x Abu Dhabi, UAEFriday 21 July 2017

'Stalemate' holds back property sector

A fifth of property projects are stalled or cancelled in Dubai, with almost all of the other 1110 developments delayed by the financial crisis.

More than 20 per cent of all construction projects in Dubai have been put on hold or cancelled in the past year, with most of the remaining projects delayed, an industry auditing company reports. This mirrors a similar slowdown in Ras al Khaimah, Ajman and parts of the capital. "The problem is financing," said Emil Rademeyer, the director at Proleads, which monitors construction activity across the region. "Without funds, no one can move forward. If the project is well above ground, then I think they'll finish it. But the smaller players are starting to fall away. Many sites are getting quiet."

Of the 1,110 construction projects in Dubai, 243 have been confirmed by Proleads as cancelled or indefinitely on hold. These buildings would have been worth US$331 billion (Dh1.21 trillion) if they had proceeded as planned. Of the remaining 867 projects, only a "very small percentage" of them were being completed as scheduled, Mr Rademeyer said. The picture painted by the data from Proleads is backed up by the Real Estate Regulatory Agency's (RERA) own audits of construction sites last year. Together with the company scream!point, the regulator began monitoring projects and displaying some of the data on its website in January of last year.

An analysis by The National of 742 building reports available on RERA's website shows just 7 per cent of projects are on schedule. Another 6 per cent have not yet started; 66 per cent are delayed or seriously delayed; and 20 per cent are on hold. Marwan bin Ghalita, the chief executive of RERA, said the data on its website was incomplete and would be updated within weeks. Dubai may have the greatest density of stalled projects in the country, but its neighbours to the north and south are being hit by the same combination of a shortage of financing and low consumer demand for housing. Abu Dhabi's Reem Island has become a focus of the capital's property slowdown, with dozens of projects scaled back or on hold.

The property consultancy Jones Lang LaSalle estimated last year that half of the 90,000 homes planned to be built in Abu Dhabi by 2013 have stalled. Many projects in Ras al Khaimah and Ajman have also stalled. The latest statistics are proof that the country's property economy is still deep in a downturn and unlikely to begin recovering for several years, industry analysts said. Andrew Charlesworth, the chief of capital markets at Jones Lang LaSalle, said that market participants were in a "stalemate".

"You're stuck in a situation where people can't build and people can't make payments," Mr Charlesworth said. The whole thing has come to a grinding halt and it will take a long time for it to work itself out." So far, there had been no major distressed asset sales of incomplete buildings despite several funds announcing they were forming to take advantage of the situation, he said. Part of the problem for stalled and severely delayed projects is that they are saddled with disputes and legal suits. Many of these have started playing out in the courts and the offices of RERA and the Dubai Land Department.

The situation may make the demolition of buildings that are no longer feasible look increasingly likely. Empty construction sites are eyesores and can deteriorate if left dormant for long periods of time. Those projects that have not progressed very far or are located on the outskirts of the city with limited infrastructure will be the most susceptible to demolition. @Email:bhope@thenational.ae afitch@thenational.ae