Investors on stalled Palm Jebel Ali project at odds with developer Nakheel
Hundreds of investors on Dubai’s Palm Jebel Ali have called on developer Nakheel to restart the project.
An estimated 400 to 450 people, most of whom made down payments during Dubai’s boom years between 2004 and 2008, find themselves in financial limbo.
All the units under the Palm Jebel Ali project, including its signature and garden villas and water homes, are “under cancellation”, according to Dubai’s Land Department.
The project is registered with Real Estate Regulatory Agency (Rera) for off-plan sales and Rera “took the necessary action to cancel the project as per law No 6 of 2010” because the construction is yet to start, according to the Land Department.
However Nakheel says the project will be built, eventually.
“Dubai Waterfront and Palm Jebel Ali are long-term projects, which we continue to review in line with our business plan and market conditions,” said a Nakheel spokeswoman last week.
Last December, the Nakheel chairman Ali Rashid Lootah told Al Ittihad that the project would be built, but not in the short term.
The investors paid anywhere between 30 and 50 per cent of the villa prices as down payments that run into millions of dirhams. While many of them poured their life savings into the project, others had taken expensive mortgages during the boom years of Dubai’s real estate sector.
Nakheel had offered to transfer their stakes to its other projects around Dubai such as such as Al Furjan in Jebel Ali and Palm Jumeirah.
Investors interviewed by The National said they were unwilling to move on to these projects as they say the options offered were not attractive. Now, after years of uncertainty they are looking to have their home built.
In November, 74 homeowners wrote to Mohammed Al Shaibani, the head of the Ruler’s Court and Dubai Investment Authority, to look into the matter.
“The lack of certainty as to when our homes will be built has caused, and is causing, tremendous financial and emotional suffering for us and our families, and many of us continue to endure ongoing mortgage and rental costs while we are waiting,” the letter says. “Many of us have invested our life savings into the Palm Jebel Ali.”
With the real estate market picking up in Dubai, the investors are once again pushing Nakheel to restart the project. In the third quarter, Tecom Investments launched the 440-unit Villa Lantana in Al Barsha South between Dh2.3 million and Dh6.1m per unit. In June, Danube Properties launched 171 town houses in Al Furjan starting at Dh2.5m.
“Until 2012 there was not much movement in the market,” said Zubair Shaikh, a Dubai-based real estate investor who had bought five villa plots on the Palm Jebel Ali, including two for his extended family and three as investments, in 2005.
“With all the development going around close to Jebel Ali, people are now hopeful that the project will be launched.”
Nakheel is handing over 600 apartments and town houses as part of the Badrah community close to Jebel Ali golf club and proposed Palm Jebel Ali.
Between 2009 and 2010, Nakheel approached the investors with an offer to return their money in 2015 if they forfeited the plots. It offered to pay 30 per cent of the original prices that constituted the baseline down payment to Nakheel. Those investors, such as Mr Shaikh, who paid a premium of 80 per cent to buy the plots on resale, are still not ready for the offer.
“If the [project] is launched today, I will get more than 100 per cent premium,” he said.
The original prices of a garden villa in the project started at Dh2.8m and five- and six-bedroom villas at Dh5.11m. A water home was launched at Dh2m.
According to the original plan, there were 2,500 villa plots. In 2008, Nakheel extended the fronds to accommodate even more villa plots.
A lack of updates from Nakheel on the project is among the complaints against the developer from the existing investors. Barry Clague, a long-haul pilot who is based in Paris, is one of the Palm Jebel Ali investors.
“I can’t get out now,” he says. “There are 10 years hanging over me, I am trapped.”
During a visit to Dubai in 2003, he came across the model of Palm Jebel Ali in Wafi Mall and was so impressed by the promises and the location along with Dubai’s growth prospects that he invested Dh1.7m from the sale of his London apartment.
The amount comprised a 10 per cent down payment in 2004 and a 20 per cent advance in October 2008 on a five-bedroom, Dh5.7m villa spread over 7,000 square feet when Nakheel said it was ready to restart construction. The plan was to have residents move in by 2012.
“I needed a home to live in,” Mr Clague says. “Having waited for so long, we are not looking for a refund; we are looking to have our villas built and our contracts honoured.”
Palm Jebel Ali was to be the second part of the Palm trilogy. The first, Palm Jumeirah, was launched in 2001. Its first residences were handed over from 2006.
Nakheel relaunched the third palm, Palm Deira, as Deira Islands last year.
In 2006, after residents started moving into their units on Palm Jumeirah, confidence in the market was high and the villas on resale on Palm Jebel Ali were selling for a premium as high as 200 per cent, say some of the investors.
Another investor was Tammy Chater, a business consultant based in Bath, England, who invested in a Dh2m, three-bedroom water home in 2004, and in the Lost City, also from Nakheel. That has since been cancelled.
She had made payments of Dh600,000 to Nakheel for the waterhome in 2004 and 2008, and lost £35,000 (Dh202,015) on the Lost City project after it was cancelled. Lost City was relaunched in 2007 as Al Furjan.
In 2004, Nakheel had said 75 per cent of its Lost City project spread across 560 hectares in Jebel Ali had been sold.
Once the Palm Jebel Ali was put on the long-term project list during its debt restructuring, Nakheel offered to swap Ms Chater’s payment for a one-bedroom apartment on Palm Jumeirah or a town house in Al Furjan, with additional payments. Her Palm Jebel Ali villa was to be around 3,800 sq ft.
“We lost our home in the UK because we couldn’t keep up with the mortgage,” Ms Chater said. “This was going to be our pension plan.”
She had come across the project in the British press and a friend had also invested in Palm Jebel Ali.
“All investors understand that the infrastructure is not ready, we know the market has been difficult,” she said. “All we want Nakheel [to do] is to honour our original contract.”
In 2012, Mr Lootah told The National that of the total Dh9.9 billion of advances from customers still waiting to get their units, about Dh7.3bn had been “sorted out”. That would leave about Dh2.6bn remaining to be sorted.
Dr Rakesh Kumar Singh, a London-based general practitioner, has already made payments totalling £400,000 for his villa, with the last payments five years ago.
“I made so many trips to Nakheel but nobody talks, or replies to my mails,” he says.
He last visited Nakheel’s offices 10 months ago. Nakheel repaid its Dh7.9bn bank debt in August, four years ahead of time. That month, it paid Dh5.54bn to lenders after Dh2.35bn payment in February.
During the first nine months of the year, the company made a profit of Dh2.6bn, up by 47 per cent year-on-year. It handed over 956 homes during the period, less than its projection of 1,600 homes. “We are pleased that Nakheel has turned around, we have been loyal and patient, and all we want is Nakheel to write to us with an assurance that the contract will be honoured,” Mr Clague said.
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Published: December 2, 2014 04:00 AM