Banks and developers have held a series of meetings to address the growing risk of property buyers defaulting on deals after paying deposits.
As an indicator of the dimensions of the threat, Marwan bin Ghalita, the chief executive of the Real Estate Regulatory Authority (RERA), told The National late last year that some developers had reported up to 40 per cent of buyers falling behind on their payments. However, no defaults have been registered.
"All defaults are handled by the Land Department. They did not register any defaults yet and by law they have to give investors 30 days before they do so," Mr Ghalita said yesterday.
Ian Albert, the regional director of the property consultancy Colliers International, said his firm was helping banks assess risk and changes in loan-to-value ratios on their property portfolios.
"We are talking to banks about potential defaults. At the moment a lot of banks are having internal meetings looking at that possibility of defaults," he said. "They are looking at all their options for these situations."
Analysts say another effect of rising default levels will be that developers are left short of cash. Defaults on payments on property will leave developers with liabilities of up to US$25 billion (Dh91.82bn) over the next two years, said Saud Masud, a property and construction analyst at UBS.
Industry officials said there was some uncertainty surrounding the issue of liability in case of defaults. "So far this issue has been handled case by case," said Adel Lootah, who heads the Dubai Property Society.
Under interpretations issued late last year by RERA of existing regulations, buyers who default are liable for 30 per cent of the full purchase price. At the same time, developers are required to link payment schedules to construction.
According to UBS estimates, about a quarter of the residential property sold in Dubai was bought with mortgages, bringing the total in outstanding mortgages to about Dh110bn at the end of last year. The value of the overall residential property market is estimated at Dh500bn.
"When you have a market of this size, then a default of $25bn is not that much," said Mr Lootah. "We are going through a downturn, but the strong developers will survive it."
Property prices across the Emirates have fallen by about 25 per cent in the past quarter after speculative money was pulled out of the country following the Lehman Brothers collapse, and local lending has practically ceased as banks hoard cash and restrict lending.
"We will see more voluntary and involuntary defaults in 2009, it will basically be the year where the effects are the greatest," said Roy Cherry, a property analyst at Shuaa Capital.
Mr Masud estimates that only about 40 per cent of the 140,000 units scheduled for delivery this year and next year will be completed. In addition, he estimates that 30 per cent of Dubai's residential properties may be vacant by the end of next year as the population falls and oversupply increases.
Asked about possible defaults, Mr Masud said: "I think that situation can only snowball. Initially, high prices locked people out of the market. Now they are facing falling [property] prices."
Another problem is individuals who cannot find a mortgage.
"I have lots of calls from individuals and a pattern is emerging," said Mathew Hooton, the head of real estate at Ashurst, a law firm. "They have signed contracts and now they cannot get the mortgages."
Typically, these clients signed a memorandum of agreement with the developer at Cityscape or other trade fairs, where the developer promised them a mortgage with a particular bank, which is now no longer available.
"Many people who bought off plan in 2008, especially at the peak in the second half, today find themselves in a negative equity situation. With the prevailing uncertainty around the economy and increasing job insecurity, many may be inclined not to pay any more," said Mr Cherry.
