UAE Projects Suspended Or Cancelled Hit $75bn

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Feb 03, 2009
sage & onion wrote:
arniegang wrote:If bought off plan Sage, then no mortgage lender will release all of the agreed amount until the project is signed off.

The banks then reserve the right to make a valuation of the property for mortgage purposes to release the balance of the funds.

If that valuation does not concur with the original asking price then the bank will not release the funds and insist the purchaser find other means of finance by way of a 2nd mortgage.

They wont be able to secure further borrowing because 90% of the banks have adjusted their terms in respect to LTR (loan to value).

Its a time bomb waiting to happen mate.


In this case is the money not paid into an Escrow Account?, forgive me for not understanding the process, it just doesn't seem correct the way that your explaining it.



Mate

When buying off plan stage payment are made into an Escrow account.

So lets say i bought in Marina Mall in Oct 07 for 3 million. I would have paid an initial depostit of 10% or 300k Dhs. This would have been my 10% mortgage deposit on the assumption i was looking for a mortgage @ a 90% LTV (loan to value).

The bank would have made further stage payments as per the contract also to the Escrow account.

As Marina Mall isn't due to complete until the end of this year by now all the stage payment upto 60% of the purchase cost have now been made.

On completion the bank will have to forward the final 40% to complete and the owner can then take possession.

The banks in Dubai (and in the UK) are now valuing properties at completion. If the valuation is less than the original selling price the bank has the right to say to mortgage customer

"we are not lending you 90% of the original price, as per our contract we are only going to lend you 90% of the valuation. As the valuation is now 2 million AED we will not advance you the 40% to complete your purchase. You are now required to find the remaining 40% from your own or other sources".

So basically, now the purchaser is up the creek. He has a debt by way of a 50% mortgage (plus his original 10%) totaling 1.8 million Dhs. His property is valued around 2 million by the bank but he still requires a further 1.2 million dhs to take possesssion.

Unless he has 1.2 million in cash he is basically stuffed. Even then he is double stuffed knowing he has to find 3 million to complete on a property worth 2 million.

It is called Negative Equity Sage. This is the mortgage problems facing many Brits and Americans now. Those who bought in the peek at vastly inflated prices at a high loan to value, cannot now remortgage or sell because the amount they owe to the bank will not pay off or clear the original debt. The house or appartment is also worth less than the original mortgage.

This is why 90% of all the banks in Dubai are not lending to those with a large deposit of around 30%. The banks know full well in a declining property market it is financial suicide to lend at a high loan to value ratio.

Established banks with much expertese in established property markets like LloydsTSB, have put a 50% LTV cap on Villa mortgages in Dubai. They have suspended all appartment mortgages.

This to me is the indicator that their projections indicate the property slump in Dubai is going to be in excess of 50% for villas and even more for appartments.

arniegang
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Feb 03, 2009
Thanks Arnie, read and understood.
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Feb 03, 2009
I'm have a negative mortgage :(
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Feb 03, 2009
You forget one step Arnie and I explained. Which is:

You only pay via the bank when the development progression is signed off.
If there's no sign off, and the projects fails for instance...you and the bank pay nothing more. But you lose the amount that went already in (worst case)
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Feb 03, 2009
RobbyG wrote:You forget one step Arnie and I explained. Which is:

You only pay via the bank when the development progression is signed off.
If there's no sign off, and the projects fails for instance...you and the bank pay nothing more. But you lose the amount that went already in (worst case)


I agree

But, if it has been funded by the bank as a Mortgage, you still end up with a mortgage that has to be paid back whether you take completion or not

Most banks up till now, have just accured up the interest and added this amount to the total amount borrowed. So basically purchasers have had a payment "holiday", until completion.

In the event it all goes "tits up" the purchaser still owes the money/mortgage to the bank. The bank doesn't say "ohhh thats ok, we will just write off the 1 million dhs we have lent you on account".
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Feb 03, 2009
sage & onion wrote:
RobbyG wrote:
sage & onion wrote:
arniegang wrote:If bought off plan Sage, then no mortgage lender will release all of the agreed amount until the project is signed off.

