Dubai is getting many of its stalled construction projects back underway by attracting fresh investment
Work on the project had started so well–and in typical Dubai record-breaking style. Construction on The Pentominium–so called because it would feature a 604-square-metre penthouse on every floor– began in 2008, with one of the deepest excavations ever conducted for a tower project. Next followed the largest concrete pour in the Middle East region, with a single 13,139-square-metre concrete pour over 44 hours. Soon 700 workers were on site, working around the clock. And in March 2011, Arabian Construction Company, the Dubai-based main contractor, reported the project was running nine to 11 days ahead of schedule.entominium’s promotional website, but work on the supertall tower has long since stalled. At 516 metres, the building in Dubai would have become the world’s tallest residential tower once complete, only outdone by the world’s highest overall, the Burj Khalifa, also in the emirate.
But by August of that year work had stopped after the developer, Trident International Holdings, fell behind on payments for a 75 million dirham ($20.4 million) loan. Four years later the tower still stands incomplete, just one of the dozens of casualties of the global financial crisis to litter the region.
A planned sovereign bond prospectus for Dubai in April 2012 reported a total of 291 projects were on hold in the emirate as of 31 March of that year. “In any other place it would have become the problem of the developer and the client because the Land Department did not necessarily recommend anyone to make an investment,” says Sanjay Chimnani, managing director of Dubai real estate agent Raine & Horne. Dubai has adopted a different approach, he says, by taking “the onus for clearing up some of the problems of the past.”
Dubai aims to do this through Tanmia. Launched at the beginning of 2012, the programme was the initiative of the Investment Promotion Centre, the investment arm of the Dubai Land Department. Its aim is to revive Dubai’s stalled projects, simultaneously helping investors recoup their money and saving Dubai’s image as a safe place to invest.
It has managed to successfully “reactivate” 46 projects worth around 11 billion dirhams ($3 billion). The projects are a mix of residential, commercial and mixed-use developments with varying completion rates, from zero to 80 per cent. They are spread all over Dubai, but some areas are home to more, like Business Bay.
The decision of which developments to take on board depends on a number of factors. “We study all of the projects based on certain criteria, like the location, whether the land is paid fully or not, the return on investment, the collection from the investors,” says Majida Ali Rashid, assistant director general and head of Investment Management and Promotion Center, the investment arm of Dubai Land Department. Projects that fit the requirements are then presented to interested developers. Most original investors in the project decide to continue, Ali Rashid says. But many accept that they may not get a full return on their investment due to the terms of the deals. “We do settlement agreements and negotiate from their side and the developer’s side,” she says.
Dubai has taken many steps since to ensure there’s no repeat of the unravelling of the property sector in the future. For example, laws now prevent projects from being launched unless developers hand over a 20 per cent construction guarantee and pay for the land in full. “I think when people see that kind of positive behaviour from a government looking for investors from abroad, they see that as a sensible move for long term stability in the market,” says Martyn Crook, sales director for Al Barari, a luxury development located 10 kilometres from downtown Dubai.
In January of this year The Dubai Courts listed 166 projects that had been cancelled–some of which had already been liquidated with money distributed among investors. Dubai Land Department was unable to give a figure for the current number of stalled projects.
The Pentominium remains on the list, according to Ali Rashid. But the supertall residential tower may be completed yet. “The Pentominium is one of the projects in our portfolio and we are working with a serious developer who is interested to take over the project,” says Ali Rashid. If the negotiations go well, building work could even begin again next year, she says.
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