A New Strategy Outlined by Deyaar to Reduce Default Rate to 20%
For 2009, a strategy has been outlined by the development to minimize the default rates of the company, as told by the company’s chief executive. Markus Giebel, the CEO of the company said, “Around 60 per cent of our customers came back to us saying they were unable to pay up on their property. We believe our new strategy will help us bring down our existing default rate to around 20 per cent”. All the business revolves around Dubai Real Estate and to match the competition in market, this consolidation policy has been generated.
Due to the consolidation policy adopted by Deyaar, it will not see any noticeable changes on its profitability according to Giebel as it spoke to Emirates Business. Profits obtained in 2009 are estimated to be around Dh500 million, touching levels of the year 2007.
Giebel said, “Deyaar’s consolidations will not impact its profitability, and we will go back to 2007 levels of profitability, which is a healthy figure. Profits and revenues are not major issues for us today – what is important right now is to ensure adequate cash flow and help our customers with financing difficulties.”
In accordance with the new strategy of consolidation, Mirar Residences, Deyaar Park and Deyaar Enclave, embracing Dubai’s four million square foot area, is planned to be consolidated within the remaining portfolio of the Deyaar.
In these projects, investors will be provided with an option to reassign their ownership to projects whose completion would take place on fast track grounds.Project Consolidation of up to 10 per cent cash back of the paid up amount will be done by Deyaar and on Deyaar Park, Deyaar Enclave and Mirar Residence, there will be a consolidation option of 50 per cent.
Giebel also said, “On Deyaar Enclave we will give the option of a 100 per cent pay back to the investor. We will first return the money to the investor and go to RERA saying we have no liability. Only then will RERA release the escrow”
Unit’s prices that were sold either in construction’s initial stages or at launch will be decreased in sync with lower costs of construction, in accordance with the new strategy.
It was also mentioned that, “Prices will be decreased at Deyaar’s Oxford Tower, by an average of 30 per cent – from Dh2,450 a sqft to Dh1,715 a sqft. Price reductions in Fairview Residency will range from an average of 25 per cent, from Dh1, 845 per sqft to Dh1, 385. Sales prices have been decreased In Bristol Residence, by an average 25 per cent, from Dh2, 079 a sqft to Dh1, 560.Prices will be reduced at Bristol Office by 30 per cent on average, from Dh2, 788 a sqft to Dh1, 950.”
Deyaar said, “Other reductions were under review”.
Giebel said, “Our customers will be offered lower installments on certain units through soft payment plans and this will be implemented by adjusting the original payment schedule, allowing customers facing liquidity problems to avoid defaults and meet their obligations,”.
“In some locations where the infrastructure will be difficult to have in place in the near-term, we will give buyers the option to swap for properties in other locations,” he said. The transfer option will be purely on a voluntary basis and will give customers the option to transfer their ownership to premium projects in prime locations. It will also allow them to consolidate their total outstanding payments”. It was corroborated by Deyaar that not even a single of its projects were so far cancelled and no defaults had been recorded so far.
Giebel said, “The new strategy we have outlined will cost us a lot of money, but we are willing to do this so that our customers have the best choice”. He also mentioned that Deyaar’s complete strategy is in sync with regulations laid by RERA and all of its projects will abide by the escrow law. It is also negotiating with financial institutions to develop special mortgage packages for customers and has already signed up with RAK Bank and Dubai Islamic Bank besides being in the limelight with two other banks for protecting mortgages for its customers.
Nearly seven Projects will be completed by Deyaar Development in 2009, comprising of Hamilton Residency and Citadel at Business Bay, Madison Residency at Tecom, Sapphire Residence, Coral Residence, Ruby Residence and Jade Residence at Dubai Silicon Oasis to add feathers under the hat of Dubai Real Estate.