The banks then reserve the right to make a valuation of the property for mortgage purposes to release the balance of the funds.

If that valuation does not concur with the original asking price then the bank will not release the funds and insist the purchaser find other means of finance by way of a 2nd mortgage.

They wont be able to secure further borrowing because 90% of the banks have adjusted their terms in respect to LTR (loan to value).

Its a time bomb waiting to happen mate.


In this case is the money not paid into an Escrow Account?, forgive me for not understanding the process, it just doesn't seem correct the way that your explaining it.


Current rules denote that the developer can only ask a certain amount upfront. Only after this money has been spend on actual development progress, the developer is able to request more money from the off-plan investor and his client bank.
The bank monitors this development progress in order not to be at risk for losing the approved amount of mortgage to the client.

The money that used to be paid to a developer (old regulations), went in an escrow account, as I believe it was. Unfortunately, in market circumstances same like this, they spended the money on other things, than your development project. So that method was forbidden by the rulers and authority organizations.


So if I arrange a purchase as follows.

I enter into an agreement with a developer, off plan

I arrange a mortgage from a Bank.

I start paying the mortgage.

The Development does not go ahead.

Do I still have to pay all of the outstanding amount to the Bank?


YES

But, the purchaser has redress from the developer for "breach of contract" and as such has the right to ask for a refund of moneys paid. This is why the money is paid into an Escrow account.

The system will be tested many times this year, only then will we see the true results as the developers start to go bankrupt one by one. And the more off plan developments that any one developer has under construction, the more serious the situation ie Emaar, Nakheel and Damac.

For every dirham paid into an escrow account for the master developers, that developer cannot get his hands on the money, and any money they have taken from the Escrow Account will need to be paid back. They will be left with uncompleted projects and one hugeeeeeeeeee debt.

Bye Bye Dubai Inc RIP.

PS... the developers cannot use "Force Majeure " as a reason to not complete projects just because of financial problems and world recession.
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Feb 03, 2009
Lets not be so down on Dubai, this is our home (for now) and we need to support even if only morally as much as we can.
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Feb 03, 2009
sage & onion wrote:Lets not be so down on Dubai, this is our home (for now) and we need to support even if only morally as much as we can.


exactly.
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Feb 03, 2009
sage & onion wrote:Lets not be so down on Dubai, this is our home (for now) and we need to support even if only morally as much as we can.


Sage

I disagree. Just because its your home that is not reason to bury your head in the sand.

I can tell you, things are far worse in the UK and if you ask someone like K dog they will say the same about the States.

The difference in the UK is that we live with it every day and it is openly reported in the Media.

At the end of the day Sage, expats took their chances on a better way of life, in particular a better lifestyle and disposable income. No one forced them to leave their jobs and security in their homeland. A lot will say "we did it for the experience", bollox, they did it for the lure of money that the majority of them could never come close to earning in their own country. Dubai made the average expat in an average job, feel important. Many of these expats are now going to have that taste of true reality when they return home and find there are no jobs there either.

What goes around comes around mate. I am not knocking expats, far from it. As i said it was their choice, no one forced them to up sticks and move to the Emirates.

Yes i know it sounds harsh, but it always does when reality bites. The same goes for your apethy to an extent Sage. Just because it isnt reported to you in an open and honest way in the Media, doesn't mean to say it isn't happening.

Dubai was built on hype and an illusion that no bad can ever happen. People got sucked into that hype, people made money and had success, others have not.

Its horses for courses mate.

Do you think that the 000's of people that stand to loose serious money whether it be in propperty or business's to "support" the UAE. Get real Sage, the Dubai experience is going to leave a very bitter taste in a lot of peoples mouths.

