Investors In Dubai Reluctant To Make Payments On Pre-Construction Property

Experts believe that the Dubai property market will not recover from the current economic downturn until 2011. With investors and developers in a stalemate over payments and delayed …

Experts believe that the Dubai property market will not recover from the current economic downturn until 2011. With investors and developers in a stalemate over payments and delayed construction starts, and an over supply of residential units, many believe that an off-plan recovery will not occur for at least two to three years. See the following article from Property Wire for more on this.

A recovery in the off-plan property market in Dubai is unlikely before 2011 and even that will only happen if developers concentrate on quality and win back investors dented confidence, it is claimed.

Developers also need to tie pricing plans to constructions milestones in order to win back investors who have been put off by delays and cancellations caused by the economic downturn.

‘Investors have been holding back payments because construction is not starting and developers can’t move forward because investors are not paying, that is the reality of the current situation, said Sana Kapadia, Vice President of Equity Research at EFG-Hermes.

‘The recovery of the off-plan market in the United Arab Emirates will happen only from early 2011.

Any recovery before that is unlikely.

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Pricing plans would need to be tied to construction milestones as that will hold the faith of buyers in the real estate market,’ he added.

Indeed some think it will take longer.

According to Chet Riley, Vice President of Real Estate Equities Research at Nomura International, believes it will be early 2012.

‘The over supply of residential units in the property market needs to be absorbed in the next two to three years.

It is unlikely that the off-plan recovery will happen before 2012,’ he said.

Confidence has been so severely dented that new investors will need to be won over by developers with more than just promises.

Elaine Jones, Chief Executive Officer of Asteco Property Management, said she agreed that developers must maintain the progress of their projects as per the schedule promised to investors.

Experts believe that tie-ups with banks and mortgage companies could help to ensure adequate funding is in place from the onset and avoid the current vicious circle and stalemate.

They also believe that developers will need to work more closely with regulatory authorities to ensure that investors interests are protected and this could also help build confidence again.

‘Aspects such as construction-linked payment plan will help to alleviate the financial burden of holding real estate if the project is delayed beyond the proposed completion date,’ said Jones.

Kapadia pointed out that developers have themselves to blame for fueling the speculation and flipping that led to the downfall of the off plan market.

‘Developers must avoid the trap of speculative payment plans that is 2 to 5% initial deposit versus the bulk at completion.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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