From Construction Week 10 May '09
Eighty percent of buyers attempted to ditch their sales contracts with a major developer when the financial crisis hit the region, the firm’s CEO has told Construction Week.
The figure gives some insight into the scale of the problems faced by developers since confidence in the real estate market began to evaporate last November.
MAG Group CEO Mohammed Nimer revealed that four out of five off-plan buyers notified the firm of their wish to default when it was announced that projects they had bought into had been postponed.
The developer accepted no more than 10% of a property’s value from its buyers before construction had begun on the project in question, Nimer assured CW.
“When we told our investors that the job had been postponed, 80% of the buyers contacted us in writing, quitting their intention to proceed,” Nimer said.“
(The main reason) was lack of finance. Or there were people who wanted to pay the first 10% and then sell to make a good premium.”
As a result, the firm has instigated a number of schemes to find a solution that benefits both parties, Nimer said.
They include the option to transfer the investment, at current market price, to a unit within a project that has broken ground. This option has been implemented despite the fact that prices at are now lower than they were in 2007, when sales on the now-postponed projects were launched.
Nimer said MAG Group is selling units today at 2004 prices, and has pledged to complete all of its projects that have broken ground.
Jones Lang Lasalle CEO Blair Hagkull underlined the importance of doing so. “For the long-term stability of Dubai and the region, it’s really important for those projects that have been started to be completed,” he said. Nimer also said that the group’s Dubai Marina project, MAG 218, would be complete by December despite suffering delays over the past 18 months due to material and staff shortages.
MAG Group has a property portfolio worth US $817 million (AED3 billion), with three “pipeline” projects yet to be launched. These include MAG 220 in City of Arabia, Dubailand, and MAG 230 on the Palm Jebel Ali.