Do you really want to support a country that throws people out of the country when that person has lost his job. What is this "country" doing to support those 000's?. I'll tell you what they are doing mate "sweet f.u.c.k all". Everyone in the Emirates apart from locals are disposable, very disposable, now they have their infrastructure, they have their developments. They sold everyone a dream, its turning out to be just that "a dream".
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Feb 03, 2009
UPDATE: UAE Delays, Cancels $263 Billion Real Estate Projs-MS

http://www.zawya.com/Story.cfm/sidZW200 ... 0Projs-MS/
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Feb 03, 2009
Red Chief wrote:UPDATE: UAE Delays, Cancels $263 Billion Real Estate Projs-MS

http://www.zawya.com/Story.cfm/sidZW200 ... 0Projs-MS/


There you go, thats is at least half of the Emirates Central Reserve Fund.
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Feb 04, 2009
Arnie is right. Lets not put our heads in the sand.

The first two decades of growth where painless, and now is the time for reality. Its not that those building are coming down now!

This is an excellent opportunity for people like myself. I'm looking to go to Dubai when everything is at top prices. This situation which reasonably can be said, is 'a healthy correction'. Money expansion and growth cannot continue forever. There are booms AND busts. Growth and recessions. And when the crap hits the streets (read: excrement dumping in storm channels) and the first delivery of hard working expats has seen it all, as do the fortune investors move out... Its time for the second delivery of problem solving expats thats gonna pick up the renewed growth in Dubai.

Its not over!! Hell not. New opportunites beyond 2010. Lower prices. Better conditions for everyone....after the marina has been cleaned from e-coli bacterias :) the rich will come back, so is Arnie. :geek:

I actually enjoy this kind of 'problems'. This is where I get my ambition from to push through this hardship periods. Maybe thats not for all of us, but it surely is my positive motivator. Don't stop....get that ass going!!! Noww!!!! :salute:
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Feb 04, 2009
arniegang wrote:
Red Chief wrote:UPDATE: UAE Delays, Cancels $263 Billion Real Estate Projs-MS

http://www.zawya.com/Story.cfm/sidZW200 ... 0Projs-MS/


There you go, thats is at least half of the Emirates Central Reserve Fund.


dummies,what does uae has to do with companies projects LOOOL
uaekid
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Feb 04, 2009
UAEkid, ....You're kidding right?
RobbyG
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Feb 04, 2009
its an oil country remember?
uaekid
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Feb 04, 2009
nevermind
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Feb 04, 2009
Arniegang,
With your explanation of the off-plan selling, it looks as if some British investors could be in DEEP trouble, particularly if they were greedy in 2007 and bought 2 or 3 expensive properties off-plan with property APPRECIATION in value on their minds. As you say, if they were borrowing heavily and the banks only lend on the new property values, they have had it. No-one else will lend them money on devalued properties. How much have they dropped in value since late 2007? About 30 per cent maybe?
Have Dubai Marina dropped that much??

It was all hunky-dory on Piers Morgan's recent ITV documentary on Dubai. He made out that Dubai was almost recession-proof.

On the prog ,Dr Sulaiman al Fahim had paid $600,000 dollars extra for a special model of car; the car number plate alone, with 2 numbers on it had cost him $2 MILLION dollars!!

Then whilst flying over Dubai, he estimated there was $300 BILLION DOLLARS worth of Real Estate "down there".

One thing!! At the end , Morgan said that Abu Dhabi had leant Dubai £8 or 9 BILLION POUNDS STERLING.

Well, that is nothing if a lot of the $300 billion dollars is only partially finished.

I'm afraid there has been too much greed and profligacy in Dubai !! Too much of HAVING TO HAVE THE BEST......on a HUGE SCALE and thinking that prices would go ON AND ON!!

They should have built LESS......and FINISHED IT, before instigating another mega-project.

If Dubai is running out of money.......then those who have BOUGHT a GOD-FORSAKEN SAND ISLAND FOR MILLIONS IN "THE WORLD" , are especially badly placed. Unless the WHOLE project is finished it won't look right!! The boating/ferrying between islands and the look of it won't be right. It costs far more to build on a sand island. Everything must come in by boat.
Buyers will be ALL AT SEA !!
Others will be UP THE CREEK without a paddle!!
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Feb 04, 2009
arniegang wrote:
sage & onion wrote:Lets not be so down on Dubai, this is our home (for now) and we need to support even if only morally as much as we can.


