Developer signs Dh1.1bn deal to speed up Lagoon project

Schön Properties, a Dubai-based developer, has signed a Dh1.17 billion (US$463 million) contract with Belhasa Engineering and Contracting Company to speed up the stalled Dubai Lagoon residential project. Investors have complained for months about delays on the Dh3bn-project, which is located at Dubai Investment Park (DIP). After earlier reports that the development had been cancelled, the Dubai Real Estate Authority said last week the project would go ahead.

Power line Gulf, a Thai construction firm hired as the main contractor and which stopped work on the site last May, will now handle part of the project - zones one and two - encompassing a dozen buildings. Belhasa will take on the construction of 17 other buildings in zones three and six. In all, the project includes seven zones. Schön said it was now searching for other contractors to complete the remaining portions of the project. Site work is scheduled to begin in October, with a projected completion date between the end of 2010 and beginning of 2011, according to the developer.

The project was launched in 2005 as an affordable housing development. The construction on the first eight buildings stalled in May, with the developer blaming soaring construction costs, the collapse of a joint venture between key contractors and the addition of a motorway through the area. The project initially included 51 buildings but was scaled back to 48 of around eight storeys each. It will also include a shopping centre, school and mosque.

Marwan bin Ghalita, the chief executive of Rera, assured investors that project's progress would be closely monitored. An auditor would also be appointed to assess the developer's accounts. Last week the company said full refunds would be given to investors who bought units scheduled for completion by December 2007, on condition that they applied before Sept 15. Investors, though, remain sceptical and frustrated. "My unit is in zone four," said one who asked not to be named. "For this and two others there is still no contractor appointed and therefore no delivery schedule. But still Schön Properties is asking for my instalments, not granting refund and sending me cancellation notices in case of delay in payments."

A spokesman for Schön said: "We are in discussions with contractors for the remaining zones and expect to make an appointment shortly." @email:[e-mail]