Dubai Total customer liabilities "mitigated" from Nakheel's long-term projects now total Dh6.67 billion out of the original Dh9.88 billion — a decline of 32.4 per cent, Gulf News has learnt.
Holders of credit notes issued by Nakheel during the real estate downturn are showing a marked preference to hold on to them over the last six months, market sources said.
While the number of notes put up for sale has come down, the discounts on them too have taken a similar fall, indicating investor confidence in the recent moves by Nakheel on the real estate development side.
"Although we have successfully swapped hundreds of purchases into properties ready for hand-over, a substantial portion of this liability switched hands through third-party consolidations," Nakheel added in the statement. "Many have been transacted with the assistance of real estate brokerage firms.
"In such a transaction, the seller would typically take a haircut on the face value of the credit [these discounts can range from 20-50 per cent]."
Developers issued credit notes to investors in those projects that were either delayed or shelved indefinitely during the downturn. In subsequent years, the holders would try and sell them to raise immediate cash. These were offered at steep discounts, but this has changed.
"The feedback we have received from both customers as well as brokers is that this is a direct result of the increase in market sentiment and confidence in Nakheel products," said a spokesperson for the developer.
Nakheel has handed over 1,171 properties to its customers this year to date. Final installments paid often are settled through such third party consolidations — ‘credit notes'. This has also played a role in the increased demand on credit notes.
"Long-term customers are holding on to their investments speculating an increase in their potential returns, or in other words, a decrease in the discounts they have to offer," said the statement from Nakheel. "The going rate for these discounts is now as low as 10 per cent."
According to Kalpesh Sampat, partner at SPF Realty, the discounts on the Nakheel notes used to be between 40 to 50 per cent just a year ago. What it meant was that the holders were offering quite generous terms to the buyers and thus hoping to get instant cash on the remainder of the credit note value.
"Nakheel sees this to be a healthy sign of market sentiments — it is pleased to see that its product offerings are attractive and is creating a win-win environment for its stakeholders," the statement said.
According to Sampat, "Despite the reduction in discounts, the new buyer of the credit notes still benefits and pays less than the amount payable on his property. Nakheel also benefits as their liability on cancelled — or indefinitely postponed — projects reduces, every time a credit note is bought and sold.
"The seller is another beneficiary as he gets money immediately, rather than waiting over the long term for the delayed project to get completed or as repayment from Nakheel."