Sage

I disagree. Just because its your home that is not reason to bury your head in the sand.

I can tell you, things are far worse in the UK and if you ask someone like K dog they will say the same about the States.

The difference in the UK is that we live with it every day and it is openly reported in the Media.

At the end of the day Sage, expats took their chances on a better way of life, in particular a better lifestyle and disposable income. No one forced them to leave their jobs and security in their homeland. A lot will say "we did it for the experience", bollox, they did it for the lure of money that the majority of them could never come close to earning in their own country. Dubai made the average expat in an average job, feel important. Many of these expats are now going to have that taste of true reality when they return home and find there are no jobs there either.

What goes around comes around mate. I am not knocking expats, far from it. As i said it was their choice, no one forced them to up sticks and move to the Emirates.

Yes i know it sounds harsh, but it always does when reality bites. The same goes for your apethy to an extent Sage. Just because it isnt reported to you in an open and honest way in the Media, doesn't mean to say it isn't happening.

Dubai was built on hype and an illusion that no bad can ever happen. People got sucked into that hype, people made money and had success, others have not.

Its horses for courses mate.

Do you think that the 000's of people that stand to loose serious money whether it be in propperty or business's to "support" the UAE. Get real Sage, the Dubai experience is going to leave a very bitter taste in a lot of peoples mouths.

Do you really want to support a country that throws people out of the country when that person has lost his job. What is this "country" doing to support those 000's?. I'll tell you what they are doing mate "sweet f.u.c.k all". Everyone in the Emirates apart from locals are disposable, very disposable, now they have their infrastructure, they have their developments. They sold everyone a dream, its turning out to be just that "a dream".


Well finally someone is honest around here, arniegang is right. however arniegang I know for sure you are not one of the people who made it in this country and I'm sorry this happened to you, however, you came here and had your chance in scamming ppl (I mean doing business) you had a tuff luck and I guess lost your investment for some reason so be it and suck it up man, you are reflecting your anger and disappointment of your failure on DF badly, don't take it personal with Dubai like you did with me. Like I always said, it doesn't matter if you fall down but what matter is how fast will get up. But whom am I kidding, with all the time you spend on the net I doubt if you will ever get up ..

Now ppl are stressed as it is about Dubai going under and instead of making it worst for them you should cool them down. Panic always leads to poor performance like what's happening to you know.

However it is too late to leave this country for your secured life back home guys, face it , it is much worst out there than in Dubai. so I would stick around if I were you.

this is for you arniegang http://www.lessons4living.com/stress_test.htm
uaekid
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Feb 04, 2009
uaekid wrote:
arniegang wrote:
sage & onion wrote:Lets not be so down on Dubai, this is our home (for now) and we need to support even if only morally as much as we can.


Sage

I disagree. Just because its your home that is not reason to bury your head in the sand.

I can tell you, things are far worse in the UK and if you ask someone like K dog they will say the same about the States.

The difference in the UK is that we live with it every day and it is openly reported in the Media.

At the end of the day Sage, expats took their chances on a better way of life, in particular a better lifestyle and disposable income. No one forced them to leave their jobs and security in their homeland. A lot will say "we did it for the experience", bollox, they did it for the lure of money that the majority of them could never come close to earning in their own country. Dubai made the average expat in an average job, feel important. Many of these expats are now going to have that taste of true reality when they return home and find there are no jobs there either.

What goes around comes around mate. I am not knocking expats, far from it. As i said it was their choice, no one forced them to up sticks and move to the Emirates.

Yes i know it sounds harsh, but it always does when reality bites. The same goes for your apethy to an extent Sage. Just because it isnt reported to you in an open and honest way in the Media, doesn't mean to say it isn't happening.

Dubai was built on hype and an illusion that no bad can ever happen. People got sucked into that hype, people made money and had success, others have not.

Its horses for courses mate.

