The false promise of Dubai’s property sector
“I have made peace with the fact that I got scammed out of all my money; but what am I supposed to do now?” So says one South African flight attendant who purchased an apartment in Dubai back in 2006, expressing what hundreds of property investors in the UAE have experienced. His apartment in the Lagoon development project was never built, yet he is now being hounded for defaulting on payments for the non-existent property.
“This is an atrociously common situation,” says Radha Stirling, founder and CEO of Due Process International and Detained in Dubai, “This client should have been living in his promised luxury apartment for the last 14 years – when it was supposed to be completed; instead, he is being pursued by Mashreq Bank for falling behind on payments for a home that never was, and never will be built. The developers, in this case Schon Property, have already received their millions from the bank, but individual buyers are expected to pay that back, even though the Lagoon apartments project, for all intents and purposes, has been scrapped. It does not take two decades to build an apartment complex in Dubai.
“We have clients who have lost their jobs after signing contracts with Schon Properties, struggling to keep up payments using their credit cards, taking out loans, sinking themselves into debt; all in the hopes of eventually owning valuable properties in the heart of Dubai, only to finally realise that they have been utterly defrauded. Clients make payments on these imaginary properties for years under the constant brow-beating by banks like Mashreq threatening that they will be criminally charged and reported to Interpol if they so much as fall behind on their instalments – never mind that the properties turn out to be phantasms.”
Stirling says that a typical contract requires investors to pay 50% of the property’s total cost in quarterly payments over 2 years, with the remainder being divided over monthly instalments which should, in theory, begin when the owner has already taken possession of the property. However, delays and cancellations of developments occur frequently in the UAE, but buyers remain accountable for fulfilling their side of the contract. “The banks do not care if the homes are ever built,” she explains, “And unfortunately, neither do the developers, once they have been paid. When property developers defraud their customers, when projects stall or are suspended, the government will seize the land, and sometimes the assets of the real estate company if they can; but individual buyers are still expected to keep paying anyway. In other words, Dubai and UAE banks directly profit from property scams, and they are making no serious efforts to stop them.”
Stirling estimates that only roughly a quarter of property developments initiated in Dubai are ever completed, but all of them attract buyers. “On any given day in the UAE,” she says, “tens of millions of dollars change hands in property deals; perhaps 75% of those deals will prove fraudulent within the next 5 years, leaving hundreds if not thousands of hopeful homebuyers not only bankrupt but slapped with criminal cases and listed on Interpol as fugitives; while the actual property scammers are free to continue bilking investors with no consequences.”
Even if developments are completed, Stirling explains, they seldom live up to the promises made at their initial launch. “Most people buy these properties as investments,” she says, “They have the intention of renting them out; but once the developments are completed and they discover that many of the amenities that were listed in the promotional material have been scrapped or downgraded, they have to face the reality that their property is not the draw for tenants they thought it would be, and they end up just being stuck with an unaffordable financial burden. They can neither rent it out nor sell it, and they still have to keep up the monthly payments while also paying the rent or mortgage on the home where they actually live.”
Dubai’s unreal estate market Most people probably believe that Dubai is home to a vibrant and luxurious property market. However, those more familiar with the UAE city-state know that this apparent real estate oasis in the desert can become investment quicksand the moment you sign the dotted line...
Stirling has coined the term “unreal estate market” to describe the property sector in the UAE, “We have simply had too many clients whose investing experience in Dubai has turned into a financial catastrophe,” she explains, “Whether the developer is state-owned or private, they have learned that they can make just as much money by not completing a project as by completing it because they can reliably pass all accountability on to individual homebuyers and depend on the relentless harassment of UAE banks to force them to pay, regardless of whether or not they ever stack one brick on top of another. If the property sector in Dubai actually operated as advertised, of course it would be a brilliant place to invest; unfortunately, like so much of the other hype about the UAE, the advertising is almost completely false.”
Detained in Dubai: http://www.detainedindubai.org
Detained in Doha: https://www.detainedindoha.org
Radha Stirling: http://www.radhastirling.com
CLAN - Crypto Legal Advocacy Network - https://www.bitclan.org/
Due Process International: http://www.dueprocess.international
IPEX - Interpol & Extradition Reform & Defence Experts - https://www.ipexreform.com/