Damac Properties, the Dubai-based developer, is running into challenges with its Dh55 billion Tarin Hills project in Iraqi Kurdistan.
Damac faces cancellation of Dh55bn Kurdish deal
Damac Properties, the Dubai-based developer, is running into challenges with its Dh55 billion (US$14.97bn) Tarin Hills project in Iraqi Kurdistan, government officials in Iraq say. Herish Muhamad, the chairman of the Kurdistan regional government's board of investment, said the government was "facing some difficulties" with Damac over the project because "nothing has started on the ground". He said the project could be cancelled.
"My team and I will discuss all possible scenarios before taking the last decisions," he said. "However, our decision might not be pre-consulted with them." The company launched the project in June last year at a ceremony that included the prime minister of the Kurdistan regional government, Nechirvan Barzani. The project was hailed as a major pledge of foreign direct investment into a region that had only recently began developing its economy after years of sanctions and brutality against its population by Saddam Hussein.
Damac executives said at the time that sales for the 170 million square foot project would start last summer and construction would start by December 2008. But there has been no activity on the project since the announcement, government officials said. Niall McLoughlin, a spokesman for Damac, said the company was adjusting the project's timeline and plans because of the global financial crisis. "Damac has taken the sensible step of reviewing the construction timetable with a view to rescheduling some projects," he said. "It simply makes good business sense for us at this time to focus on those construction sites where we are at a more advanced stage."
Mr McLoughlin said the company was in negotiations with the board of investment. Plans for the Tarin Hills project, located 18km from the Kurdistan regional capital of Erbil, showed a mixed-use development with housing and facilities for a population of 50,000. GCC property developers have been hard hit by the global economic downturn. Many are now delaying or cancelling developments, starting with some of the projects in other countries.
During the boom times, many developers signed deals to build projects in exchange for free land in countries without experienced development companies. These deals have started coming under pressure now that the companies are having difficulty financing construction. In June, Damac sold 60 per cent of its massive development projects in New Cairo, Egypt, to Egypt's Housing and Development Bank. Another Damac project in Egypt, the Dh60bn Gamsha Bay, is on hold.
Damac is facing especially difficult challenges in the wake of the financial crisis because of its large portfolio of unfinished projects. The company launched 75 projects since it was founded in 2003. So far, it has finished just seven buildings. Another 11 have reached significant levels of construction. However, 43 projects have not started construction and 14 have only completed either fencing around the site or basic piling, according to an analysis of the construction updates on Damac's website.