ABU DHABI // Developers of projects on Abu Dhabi's Reem Island are revising their plans and slowing construction of some buildings as the property downturn forces them to adjust their business models. The major challenge for many developers is to find enough financing to complete their projects. However, Reem Developers, the Najmat marina master developer, said it was still making "good progress" on its projects on the island, including the recent filling of its marina with water and the construction of storm drains and other infrastructure.
Prices in some areas of Abu Dhabi have declined since the peak of last October, while transactions have dropped to a few dozen a month in the capital, brokers say. Alan O'Donnell, the managing director of Pure Real Estate said The Wings project - two 300-metre towers in Najmat being developed by his company and Dar Al-Dhabi - was on line to be finished on time. However other developments may be struggling to meet deadlines.
"Off-plan sales are practically non-existent," said Mr O'Donnell. "Developers are restructuring from the bottom up. Many companies weren't set up with the capital to get over these types of hurdles." Mr O'Donnell said the construction schedule for The Wings would still have to be "very aggressive" to meet its deadline as Reem Developers had been delayed. "Najmat, which was supposed to be a later phase, has probably been affected the most by the last 12 months," he said.
The property boom in the capital was peaking around the time of the Cityscape Abu Dhabi trade conference last year, when developers were having no problem selling out buildings in days, if not hours. Reem Island, a 633-hectare piece of land just to the east of Abu Dhabi island, was touted as a new urban centre for the city, with marinas, malls and high-rise towers. But when the global credit squeeze started spilling into regional economies last autumn, property sales ground to a halt and buyers began having difficulties paying for their units.
This has hurt the ability of many developers to continue construction without raising new funds. Larger companies with cash reserves have been less affected, while smaller companies without financial backing are the hardest hit. Sorouh Real Estate, the master developer of the Shams Abu Dhabi project on Reem Island, has created a working group to help sub-developers obtain financing and continue with construction. Sorouh sold 104 plots of land to developers, but many are having trouble proceeding.
"There are those that may be unable to progress with their development, and we are supporting them by working closely with the sub-developers to find solutions to assist them during these difficult times," a Sorouh spokesman said yesterday. The spokesman added that there were "high levels of interest from regional and international developers" in the Shams project, and that the company was supporting existing developers and seeking new partners for the project.
Sorouh said some of the sub-developers had recently begun construction, "after a period of some stagnation", because of declines in building costs and renegotiated contracts with buyers. While some areas of the island are being affected by the slowdown, others are actually benefiting, said Susan Cronin, the chief executive of the estate agency Aztec Properties. Transactions for apartments in Marina Square, a set of 15 buildings facing the main island that are set for completion in December, had picked up in the past two weeks, Ms Cronin said. "Rental yields are still going to be as high as 10 per cent," she said.
Tamouh Investments, the developer of Marina Square and other sections of Reem Island, is striving to finish the buildings on schedule, said Daniele Seraphim, the chief operating officer of the company. @Email:firstname.lastname@example.org