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Damac investors lash out over construction delays

DUBAI — Investors in several of Damac Properties' residential construction projects are threatening to withhold payments from the company in protest over the firm's failure to finish buildings on time. Damac, which started life as a catering company but now bills itself as Dubai's 'largest private property developer', is facing an unprecedented backlash from residential property investors who bought 'off plan' apartments in advance of construction.

Buyers are furious over repeated delays in construction, contractual wrangling over compensation, complaints over interior finishes and poor customer service. Of the five projects (out of its advertised 15) Damac has started, all are running substantially behind their projected completion schedules.

Damac's problem projects are:

The Waves — was due for completion May 2005, now projected to be finished mid-2006

Ocean Heights — originally scheduled for the end of 2007, then delayed to June 2008, now will not be delivered until end of 2009.

Lake View — originally scheduled for completion by December 2006, construction will not be finished until first quarter of 2007, with the project's landscaping not ready until December 2007.

Jumeirah Lake Terrace — tower delayed six months until the end of 2006, with the showpiece lake and landscaping not ready until the end of 2007

Marina Terrace - Damac's first residential tower, delivered 14 months late. Was due for completion in October 2004, buyers were only given keys in March 2005. Subsequently, two floods from burst pipes caused damage to several apartments. Damac CEO Peter Riddoch has written to buyers apologizing for the 'protracted' delays in delivering apartments.

Many buyers have bought Damac properties as rental investments and are concerned that they will be unable to start earning income from their properties for years to come.

One Lake Terrace investor said: "Regardless that the apartment might be ready by the end of 2006, if the lake and landscaping are not completed for another year after that, I will never be able to rent the property while the project still looks unfinished and still resembles more a construction site than a place to live."

The Khaleej Times has learnt from buyers at Lake Terrace and Ocean Heights developments that a number of them have told the company they will hold back scheduled payments. Buyers are even discussing organizing mass withholding of payments.

The company, whose website boasts '4500 happy home owners' - markets heavily in the UK and Europe, but is now also receiving unflattering coverage there. Laurie McWhan, a The Waves buyer, told the London Times newspaper: "Three years after I made my investment, I don't have my house, a year's potential rent of £12,000 [Dh 82,000] is down the drain, and all they have offered me is a few thousand pounds in compensation. It's scandalous." Damac relied on wide-ranging 'force majeure' clauses to minimise contracted penalty payments to owners at Marina Terrace and The Waves.

Damac's delivery problems are adding to jitters felt by many of the Emirates property investors: particularly in the wake of the 'The Light House Affair' revelations. Developer Emad Ayoub fled Dubai in April having taken Dh14 million in advance payments for 'off plan' apartments. His Light House marina project, which was due for delivery in April, never made it past the foundations and Ayoub, after blaming 'unforeseen

technical difficulties' for the delays in construction and promising the project would be completed, is now in hiding in the UK and being pursued by police and investors' lawyers.

The levelling out of recent property price rises and the predicted oversupply of new apartments is also adding to anxiety over delayed projects and the increasingly public grumbling over Damac's construction delays and other apparent problems now appears to be having a knock-on effect with newer developments.

A Damac salesperson, who spoke on condition of anonymity, confided that Ocean Heights remains undersubscribed with a significant number of

apartments unsold. The Khaleej Times has also learnt that poorer than expected sales have led the company to offer unsold apartments at prices below their original offering price when the towers were first marketed.

The company has also launched more unusual sales incentives.

Following on from its Jaguar car offer for new owners, the company is now offering free tickets and business class airline tickets to see World Cup 2006 in Germany.

Despite almost universal praise for the daring and elegant designs of the exteriors of Damac's towers, buyers have complained about their interiors.

Bathrooms and kitchens in Marina Terrace have been described as 'cheap', 'poor' and 'horrible', with much criticism levelled at the tiles and finishings. At Marina Terrace and The Waves, much of that material is supplied by Damac's own Omani subsidiaries Al Shams and Al Amana.

Many Damac investors have resorted to online forums to express their disappointment and anger over what has happened to their investment properties. One buyer raged: "Damac are falling back into mediocrity and when they do, nothing will sell at the exorbitant prices they are expecting.

"People will see through them and this will have a effect on their future projects. Maybe they want to be blind to that fact, who knows? They will learn the hard way I think."

Another wrote: "If everyone says their interior finishings are crap, their reliability appalling and their customer service non-existent (and EVERYONE DOES!), then Damac are really wasting their time."