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Cleaning up Dubai’s property market

Cleaning up Dubai’s property market

As complaints of frauds and bouncing cheques from property developers start to increase, looks like the financial crisis is clearing out much more than money.

January 12, 2009 11:14 by



Dubai police are currently investigating $100 million fraud allegations against the bosses of Dynasty Zarooni, one of Dubai’s numerous private real estate companies, reports the Financial Times. Kabir Mulchandani, the chairman of the company, his partner, Hilal Al Zarouni and two other employees have been arrested.

The company asked people to invest AED300, 000 every month, and said that after paying six installments, the investor will receive AED1 million in return. However, after the investors paid all the installments, they never got their returns.

The company, which was planning to open offices in New York, London and Russia in 2009, claims to have a real estate portfolio of AED21 billion.

But this is not an isolated case.

Few days back, Al Barakah, a property developer which promised to build Ajman’s tallest tower, told investors it is insolvent after the company’s CEO, Imran Khan, was accused of bouncing cheques worth AED60 million. Khan is currently in hiding.

The company promised investors a 50 percent return in six months, and also gave them post-dated cheques, which later bounced.

“The group is in a de facto state of liquidation,” a company’s lawyer, Mahomed wrote in a memo obtained by The National. “Its liabilities exceed its assets. It does not conform to generally international best practices and standards. Clearly, a clean-up is needed.”

It seems like a clean-up is what is happening in Dubai currently, thanks to the economic slowdown. Several of the 800-odd real estate companies listed on the Rera website were profiting on Dubai’s property bubble, and are now struggling to come to terms with the lack of liquidity.

According to the Financial Times, more than 25 executives have been detained in an anti-corruption investigation at property companies in Dubai.

“The company (Al Barakah) was established to bring new values to the real estate industry,” Khan told Gulf News in an earlier interview.

It seems as though the financial crisis is flooding the market with ‘new’ values.



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4 Comments

  1. Peter Hammilton on January 12, 2009 11:55 pm

    Also complaints about the business partner of Dynasty Zarooni – Al Fajer Properties – has reached the Dubai Police. This is piblished in the Financial Times and Zawya ( by WSJ).
    Al Fajer Properties is owned by the 32 years old Skeikh Maktoum Hasher Al Maktoum, the former founder of AGP1. Maktoum Hasher has sold Towers ( Jumeriah Business Centre on Plot H3 and G3) Jumeirah Lake Towers to Dynasty Zarooni. Dynasty Zarooni renamed them in Ebony and Ivory Towers. The comlpaints about the fraud Dynasty Zarooni ,have been filed also directly linkt to this deal of the Sheikhs sold towers, at Dubai Police

     
  2. Dave Sturridge on January 13, 2009 10:54 pm

    It looks like there’s plenty of real estate companies in Dubai who’s past dealings and practices are about to catch up with them…

    http://37.188.120.15/kipp/2009/01/06/4974/

     
  3. gkt on January 28, 2009 9:31 am

    scams in dubai – shocking
    ever heard of being conservative with your money? isn’t it just a tad unreal to expect an appreciation of 50 % in just SIX MONTHS!

     
  4. Dubaipatchi on June 11, 2009 11:15 pm

    A member of the royal family in the United Arab Emirates has for the first time been sued by an Iranian executive on charges of fraud.

    Shahram Abdullah Zadeh has sued the brother-in-law of the emir of Dubai in an unprecedented civil action in the UAE. The 37-year-old Iranian national has accused the brother-in-law, Hasher Maktoum Bin Juma’a Al Maktoum, of trying to take over Zadeh’s real estate firm.

    “He thought he could do it all because he’s a sheik,” Zadeh said.

    The suit has challenged the transparency of the justice system of Dubai, which requires foreign investors to take on a UAE partner. Zadeh said he reverted to a civil action when prosecutors refused to file criminal charges against Hasher.

    Zadeh, a life-long resident of Dubai, said he selected Hasher as the required UAE partner in Al Fajer Properties, established in 2004 and now worth $2 billion. Zadeh said he and Hasher fell into a dispute amid delays in building a billion-dollar office tower.

    The economic downturn in the UAE has harmed a range of partnerships with foreign investors. In Dubai, the commercial capital, police have detained nearly 20 executives on suspicion of fraud. None of the detainees was connected to the ruling Al Maktoum family.

    “There is no room for corruption and the corrupt,” Dubai ruler Mohammed Al Maktoum said. “In all corruption cases, people are not only prosecuted and punished, administrative and legal holes that they exploited to commit their crimes are plugged. No one in the emirates is above the law and accountability.”

    Zadeh said Hasher, who ignored two summonses, exploited his connections to the ruling family to have the Iranian arrested. In February 2008, Zadeh was imprisoned for 60 days and pressed to renounce links to Al Fajer.

    As Zadeh languished in prison, Hasher was said to have taken over Al Fajer and appointed his son chief executive officer. By the time, he was released, Zadeh found that his office safe was ransacked and cleansed of any documents that linked him to the company.

    At one point, Zadeh appealed to Dubai’s emir. He said the emir did not respond to the complaint against his brother-in-law.

    “We understand that Al Fajer Properties is controlled by a powerful member of Dubai’s ruling family,” Moses Oye, who represents investors in another Al Fajer project, said.

    Still, Al Fajer continues to operate. On April 15, Al Fajer and the Dubai Real Estate Regulatory Agency announced the first transfer of property using a new official online system.

    Hasher’s son, Maktoum, was identified as president of Al Fajer.

    Zadeh was not mentioned.
    Properties SCANDAL Al Fajer Properties Investors filed a Petition June 2009 :

    We NOW WANT our Money Back

    Foreign investors have demanded an investigation of another Al Fajer project, Ebony Ivory.

    The investors, alleging fraud, have called on the Dubai Real Estate Regulatory Agency to force Al Fajer to issue a refund.

    “We have paid approximately $140 million and have a signed contract from Sheik Maktoum Bin Hasher Al Maktoum,” Oye, who represents investors from Britain, Canada, India, Iran, Pakistan and the United States, said. “Now, we want our money back.”

     

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