Kasim Hammami says he was making a speculative investment when he put a 20 per cent down payment of Dh4.8 million (US$1.3m) on an entire floor of the planned Beachfront Living tower in Dubai's Waterfront development in 2007. "It was pure buying and selling of properties," the Syrian businessman said of the strategy for the company he co-founded, New Wave Investments. "We would trade three or four properties a year."
But, almost three years later, that investment is at the centre of a dispute between Mr Hammami and the developer, Omniyat Properties, which has sent him a cancellation notice after he defaulted on further payments. In a property economy that, towards the end of the boom, was dominated by both speculative developers and buyers, many disputes similar to that involving Mr Hammami have ended up in the courts and the halls of the Land Department and Real Estate Regulatory Agency (RERA). Hundreds of cancellation notices have recently been sent out by developers and the Land Department to buyers who have default.
"Everyone in Dubai is pointing the finger at what's called speculators," Mr Hammami said. "We all share some responsibilities, including the regulator and the developer. What I would like is fair treatment." Property laws in Dubai have created a standoff between buyers and developers. Developers are allowed to collect 30 per cent of the value of a property before connecting the remaining payments to construction milestones.
Mr Hammami would have to pay another 10 per cent of the Dh24m he has committed to pay for four apartments, or Dh2.4m, to meet his obligations. Meanwhile, Omniyat has only recently started construction of the tower after hiring of a contractor to install piling. RERA classifies the project as not having reached the first of five construction milestones. A report on its website from February 23 said the "enabling contractor has started mobilising on site" and "shoring works have started".
According to an official review of the project's escrow account by Caliber Middle East, a consultancy that advises RERA, earlier this year, Omniyat sold more than 200 apartments and collected Dh314.7m. Of that money and other funds Omniyat invested in the project, Caliber's review shows, the company spent Dh237m on land payments and Dh101.6m on marketing expenses. Just Dh738,866 was spent on construction. Omniyat declined to comment last week.
Nakheel, the developer behind the entire 130-square km Waterfront project, has stopped work on it and has not yet announced a plan for future building. "How can I invest more money when the project has barely started," Mr Hammami said. The two sides have failed to reach an agreement during the past year. A group of investors applied to RERA to cancel the project last year but did not receive a response, lawyers said. Then, earlier this year the Land Department acted as an intermediary with an offer to lower the price per square foot, but increase the size of the apartments by 20 per cent.
Mohammed Gamal, an investor who signed up to buy a floor of Beachfront Living for Dh35m in 2008, said: "Investment entails by its sheer nature the possibility of loss. But, there are principles. It cannot be acceptable under any circumstances than when an external factor like the financial crisis comes that one party wins all and other party loses all." email@example.com