Dubai Firm Offers Help To Distressed Property Investors
Friday, July 30, 2010

Smith and Ken, a UAE-based property agency, has launched a scheme to help investors who have lost their money and life’s savings on off-plan property investments in Dubai.

Smith and Ken’s Real Estate Recovery Scheme (RERS) is, the firm says, designed to help investors recover the monetary value of their real estate investments through a like for like credit note to the value of what they have already paid against one of Smith & Ken’s properties.

Announcing the scheme, Benjamin J Smith, CEO, Smith & Ken, said: “There is always an element of risk involved when investing in offshore development plans even though you do a thorough background check on the developer and the property. There are situations that are beyond one’s control like worldwide economic challenges or the developer going bust. Smith and Ken’s Real Estate Recovery Scheme (RERS) aims to help investors in such unfortunate circumstances. Whether they have put down a 10% deposit on the property or paid up a larger percentage, we will help them to recover their money by swapping units in most delayed or cancelled developments for thriving completed properties in prime UAE and international locations.”

Once an application for RERS is approved by Smith & Ken, the company invites the investor to choose a new property, and once it is done, Smith & Ken deducts the amount the investor has already paid from their new apartment, office space or plot of land, the company explained.

“Apart from more financing options and government regulations, innovative schemes like RERS are key to a recovery in the property market,“ Smith added.

“There have been many distressed cases since property value fell by almost 50% by the end of 2008. But there is hope, and signs of recovery are already there. Average residential property prices in Dubai rose by 2% in the first quarter of 2010 compared to the same period last year. Prices have now risen 4% since the last quarter of 2009 creating confidence in the market," he observed.

However, according to the ratings agency Fitch, Dubai's property market is likely to remain depressed until at least 2012/13, and the firm expects many property developers to undergo refinancing as they struggle to meet their debts.

"Despite signs that conditions may be stabilizing, as well as a recent round of debt restructurings and extensions, Fitch believes that the credit outlook for the sector remains negative," said Bashar Al Natoor, Director in Fitch's EMEA Corporates team, Dubai.

Natoor predicts that, at best, the sector is headed for a period of "stagnant growth" and at worst, a double dip contraction which could lead to a "severe" fall in prices.

A report by by property consultants CB Richard Ellis also suggests that rents in Dubai remain subject to downward pressure, with residential lease rates having fallen by as much as 33% in the second quarter of 2010 compared to the same period last year. In one one area, Barsha, lease rates have plummeted by 44% since the height of the market.

On a brighter note for Dubai, Emaar Properties, the builder of the Burj Khalifa, the world's tallest tower, recorded 122% growth in profit in the first half of 2010 compared to the first six months of 2009, at USD451m. However, the strong improvement in its bottom line was underpinned by its projects in key international markets, including India, Saudi Arabia, Jordan, Egypt and Syria.

"Our emphasis now is on strengthening our core competency of developing premium real estate projects, and building on our assets in promising emerging markets," said Mohamed Alabbar, Chairman, Emaar Properties. "This concerted approach has resulted in further strengthening our financial fundamentals, despite the challenges of the global financial climate."