Dubai: Many remain suspicious over years of delay at Schön Properties' Dubai Lagoon project. But the developer and the investors' group have decided to cooperate under the auspices of Dubai's Real Estate Regulatory Authority (Rera).
"We've all been angry and many still are, but the best is to put the anger aside and talk instead of keep going around in circles and risk the project disappearing into the sand and ruining our own homes' reputation," said Jamal Sirhi, who heads the Dubai Lagoon Investors' Committee (DLIC) representing around 600 to 700 investors.
The Dubai Lagoon project has about 2,000 buyers. Many have been bitterly complaining over a lack of communication from the developer, and the fact that their needs are not being addressed. They simply lost trust as construction kept being delayed.
Some investments were terminated when investors refused to pay. Jawed Qasim was surprised to find his unit cancelled when he received a letter to pay a balance after a new completion date was announced.
"I was forced to sign a construction-based payment plan in order to reinstate my unit. Friends of mine didn't get their apartment cancelled."
Not up to par
Danial Schön, vice president of Schön Properties admitted that communication has not been up to par, in particular in 2008 and 2009, citing the market situation creating confusion and lack of direction on the investor and developer side.
"There was uncertainty. Credit controllers were terminating in Zone 6, when it was understandable that the buyer wasn't paying as we only had excavated. When the crisis hit, we became more hands on and restructured management internally."
An apology letter has been sent and customer service streamlined. Schön said that around 350 buyers are in zones which are on-hold and 65 transferred to units with specifications as close as possible to the other zones.
Now the door is open for talks and details are being hammered out. As a start, Schön is offering a construction-linked payment plan with a 10 per cent discount.
The plan has received a mixed response from investors. Quite a few, according to the developer, were happy to switch to it; others perceive it to be unfair and say the discount is not enough.
Victor Kolesnikov explained that the discount really only forfeits the 10.5 per cent premium buyers had to pay for the favourable payment plan allowing several years to pay 40 per cent after handover.
"I will agree to shift only with a minimum of 20 per cent discount, as I need to take a loan in my country. Plus there should be a five per cent compensation for five years delay," Kolesnikov added. He also questions the validity of the Rera construction-linked schedule.
"The sixth floor slab is 60 per cent; mechanical-, electrical and plumbing is the other 40 per cent of construction progress. So why should we pay 90 per cent," he said.
Sirhi explained that he was still pushing for weekly meetings with Schön and Rera for a more favourable construction schedule and better discounts and urged the developer to keep the door open for individual cases needing a refund.
"We managed to get agreement on 15 per cent discount for some."
About 95 per cent of the project's first phase is sold if all investors consolidate into it from Phase 2 (zones 6 and 7), but apart from that Schön ruled out refunds and consolidation. Refunds by law have to go through the courts.
"Our funds are limited and prioritised to go towards construction. Equally we can't afford to lose receivables through consolidation. Money is tight."
Mistrust
Payment plan aside, investor's mistrust runs deep. Chris Fernando said he would pay more for the unit than he had purchased it for in 2005 if he switched payment plans.
"I lost at least 3.5 per cent interest a year on my money for five years. While Schön could have made money with our money, the escrow account only came in half way through. They kept changing contractors, playing for time."
Schön underlined that he is not forcing anyone to switch to the new payment plan. The old contracts remain valid.
"We understand our clients are also losing money on rent et cetera, but we're the biggest loser, spending Dh2 million a month on operations. This is not about profit anymore but about our reputation. We want to deliver this thing as soon as we can. That's why we request money linked to construction."
The developers said it locked in construction prices at Dh195 per square foot in 2006 but by the time they had designs re-approved construction costs surged. Now the cost around Dh250 to Dh300, but in the meantime a lot of money had been spent.
"The most important part is for construction to restart to regain confidence. The developer is being very transparent now, we talk to the contractors and get regular updates on Twitter," Sirhi said.
Schon said that the biggest guarantee that the development will be completed is its mere presence. "We are building and continuing our operations in these market conditions, that is the biggest proof. I don't foresee anymore delays if buyers stick to paying."
Mayhem
Blame the metro
The project was launched in 2006 and construction company Powerline was appointed as contractor and completion envisaged in 2008. But the RTA's plans to widen the main highway and Metro plans threw a spanner in the works.
"The RTA took 10 metres of our project after negotiations. We shrunk the size of our lagoon by 20 per cent. The redesign took a lot of time and by the time of approval in November 2007, construction prices had jumped massively. We had to pay the contractor billions out of our own pocket," said Danial Schön, vice president of Schön Properties.
In July 2008 Powerline was again mobilised to complete construction by late 2009, but the developer said the pace of construction was too slow and terminated the contract in February 2009 and transferred construction of Zone 1 to Bin Sabt a month later. Bin Sabt has completed the structure of the eight buildings in Zone 1, with handover by end-year and is working on Zone 5. Belhasa is working on Zone 3, which has reached the second floor.
