Nakheel plans to slash maintenance fees at its real estate developments in Dubai by nearly a third and has pledged homeowners in its properties will pay the lowest service charges in the city.
“We are shooting for a 30 percent reduction in services charges compared to 2010… We want to have the lowest service charges in Dubai,” said chairman Ali Rashid Lootah.
Nakheel, which plans to handover nearly 8,000 homes in nine developments across Dubai in the 15 months ending December 2012, said the discount would come largely from renegotiated service contracts with maintenance providers.
“It is due to value engineering, negotiation and renegotiation of service provider contracts that we managed to reduce service charges across all our developments,” Lootah said.
Service fees have been a particular bone of contention between developers and homeowners, with buyers accusing developers of charging inflated fees for building upkeep.
Developers who once saw millions of dollars in profit during Dubai’s real estate boom have struggled to stay afloat after emirate’s property bubble burst in late 2008. In projects such as Nakheel’s Discovery Gardens and Palm Jumeirah default rates on service charges among homeowners are estimated to be as high as 50 percent.
Under strata law, Dubai homeowners are entitled to establish associations to oversee the maintenance budgets and contracts of their properties. Arabian Business last week reported that some owners are facing charges of up to $4,000 a month from developers as their homeowner association awaits approval from the emirate’s land department.
Nakheel said last week it would handover 7,982 homes in Dubai by December 2012, in projects including Jumeirah Islands, Al Furjan as well as Badrah and Veneto in the Waterfront project.
The indebted developer also confirmed plans to build new villas on Palm Jumeirah to accommodate a rise in demand, and to begin work on a dedicated mall for the offshore island.
“We are reviewing- and hopefully before the end of year, after doing internal evaluations- the Palm Jumeirah Mall, which is going be an added value to Palm Jumeirah and the rest of the area,” Lootah said. “And also hopefully we will be launching new villas on Palm Jumeirah and will go out for engineering very shortly.
“We are seeing transactions are increasing and there is high demand and that has encouraged us.”
Nakheel was one of the biggest casualties of Dubai’s real estate crash, suspending at least 100 projects in the wake of a property collapse that more than halved house prices in the emirate.
Nakheel said August 24 it was restructuring some AED59bn ($16.1bn) of liabilities, including AED32bn to Dubai government, AED19bn to trade creditors and AED8bn to banks.
Nakheel last week said it would issue the first tranche of a twice-delayed AED4.8bn Islamic bond to trade creditors at a profit rate of 10 percent.
The company offered trade creditors repayment of 40 percent cash and the remaining 60 percent in the form of an Islamic bond, or sukuk as part of its restructuring program.
The Islamic bond will not be backed by the government but by Nakheel’s assets, the chairman said, adding no assets had yet been sold as part of the restructuring.