Dubai Pearl developer cuts cost of apartments to avoid defaults

Some investors given 40% discount on property from boom

The developer of the Dubai Pearl has cut 40 per cent off the cost of apartments bought at the peak of the market in a bid to avoid customer defaults. There will also be fewer offices built at the Dh15 billion (US$4.08bn) project, which will include MGM Grand and Bellagio hotels, as Pearl Dubai curbs commercial supply in an already saturated market.

Luxury apartments at the project sold for as much as Dh6,500 a square foot in 2008. Those who bought at this price will now pay 40 per cent less, while others have been given discounts of 10 per cent. Buyers have also been given longer to pay for their properties as the developer tries to limit defaults, while the construction deadline has been put back to 2013, two years later than planned. "Today, sentiment is low," said Abdul Majeed Ismail al Fahim, the chairman of Pearl Dubai. "I don't blame people but we are also accommodating all our customers and we have given them significant discounts."

Meanwhile, more amenities, such as recreational facilities, have been added to the project to provide residents with a "better product", Mr al Fahim said. About 1,445 homes are under construction at Dubai Pearl, 95 per cent of which have been sold. "People will come to realise, as market sentiment improves, that what they have invested in is a real investment," Mr al Fahim said. Dubai Pearl, opposite Palm Jumeirah, will be made up of four 73-storey towers including residential and commercial space and seven hotels. Al Habtoor Leighton is working on a Dh8.85bn contract to build the project, which has about 600 workmen on site.

All four buildings are planned for completion in 2012, while the hotels will be ready one year later. Pearl Dubai also paid more than Dh100 million in 2008 for Archangel, an island that forms part of Siberia in Nakheel's The World island development. The island, for which the company has so far paid about 40 per cent of the price, was intended for the sole use of residents at Dubai Pearl. Reclamation for more than 250 islands was completed at The World in early 2008, although construction has only begun on The Heart of Europe, a group of six islands being developed by the German company the Kleindienst Group.

"My initial plan was to start work on the island this year but I'm not planning to now," said Mr al Fahim. "Nevertheless, the island is there and has a very nice design. We'll see how Nakheel will co-operate because the situation is different and the viability of that project has changed." Dubai Pearl was launched in 2003 and was intended to be developed by a company owned by Dubai Pearl Incorporated, part of the Qatar-based Omnix International.

But delays led the Dubai Technology, e-Commerce and Media Free Zone, in which the project is located, to assume control in 2006. Pearl Dubai then took over the development in October 2007, redesigned it and demolished what had already been built of the original project.