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Emaar shrugs off debt as it faces new fines
Emaar seems to be constantly in the news these days, what with its third quarter report and the threat of an Indian fine. Kipp takes a closer look at the latest developments affecting the property developer
October 29, 2010 8:28 by Eva Fernandes
This week Emaar is in the spotlight as Kipp takes a look at recent developments with the company.
Drop in profits
Emaar’s profits dropped 7 percent as the company announced profits of Dh612 million for the third quarter. The drop in profits comes as the result of a particularly bad year, increasing costs and the not-so-successful rental of units in the Burj Khalifa.
Speaking to The National, Chet Riley, a Nomura Securities analyst, says, “We believe that the cost of running the hotels and malls is getting higher (…) Together with the holding cost of units that haven’t been delivered, less Burj Khalifa deliveries and impairments, their profits missed our expectations.”
But news of Emaar’s decline in profits in the third quarter comes after news that the Delhi Development Authority (DDA) has received instructions from the Urban Development Ministry to seize Rs.1.3 billion from Emaar-MGF for its shoddy work and delay in constructing the residential block it built for the Delhi Commonwealth Games.
Gulf News quotes a senior official in the Urban Development Ministry as saying, “Emaar is being penalized for structural defects, and inadequate amenities including insufficient power and waste supply in the games village.”
But Emaar says the Indian fine will not seriously affect the company’s cash flow, as it has been issued against Emaar-MGF (a collaboration with India’s MGF Development). The company said on its website, ‘The encashment of the guarantee has no direct impact on Emaar as the guarantee has been issued through the facilities available to the company in India.’
Emaar’s Burj Khalifa rental decline
And it seems Emaar’s woes are not limited to the sub-continent, but having something to do with the almost-unlived-in tallest tower in the world, Burj Khalifa. With annual rent once estimated at Dh180,000 for a one -bedroom flat, the asking price for a chance to live at the world’s tallest tower has dropped to Dh.120,000, with two bedrooms being available for Dh.220,000. Despite the plummeting prices, the tower remains significantly unoccupied. Laura Adams, Better Homes adviser told Gulf News 825 apartments of 900 are still empty.
It remains to be seen whether Emaar will be as quick to shrug off falling profits and rents as easily as it did the threat of a fine from the DDA.