Do you think that the 000's of people that stand to loose serious money whether it be in propperty or business's to "support" the UAE. Get real Sage, the Dubai experience is going to leave a very bitter taste in a lot of peoples mouths.

Do you really want to support a country that throws people out of the country when that person has lost his job. What is this "country" doing to support those 000's?. I'll tell you what they are doing mate "sweet f.u.c.k all". Everyone in the Emirates apart from locals are disposable, very disposable, now they have their infrastructure, they have their developments. They sold everyone a dream, its turning out to be just that "a dream".


Well finally someone is honest around here, arniegang is right. however arniegang I know for sure you are not one of the people who made it in this country and I'm sorry this happened to you, however, you came here and had your chance in scamming ppl (I mean doing business) you had a tuff luck and I guess lost your investment for some reason so be it and suck it up man, you are reflecting your anger and disappointment of your failure on DF badly, don't take it personal with Dubai like you did with me. Like I always said, it doesn't matter if you fall down but what matter is how fast will get up. But whom am I kidding, with all the time you spend on the net I doubt if you will ever get up ..

Now ppl are stressed as it is about Dubai going under and instead of making it worst for them you should cool them down. Panic always leads to poor performance like what's happening to you know.

However it is too late to leave this country for your secured life back home guys, face it , it is much worst out there than in Dubai. so I would stick around if I were you.

this is for you arniegang http://www.lessons4living.com/stress_test.htm


Well Kid, I happen to know that you are wrong about Arnie.
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Feb 04, 2009
well he seems to be pissed off at something, can't put my hand on it yet
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Feb 04, 2009
RedKite wrote:Arniegang,
With your explanation of the off-plan selling, it looks as if some British investors could be in DEEP trouble, particularly if they were greedy in 2007 and bought 2 or 3 expensive properties off-plan with property APPRECIATION in value on their minds. As you say, if they were borrowing heavily and the banks only lend on the new property values, they have had it. No-one else will lend them money on devalued properties. How much have they dropped in value since late 2007? About 30 per cent maybe?
Have Dubai Marina dropped that much??

It was all hunky-dory on Piers Morgan's recent ITV documentary on Dubai. He made out that Dubai was almost recession-proof.

On the prog ,Dr Sulaiman al Fahim had paid $600,000 dollars extra for a special model of car; the car number plate alone, with 2 numbers on it had cost him $2 MILLION dollars!!

Then whilst flying over Dubai, he estimated there was $300 BILLION DOLLARS worth of Real Estate "down there".

One thing!! At the end , Morgan said that Abu Dhabi had leant Dubai £8 or 9 BILLION POUNDS STERLING.

Well, that is nothing if a lot of the $300 billion dollars is only partially finished.

I'm afraid there has been too much greed and profligacy in Dubai !! Too much of HAVING TO HAVE THE BEST......on a HUGE SCALE and thinking that prices would go ON AND ON!!

They should have built LESS......and FINISHED IT, before instigating another mega-project.

If Dubai is running out of money.......then those who have BOUGHT a GOD-FORSAKEN SAND ISLAND FOR MILLIONS IN "THE WORLD" , are especially badly placed. Unless the WHOLE project is finished it won't look right!! The boating/ferrying between islands and the look of it won't be right. It costs far more to build on a sand island. Everything must come in by boat.
Buyers will be ALL AT SEA !!
Others will be UP THE CREEK without a paddle!!


and where would've we sheltered the huge number of you who flow here everyday mr smart ?in tents maybe ?
uaekid
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Feb 04, 2009
UAE kid

[1] I live in the UK. I have been on holiday ONCE in my life. I don't need the place.............so you would not have been sheltering ME in a tent.
[2] I have been in business 40 years . I have always dealt HONESTLY with people. I have sealed HUNDREDS of business deals by WORD OF MOUTH ALONE.......and STUCK to my WORD........WIN OR LOSE!!
[3] That is not the case with Dubai. You have to dot the "i" s and cross the "t"s and watch EVERY LOOPHOLE.

