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Up to 30 percent of investors on the $4.1bn Dubai Pearl mega-project have rescheduled their payments amid concerns over defaulting, Arabian Business can reveal.
In an interview, Dubai Pearl CEO Santhosh Joseph also admitted that only a fifth of residential units and half of the commercial space had been sold.
It is understood more than 150 of the 530 investors on the project have delayed payments – with Dubai Pearl now asking its shareholders for an advance capital injection of up to $500m to cover the spiralling rate of defaults. A further 32 investors have defaulted on their payments.
Asked how many investors had encountered problems with project payments, Joseph said: “Right now around 25 to 30 percent have delayed their installments by three to four months. They are paying but they are taking more time than they were last year.”
Asked how many investors had encountered problems with project payments, Joseph said: “Right now around 25 to 30 percent have delayed their installments by three to four months. They are paying but they are taking more time than they were last year.”
The development, located opposite the Palm Jumeirah, is owned by a consortium led by Abu-Dhabi based conglomerate Al Fahim Group and will consist of residential and office space, hotels, and a 2,000 seater theatre. Foundation works on the project started in January this year. The developer, Pearl Dubai, has agreed with its stakeholders an advance of $400m to $500m of equity over 2009 and 2010 to help fund the construction of the project.
The capital was originally intended to be drawn over the next four years.
Some $250m of equity has so far been drawn by the developer of a total capital base of $700 to $800m, Joseph said.
“Because of the market situation we are advancing the draw down of the capital,” Joseph said.
“The capital was planned to be brought in the later stages of the project. Now we are advancing it over 2009 and 2010,” he added.
He declined to name other shareholders, of which Al Fahim is the largest. Hydra Properties CEO Dr Sulaiman Al-Fahim is in no way connected to the Al Fahim Group. DIFC Investments in October last year invested more than AED3bn ($817m) in Dubai Pearl.
The global credit crisis has led to the collapse of house prices in Dubai, widespread investor defaults on real estate payments and personal loans, and billions of dollars worth of projects cancelled and delayed.
Property consultant Colliers International said property values fell 41 percent in the first quarter of 2009.
Buyers at Dubai Pearl have said they are unable to meet payments and are now questioning the viability of investing in a scheme where the price of units are worth considerably less than what they purchased them for at the height of the market last year.
One investor, who did not wish to be named, told Arabian Business: “Many of us cannot make payments due to the collapse in the market. Even if they give us revised payment plans it will be no use as it will be five years before we can find buyers or tenants.
“People would rather forfeit their money than part with a single penny even if they had the money.
"Investors also claim their contract prevented the sale of units on the secondary market when they bought into the project.Joseph denied this and said: “As per our Sales and Purchase Agreements, investors were allowed to sell their property under certain terms and conditions.
All property purchases are registered in the buyer’s name at the Dubai Land Department.” Of the 80 percent unsold residential units, over two thirds are branded residence, which have not been launched yet. However, it is still possible to buy the branded units, Joseph said.
Last November, the $3.75bn main construction contract was awarded to Al Habtoor Leighton Group. Dubai Pearl is due to be delivered in three phases over the next four years.
Delayed payment is due to recession. We should have seperate agenda for crisis
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