Business Bay developer in break-even unit sale

Desperate firm to pay contractors through escrow as it seeks escape

Business Bay in November 2009. Photo: Karim Sahib/AFP/Getty Images.
Business Bay in November 2009. Photo: Karim Sahib/AFP/Getty Images.

A private developer in Dubai is looking to sell units in Business Bay at the cost of construction simply to move on from the project as soon as possible, according to anonymous sources talking to local media.

“The developer just wants to finish the project and hand it over so to keep his market reputation intact. We have been advised by him to find a bulk buyer, who will pay the remaining money so the contractor can finish the project,” a real estate agent coordinating the sales told Emirates 24/7.

The buildings in question are 65% complete and the developer still needs more funds to finish. The source said that the company “is not going to pay the contractor directly. Sales agreements for the remaining units (21) will be registered with the Land Department… funds will be transferred to the escrow account from where it will be released to the contractor.”

Business Bay is a mixed-use development comprised of office space, residences, hotels, retail outlets and community space as well as villas, schools and hospitals.

It has been one of the main areas in Dubai that has seen construction work stalled in the last year, leading to an uneven development, despite the opening of a Metro station for the site last year. The source added that this was the first time in their experience that units were sold at break-even price.

Dubai’s Real Estate Regulatory Agency said last year that 202 projects had been cancelled in the emirate and more projects were likely to be cancelled this year.

Marwan bin Ghalaita, CEO of RERA, told Construction Week's sister publication Arabian Business that there would be many cancellations in 2011 for projects “that have no benefit for Dubai or for the investor.

“If a project is not feasible for Dubai’s economy, it will be cancelled,” he said. “And owners will have the right to know it.”

In an online poll last week, 27.5% of CW readers believed that the government should help developers with their partially completed buildings. More than 21% believed that banks should free up funding to help developers, and 19.6% believed any unfinished projects should be torn down, out of the five options available.
 

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