I'm not thick, I know it is the same for bank and housing deals in the UK to. I used to sell certain produce by word of mouth, worth thousands or hundreds per deal.
[4] You have just said "SCAMMING PEOPLE" as an expression for "DOING BUSINESS ". What a SCUMMY, DISHONEST , RIFF-RAFF ATTITUDE TO BUSINESS!! It says it all about Dubai !!!

I would trust you as far as I could spit!
RedKite
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Feb 04, 2009
Typo .....I have been on holiday to DUBAI once in my life.
RedKite
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Feb 04, 2009
Arnie mate, thanks for the detailed explanation on LTV, mortgages and other stuff.
Thankfully, I'm still in the black on my house mortgage.
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Feb 04, 2009
I believe there is a great deal of TRUTH in what Arnie is saying. He lives in Bristol, does he not?
So why has he lost out in Dubai? Is he not a moderator too?
The only thing! Is Dubai worried that the Dubai bank where his money is invested might go bust?

Dubai's best chance is Abu Dhabi. AD cannot afford to leave Dubai in an unfinished mess, surely?

There has been far TOO MUCH overreaching ambition in Dubai. Sheikh Mo must be responsible for some of that, if he has spent far beyond his means. He and his family own much of the business.

Dubailand, Hydropolis, The World, The Palms, Al Burj, Burj Dubai etc were all MIND-BOGGLINGLY ambitious. They must be PAID FOR by someone.
It is NOT CLEVER to start something you are not certain to finish. It is CLEVER to look into the future and anticipate events accurately.

I have been saying since 2002 that UK property would drop at any time because it was INFLATION NOT PRODUCTION.
UK workers and other inflation at 2 to 3 per cent per annum.......WITH PROPERTY GOING UP 20pc !!! CRAZY!! UNSUSTAINABLE!!

The whole world has been on PROPERTY BUBBLES.......now bubbles are bursting EVERYWHERE ......... It's like spraying cold water over a bubble bath and popping the lot!!
RedKite
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Feb 04, 2009
Another typo......Is ARNIE worried that the Dubai Bank where his money.............etc

Sorry ! Too much of a hurry.
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Feb 04, 2009
Re the bank.
Arnie.... Would you have put your money in a British bank in Dubai......like Barclays ? Common-sense tells me you surely did.
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Feb 04, 2009
RedKite wrote:Re the bank.
Arnie.... Would you have put your money in a British bank in Dubai......like Barclays ? Common-sense tells me you surely did.


So far as we have experienced their has been no problem with the banks here. They are also supported by the Central Bank in Abu Dhabi.
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Feb 04, 2009
RedKite wrote:Re the bank.
Arnie.... Would you have put your money in a British bank in Dubai......like Barclays ? Common-sense tells me you surely did.


I have my investments spread between LloydsTSB and HSBC in Dubai. Through these 2 banks i have offset a large portion of my savings via both their offshore branches in Jersey. Technically i have split it 4 four ways.

The bank guarantee in Dubai does not cover British and American Banks . The guarantee only applies to Arabic Banks.

It is therefore not wise to keep a large sum of money in any 1 non arabic bank. I dont believe there is a major problem with Brit Banks, with the possible exception of Barclays.
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Feb 04, 2009
arniegang wrote:
RedKite wrote:Re the bank.
Arnie.... Would you have put your money in a British bank in Dubai......like Barclays ? Common-sense tells me you surely did.


I have my investments spread between LloydsTSB and HSBC in Dubai. Through these 2 banks i have offset a large portion of my savings via both their offshore branches in Jersey. Technically i have split it 4 four ways.

The bank guarantee in Dubai does not cover British and American Banks . The guarantee only applies to Arabic Banks.

It is therefore not wise to keep a large sum of money in any 1 non arabic bank. I dont believe there is a major problem with Brit Banks, with the possible exception of Barclays.


The Guarantee does indeed cover the foreign banks that are here, that has been clearly clarified by the Central Bank some time ago, but it is only for money that is on deposit here.
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