Damac promises ‘realistic’ finish dates

DAMAC, the largest privately-held property developer in the UAE, is to revise the completion dates it quotes to investors amid increasing concern over construction projects running late.

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By  Ben Flanagan Published  October 15, 2006

DAMAC, the largest privately-held property developer in the UAE, is to revise the completion dates it quotes to investors amid increasing concern over construction projects running late. When Arabian Business presented evidence that Damac has failed to deliver apartments on time, Hussain Sajwani, Chairman of Damac Holding, pledged that the company would publish “more realistic” completion dates for existing and future projects. These will be posted on its website “soon” on most projects, an extra six months will be required to complete building work. “When we set those dates two years ago – for Marina Terrace and The Waves – those challenges were not there at the time, they have come later on,” said Sajwani. “We are going to [publish] more realistic dates based on the new challenges.” Some analysts fear that property investors, most of whom buy off-plan, could be put off buying in the UAE when projects – by Damac and many other developers – are delayed. Damac’s first three Dubai projects ran late. Its own website states that The Waves development was due for completion in late 2005, but was delivered in August 2006. Marina Terrace was due mid 2005 but delivered in March 2006. It was reported elsewhere that some Marina Terrace residents complained of ‘snagging’ problems even after the official completion. Lake Terrace, another of Damac’s developments, was due for completion in mid 2006 but pictures on the website show it still under construction as of September. Sajwani attributed the delays to high demand for quality building contractors, which have struggled to cope with increasing workloads and have bitten off “more than they can chew.” This, said Sajwani, is a problem faced by all Dubai developers – and means both delays and rising costs. “You mention to me one developer who delivers on time. It is not a question of [just being a] problem for Damac,” he said. Projects by other developers that have been delayed include Palm Jumeirah, Jumeirah Beach Residence, and parts of International City. “Overall, there are challenges in Dubai in a number of areas,” continued Sajwani. “The biggest challenge we face today is a lack of reasonable quality contractors, because there is so much work. The delay is happening on the construction side.” “Going forward, [investors] know that at least we deliver, and we deliver good quality. Yes we are late, but look at the quality,” he added. Currently, developers are under no legal obligation to provide compensation to investors when the delivery of a project is late. This has prompted calls for compulsory penalty clauses to reassure investors. However when Damac’s projects are delayed, it voluntarily offers interest on money already put down, and will defer the final payment until completion. Sajwani claimed that delays can sometimes be “a blessing” to investors, because they do not have to move in when the infrastructure surrounding a development is not finished, even if the building is. Longer completion times could have a knock-on effect to the business model chosen by most Dubai developers – selling units off-plan – according to Sajwani: “When the whole town is delayed it changes the whole market,” he said. Damac has developments in Dubai, Abu Dhabi, Qatar, Jordan and Lebanon. The latter, a US$120m venture in Beirut City Centre endorsed by Ivana Trump, is back on track following the recent conflict. The company – which has a paid-up capital of over US$80m and US$4bn worth of projects worldwide – says that it is looking for new opportunities in Egypt and Morocco, as well as exploring the further potential of Dubai.

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