New Dubai property precedent decided
A property investor has been awarded a refund for an office unit he bought in a project that is 20 months behind schedule after taking the developer to court.
British businessman Ron Oakeley bought two offices in a building in Dubai’s Business Bay that was to be named after the former Formula One racing driver Niki Lauda. The proposed Niki Lauda Twin Towers building was part of a trio of projects launched by German developer Alternative Capital Invest Real Estate, in 2007.
He filed a lawsuit against ACI in March last year to try to recover more than Dh1 million ($272,000) he had invested in the project, which was due to be completed this year. The courts in Dubai are likely to get busier this year as both investors and developer resort to legal action. Investors will be more confident following the Oakeley case. Indeed, a new poll shows that 56% of people think property investors should go straight to court if developers halt or delay projects they have bought into.
The survey by Arabian Business poll has found that only 11.7% said investors should accept revised offers, especially in the current economic climate. It is estimated that more than 400 projects with a total value of over $300 billion were placed on hold or cancelled in the UAE last year.
And developers are more prepared than ever to take action over property owners that have not paid their annual maintenance fees. It is estimated that about one third have not done so, some of whom are in dispute over rising costs.
One developer confirmed that it has applied to get a court order to force apartment owners to pay any outstanding fees. ‘We generally take a year’s maintenance fee before handover. The problem now is that owners are not paying from the second year onwards,’ said a spokesman.
Another developer reported that 70% of owners in its buildings had paid the yearly fee but it was having to fund the remainder, which was an additional burden on in tough times.
Dubai’s Real Estate Regulatory Authority has previously warned developers not to raise maintenance fees, the values of which must be cleared by the authority. Meanwhile investor confidence in the GCC region fell for the second month in a row and the real estate sector is forecast to decline even further over the next six months, according to research from Dubai based investment bank SHUAA Capital.
Its latest GCC Investor Confidence Index shows that confidence levels in the six nation GCC declined for the second month in a row, with February down 8.9 points on average. The report said that uncertainty around the Dubai World debt restructuring was at the heart of investors’ continued pessimism.
The United Arab Emirates declined the most and dropped 11.7 points, followed by Saudi Arabia, down 8.7 points, and Qatar down 5.8 points. The UAE Index now stands at 84.4 points, below the critical 100 point mark and just 1.9 points off of its all-time low following the Dubai World standstill announcement in November last year.
UAE investors were also less enthusiastic about the economic prospects for the next six months, with only 17.5% predicting the outlook will improve and 25% believing it will worsen.
By comparison, in Saudi Arabia 42% of investors believe things will improve and only 2.5% foresee a decline. On average, 30% of investors in the GCC see economic conditions improving over the next six months.