Nakheel, the troubled Dubai developer restructuring $10.8 billion in debt, has confirmed it is no longer selling real estate units in the emirate.
The state backed company, which overstretched itself building islands in the shape of palms and other ambitious projects, said it is to focus instead on offering swap options to existing investors.
‘Nakheel has stopped selling properties currently, and is focusing on consolidations and swaps options,’ a spokesperson said in a statement.
Nakheel offered credit swaps in the wake of Dubai’s real estate crash, to enable buyers to transfer cash from unfinished or halted developments to completed real estate.
The company was one of the biggest casualties of Dubai’s real estate downturn, which saw prices halve from their 2008 peak and almost half of developments in the emirate cancelled.
The developer’s inability to meet its debt obligations, in the wake of a property collapse and the global credit crunch, helped trigger Dubai’s debt crisis in 2009.
Real estate analysts are divided on news the developer had stopped pursuing property sales, with some seeing it as a sign Nakheel was keen to restore confidence in its projects.
‘In good times and bad, looking after existing clients before pursuing new ones makes smart business sense,’ said Michael Michael, director of sales and leasing at Landmark Properties told Arabian Business.
‘The announcement to stop selling properties and focus on consolidation and swap options may restore a degree of customer confidence in Nakheel and its projects. I believe the announcement shows a sign of commitment which is always good for the market,’ he added.
Delays are also affecting other parts of Dubai’s real estate markets. Business Bay is struggling to attract tenants as an upsurge in construction activity across Dubai squeezes rental rates and occupancy levels, according to real estate consultancy firm CB Richard Ellis.
‘Despite a prominent location adjacent to the existing central business district (CBD), Business Bay faces a battle to reverse huge vacancy rates,’ the firm said in its latest report Sunday.
Rental rates for one bedroom apartments in the development average around AED55,000 ($14,974) per annum, around 36% lower than those in the nearby Downtown Dubai district, which average around AED75,000 ($20,419).
‘Tenants have proved unwilling to contend with ongoing infrastructure issues and facility shortages,’ the report says.
The 64 million square feet Business Bay is set to become home to about 191,000 people across 240 towers when completed.