Property investors who bought homes in the stalled Lagoons project in Dubai are being offered alternative apartments within Jumeirah Beach Residences in the first sign of consolidation among Dubai Holding's two main property units. Sama Dubai, the developer of The Lagoons, is the latest property company to explore transferring credit among buyers, according to investors.
The trade in off-plan properties has accelerated in the emirate in recent months as developers act to consolidate projects and convince buyers to keep paying for homes they bought during the economic boom. Khalid Khatri, who bought three units in The Lagoons project, said the company had recently contacted buyers with an offer to transfer their credit into apartments in either Executive Towers or Jumeirah Beach Residences, which are both owned by Dubai Properties.
"They told us they were not cancelling the project, but we could transfer a one-bedroom from The Lagoons to a similar unit in JBR or Executive Towers," Mr Khatri said. The offer could be attractive to many buyers because there was no certainty when or if The Lagoons project would proceed, he said. Dubai Properties recently merged operations with Sama Dubai and Tatweer as part of a consolidation of Dubai Holding companies. The conglomerate is owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
Chet Riley, an analyst at Nomura Securities in Dubai, said the move was an indication that Dubai Holding was making some developments a priority and putting others on the back burner. "They are going through the projects and deciding what's going to go ahead and what's not going to go ahead," he said. "By offering a credit note, they are protecting their cash flow and consolidating projects." The Lagoons is one of the most prominent projects in Dubai to have been put on hold. The project, estimated to cost Dh80 billion (US$21.78bn), consists of 350 plots in a waterfront area created by expanding Dubai's Creek. The development includes four buildings designed by TVS Design to look like flames.
A spokesman for Dubai Properties Group declined to comment on the details of the arrangement. "We remain committed to The Lagoons and progress continues on the development," he said. "It is always our first priority to meet the needs of our customers and while we are in constant dialogue with our owners-investors it would not be appropriate to comment on these discussions." Sama Dubai has not officially cancelled any projects, but it has made heavy staff cuts, to less than 100 from a peak of about 750, since the property downturn took hold last autumn, according to current and former employees.
The company has stalled most of its projects while Dubai Holding consolidates its property development companies. But strong consideration is being given to resuming work on at least three of its projects next year, according to one person familiar with the matter. These include The Lagoons project, Dubai Towers in Doha and the Salam Yiti resort project in Oman. Hashim al Dabbal, the chairman of the new property division of Dubai Holding, said last month the company would restart some projects.
Wael al Lawati, the chief executive of the Oman tourist company Omran, said Sama Dubai had given "assurances of their commitment" for the Salam Yiti project. "The project will focus on the hospitality components initially, to be followed later by the residential components," he said, adding that construction would probably restart "some time next year". Developers have allowed off-plan investors to buy and sell credit notes, enabling them to concentrate buyers into buildings that have made the most progress, while cancelling those where work has yet to begin.
The practice can also benefit investors by allowing them to withdraw from stalled projects where they risk losing their initial downpayment. So far, the majority of trade in credit notes, also known as "consolidations", has taken place among buyers of Nakheel and Emaar properties, according to brokers. bhope@thenational.ae