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 Aarti Nagraj
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.
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.