uharnischfeger@thenational.ae
Crazy Rich Asians
Director: Jon M Chu
Starring: Constance Wu, Henry Golding, Michelle Yeon, Gemma Chan
Four stars
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
UAE%20ILT20
%3Cp%3E%3Cstrong%3EMarquee%20players%3A%3C%2Fstrong%3E%3Cbr%3EMoeen%20Ali%2C%20Andre%20Russell%2C%20Dawid%20Malan%2C%20Wanindu%20Hasiranga%2C%20Sunil%20Narine%2C%20Evin%20Lewis%2C%20Colin%20Munro%2C%20Fabien%20Allen%2C%20Sam%20Billings%2C%20Tom%20Curran%2C%20Alex%20Hales%2C%20Dushmantha%20Chameera%2C%20Shimron%20Hetmyer%2C%20Akeal%20Hosein%2C%20Chris%20Jordan%2C%20Tom%20Banton%2C%20Sandeep%20Lamichhane%2C%20Chris%20Lynn%2C%20Rovman%20Powell%2C%20Bhanuka%20Rajapaksa%2C%20Mujeeb%20Ul%20Rahman%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EInternational%20players%3A%3C%2Fstrong%3E%3C%2Fp%3E%0A%3Cp%3ELahiru%20Kumara%2C%20Seekugge%20Prassanna%2C%20Charith%20Asalanka%2C%20Colin%20Ingram%2C%20Paul%20Stirling%2C%20Kennar%20Lewis%2C%20Ali%20Khan%2C%20Brandon%20Glover%2C%20Ravi%20Rampaul%2C%20Raymon%20Reifer%2C%20Isuru%20Udana%2C%20Blessing%20Muzarabani%2C%20Niroshan%20Dickwella%2C%20Hazaratullah%20Zazai%2C%20Frederick%20Klassen%2C%20Sikandar%20Raja%2C%20George%20Munsey%2C%20Dan%20Lawrence%2C%20Dominic%20Drakes%2C%20Jamie%20Overton%2C%20Liam%20Dawson%2C%20David%20Wiese%2C%20Qais%20Ahmed%2C%20Richard%20Gleeson%2C%20James%20Vince%2C%20Noor%20Ahmed%2C%20Rahmanullah%20Gurbaz%2C%20Navin%20Ul%20Haq%2C%20Sherfane%20Rutherford%2C%20Saqib%20Mahmood%2C%20Ben%20Duckett%2C%20Benny%20Howell%2C%20Ruben%20Trumpelman%3C%2Fp%3E%0A
MATCH INFO
Uefa Champions League, Group B
Barcelona v Inter Milan
Camp Nou, Barcelona
Wednesday, 11pm (UAE)
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
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Breaking News: The Remaking of Journalism and Why It Matters Now
Alan Rushbridger, Canongate
MATCH INFO
Euro 2020 qualifier
Ukraine 2 (Yaremchuk 06', Yarmolenko 27')
Portugal 1 (Ronaldo 72' pen)
Torbal Rayeh Wa Jayeh
Starring: Ali El Ghoureir, Khalil El Roumeithy, Mostafa Abo Seria
Stars: 3
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Is it worth it? We put cheesecake frap to the test.
The verdict from the nutritionists is damning. But does a cheesecake frappuccino taste good enough to merit the indulgence?
My advice is to only go there if you have unusually sweet tooth. I like my puddings, but this was a bit much even for me. The first hit is a winner, but it's downhill, slowly, from there. Each sip is a little less satisfying than the last, and maybe it was just all that sugar, but it isn't long before the rush is replaced by a creeping remorse. And half of the thing is still left.
The caramel version is far superior to the blueberry, too. If someone put a full caramel cheesecake through a liquidiser and scooped out the contents, it would probably taste something like this. Blueberry, on the other hand, has more of an artificial taste. It's like someone has tried to invent this drink in a lab, and while early results were promising, they're still in the testing phase. It isn't terrible, but something isn't quite right either.
So if you want an experience, go for a small, and opt for the caramel. But if you want a cheesecake, it's probably more satisfying, and not quite as unhealthy, to just order the real thing.
MATCH INFO
Uefa Champions League last 16, first leg
Liverpool v Bayern Munich, midnight, Wednesday, BeIN Sports
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh132,000 (Countryman)
All%20The%20Light%20We%20Cannot%20See%20
%3Cp%3E%3Cstrong%3ECreator%3A%20%3C%2Fstrong%3ESteven%20Knight%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EMark%20Ruffalo%2C%20Hugh%20Laurie%2C%20Aria%20Mia%20Loberti%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E1%2F5%C2%A0%3C%2Fp%3E%0A
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
Suggested picnic spots
Abu Dhabi
Umm Al Emarat Park
Yas Gateway Park
Delma Park
Al Bateen beach
Saadiyaat beach
The Corniche
Zayed Sports City
Dubai
Kite Beach
Zabeel Park
Al Nahda Pond Park
Mushrif Park
Safa Park
Al Mamzar Beach Park
Al Qudrah Lakes
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
