Investors in Hydra's properties want want guarantees against a falling market.
Home buyers tackle Hydra
ABU DHABI // A group of more than 50 property buyers is asking Hydra Properties to guarantee its investments as the market for home sales slows in Abu Dhabi. The investors are raising several points of contention with the company, including claims of unfair price rises on previously sold properties, slow construction and a lack of transparency.
Sulaiman al Fahim, the chief executive of Hydra Properties, denied the validity of the complaints and said many investors were trying to get out of their obligations because the market had slowed. "Everybody is unhappy with their investments in the whole of the UAE," he said. "People are just trying to delay to see how the market looks. But we cannot let them do that. If you don't pay on time, you get fined. That's what happens to you with a loan for a car or anything else."
Mr al Fahim said Hydra had "not delayed any of the projects". "If we have investors in a project, we are going forward," he said. The disputes are among the first to arise in Abu Dhabi, where the downturn in the property sector has been less severe than in Dubai. The issues being raised highlight the difficulty of resolving property disputes in the capital, where there is no specific regulatory framework for the market. In Dubai, the Real Estate Regulatory Agency (RERA) can penalise a developer for failing to follow guidelines, and there is a property court to settle claims. There have been rumours of such an agency being established in Abu Dhabi, but no official confirmation from authorities.
"We've been to several law firms, but they have told us that the property laws are not yet in place in Abu Dhabi," said Julie Wallace, a member of the buyers' group who said she wanted a refund of her downpayment on a Hydra villa because she lost her mortgage. Lawyers in Abu Dhabi said they were seeing a rise in the numbers of people calling for legal advice on purchases. But because there are no specific laws for the property sector, they are telling them to try to negotiate directly with the developer, rather than risk a difficult case in the civil courts.
"I think Abu Dhabi will ultimately have to create some sort of authority to regulate the real estate sector," said Basil Siddiqi, a lawyer with Hadef Al Dhahiri and Associates. "Without it, it will be very difficult for the market to mature and grow in a sustainable manner." Mr Siddiqi said many investors in Abu Dhabi, like Dubai, "signed agreements without reading them carefully or requiring the appropriate clauses".
Many Hydra investors signed only short sales reservation agreements for their purchases, leaving them with little contractual recourse against the developer. Later, after paying a significant portion of the purchase price, they began receiving detailed contracts that included price increases. Karl Howard, an Emirates Airline pilot and another investor in the group, said he bought a three-bedroom apartment in Hydra Village on the secondary market, but after paying 40 per cent of the price he was told the price had increased by 10 per cent, along with the apartment's size.
Abu Dhabi Commercial Bank, which had granted him a mortgage, would not agree to the new price and he was left to fend for himself, he said. "Now Hydra is demanding their next 10 per cent payment in April," he said, adding that the company had sent him a note saying he would be fined Dh500 (US$136) for each day the payment was late. In November, Mr al Fahim said the price rises at Hydra Village came about because the designs for the villas were changed to make them larger. More green space was also added to the overall development, he said.
"In my opinion, no one could possibly sign this contract as it is written," said Daniel Keogh, one of the investors in the group. He said that his final notice demanding payment said Hydra would not only keep the money paid so far, but also would seek compensation for any losses or damages it suffered because of the default. "Hydra is attempting to coerce their customers into signing this contract by threatening financial and legal actions," he said.
Mr al Fahim said the difficulties buyers were facing were because of the banks' unwillingness to lend. "As a private developer, there is only so much we can do," he said. "We need more money into the Central Bank, more money into real estate. We need the Government." Mr al Fahim said it was a "hard time" for the market. Last week, he was elected as the inaugural chief executive of the Arab Union for Real Estate Development. The group "should improve confidence and trust in the industry" and "give investors an extra level of security", he said, according to the business magazine Arabian Business.
One expected result of a rising number of disputes was a property market more balanced between buyers and developers, said Matthew Hooton, the head of property in the Middle East at the law firm Ashurst. "It is no longer a developer's market and accordingly the contract terms that investors will accept are starting to change," he said. "Investors have become more sophisticated and more wary. They are starting to seek legal advice and should no longer feel they have to accept unfair or uncertain terms to secure a deal."