Stalled Dubai project given funding

A partially-completed Jumeirah Lakes project is the first development to receive financing through a government program.

High rise buildings in Jumeirah Lake Towers in Dubai, where work will restart on a partially completed 35-storey tower.

A Jumeirah Lakes Towers project is the first development to receive financing through a programme established last year by the Dubai Government to aid stalled projects.

Al Manal Development will receive Dh65 million (US$17.6m) from Mashreq to finance completion of Lakeside Residence, a partially built 35-storey tower, the Dubai Land Department announced yesterday. The financing from the bank was arranged through the department's Tayseer programme, which is aimed at boosting investment in stalled projects.

Such developments need to be registered with the department and have to meet certain requirements, including an escrow account for buyer payments, the government agency said. The projects must also be "moving forward" on their construction schedules.

"Projects that are judged to have the highest possibility of completion will be approved and included in the programme," the department said.

Tayseer is designed to address one of the pressing problems facing the Dubai development market - the inability to acquire financing to complete partially constructed projects.

The problem is "acute", said Nicholas Maclean, the head of the UAE office of the property company CB Richard Ellis. "International and local banks have not yet stepped up to the plate."

Banks are reluctant to finance projects that may not already have buyers in place. But they are also wary of offering mortgages to buyers, making it difficult for developers to arrange financing to complete projects, Mr Maclean said.

"The frustration of the market at the moment is that there is demand to occupy accommodations," Mr Maclean said. "Anything the government can do to make the market more liquid, the better."

The Land Department announced the creation of Tayseer last October. It was hoped that the programme would restart as many as 48 projects by helping to raise Dh5 billion of financing.

The Government's role would be to certify projects worthy of the banks' attention.

"We came as a government and said finance should resume, but it has to be directed at the right projects," Marwan bin Ghalita, the chief executive of the Real Estate Regulatory Authority (Rera), said at the time.

"We are telling [the banks] these are the clean projects," he said.

Seven banks and 114 projects have joined the programme, the department said yesterday.

Al Manal first announced plans for Lakeside Residence in 2006. The Dh300m project included 358 apartments and retail space, covering a total of 50,000 square metres.

As of October, construction was substantially complete and work was progressing on the internal finishings, according to an analysis of the project posted on the Rera website that month.

Mashreq is offering the project a two-year loan "depending on completion percentages", according to the Land Department.

"The existence of an authority such as Tayseer will ensure that well-assessed projects are completed, while ensuring transparency between financial institutions and developers," said Abbas Hasan, the co-head of Mashreq's corporate banking investment group.

Dubai property prices have fallen by as much as half since the peak three years, according to some estimates. An additional 25,000 units are expected to be completed in the next year, putting further downward pressure on prices, according to the property company Jones Lang LaSalle.