Property Developers in Dubai Facing Non-Payment Issues

Developers in Dubai are beginning to face the same issues as other property developers around the world. Falling prices and dried up credit means that customers are not so keen to pay for off-plan developments that are now worth considerably less than the agreed prices.

The Dubai market relied heavily on speculative investment from "flippers," who planned to sell on their property before completion and certainly had no intention of ever moving in. As the credit crunch takes it's toll, these flippers are bailing out of agreements. Khalid Esbaitah, Managing Director and CEO at Al Mazaya Holding, mentioned that the recent influence of the global financial crisis has deeply affected the market and rendered debtors unable to pay money owed to Al Mazaya. This has forced Al Mazaya to adapt a series of  measurements, which could affect 2008 returns.

"A number of factors have pushed Al Mazaya to take measurements that may seem hard at the moment, but will, on one hand, definitely be helpful in sustaining the company in the future, while on the other hand will preserve the assets and money needed to complete current and future projects", said Esbaitah.

Esbaitah is apparently an optimist by nature and feels that the contractual obligations of buyers will save Al Mazaya from the effects of the crisis.  "Strong documentation and contractual obligations protect Al Mazaya from market fluctuations,"he said.

The simple fact is that it is far more cost effective to simply walk away from the deposit than to follow through payments on a property that is umlikely to appreciate in the foreseeable future.The other simple fact is that if a customer cannot get financing, they cannot pay.  This is being seen all over the world at the moment. The lawsuits are starting to fly as the property prices in Vancouver collapse, and the New York luxury condo developers are hastily reaching for their lawyers and chopping prices down to size.