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Amid slowing market conditions, government spending cuts and continued oil price decline, a number of realty projects in the UAE won’t be completed as scheduled this year, an industry consultant has said.
Real estate investment and advisory firm JLL estimated that the delivery of some 18,200 residential units in Dubai won’t come as originally anticipated due to a number of issues. The figure represents 70 per cent of the 26,000 units earlier planned for completion in 2016.
“[The] information received from developers is that 26,000 [residential] units are expected to be delivered in 2016 within 136 projects. Of these figures, based on previous years, we expect around 30 per cent of these to be completed as scheduled,” Craig Plumb, JLL head of research for Middle East and North Africa, told Gulf News.
“These figures relate to Dubai rather than Abu Dhabi, but we would expect the two markets to be relatively similar,” he added.
In recent years, Dubai saw several launches of affordable, middle-end and luxury property projects across the emirate, including Jumeirah Village Circle (JVC), Dubai Marina and Palm Jumeirah. Some of these projects were supposed to deliver about 26,000 apartments, more than 7,000 villas and townhouses and 1.1 million square metres of office space in 2016.
Projects delays have been attributed to financing issues, contractual disputes, construction delays and licensing/approval delays. Some developers also tend to hold back completions to avoid flooding the market, while some investors have shied away from off-plan properties.
“Over the past five years, the materialisation rate of proposed projects has been relatively low, with only 30 per cent for proposed residential projects and 45 per cent of proposed office space completing on schedule,” JLL said.
Haider Tuaima, research manager at ValuStrat, said project delays are common in Dubai’s property market. "It happens every year, [although] some developers actually delivered their projects ahead of schedule last year."
He said delivery of some properties has been stalled due to “over-optimistic completion dates” and “poor project management.”
“Some developers don’t factor in various approval requirements and the time these approvals may take,” Tuaima told Gulf News.
“[Besides], some off-plan projects have seen a slowdown in investor appetite, resulting in shortage in the project’s cash flow. That’s why many developers are introducing attractive payment plans that go beyond handover dates.”
“Some developers are invariably slowing up as sales demand slows, as they are in no rush to complete a project that has a lot of unsold units.”
However, project delays can be taken as a “blessing in disguise”, JLL said, as they can “help stabilise the market and avoid excessive oversupply.”
But even if all the projects in the pipeline were delivered on time, Tuaima said there won’t be any risk of oversupply because the number of people who choose to come to Dubai for work is growing.
“The Dubai population grew 5.5 per cent last year as opposed to 5 per cent the year before. There is plenty of demand stemming from the residents alone.”
Source: Cleofe Maceda, Senior Web Reporter, gulfnews.com