Dubai: Property developer Nakheel on Sunday said it has started paying trade creditors — contractors and sub-contractors dues of up to Dh500,000.
A Nakheel spokesperson said all trade creditors have been or are in the process of being paid Dh500,000, which means that those owed Dh500,000 or less are paid in full.
"Our talks with our partners are progressing and we are confident that an agreement will be reached shortly," the spokesperson said.
This allows for projects, which slowed down or were put on hold. to regain activity. "Projects are being prioritised following an assessment of construction stages, cost of completion, customer collections and market supply and demand.
Construction of the near-term projects is likely to continue in the coming weeks as part of the recapitalisation process," the spokesperson said.
Nakheel's announcement that it is about to restart construction of certain projects coupled with repayment is lifting market sentiment, analysts said.
Reluctance
"In real terms it is quite good as you had a number of people who weren't paid but there was reluctance to go after a government-related entity," said Mark Fraser, partner at law firm Taylor Wessing.
Some creditors could not recover the debt and wrote it off into a black hole so that new money now goes into the bottom line, he said. "The payments take the pressure off and start resuscitating relationships and projects."
Projects need to have scope for some form of return if not they move down the priority ladder, said Fraser. "However, those same projects could become a trigger for others to restart," he said.
Nakheel did not reveal which projects it was focusing on, but developments where many end-users bought into, like Jumeirah Park and Al Furjan are likely to be on the priority list.
"The list is still being finalised, but these projects are likely to be part of it as it needs to focus on those underway," said Nicholas Maclean, managing director, CB Richard Ellis Middle East.
"The news is good for Nakheel's real estate stock as it brings clients back to Nakheel product, who due to uncertainty excluded it from their considerations," he added.
Confidence
"Now they are looking at the product again and Nakheel payments flowing is making people more confident to doing business with Nakheel again.
It is good for Dubai's reputation in general that an amicable agreement where everyone recoups 100 per cent paid of what they were owed."
Liz O'Connor, Director — Residential Sales and Leasing at Better Homes, also expected the market to react positively, although it would probably not make much difference to transactions regarding Nakheel off-plan properties.
Construction
"Should Nakheel restart construction on projects that have been on hold we have no doubt this will increase confidence in the market," she said.
"However, we need to see which projects have been selected for completion before we could comment on any impact the news would have on transaction activity," O'Connor added.
"Currently the large majority of our transactions are ‘ready now' properties and any off-plan properties purchased are generally a maximum of six months away from completion."
