure completion of this project," the petition said.

The case is being closely watched by the property industry, which hopes to attract more international investors.

In recent years, Bahrain has earned plaudits as "business friendly", ranking 28th worldwide last year in the World Bank's "Ease of Doing Business Index".

"The longer this remains unresolved the greater the potential problems can be," Mr Williams said.

 

kbrass@thenational.ae