Customer Liabilities Mitigated From Nakheel’s Projects Decline By 32.4%Friday, May 11, 2012
According to the news, the total customer liabilities mitigated from Nakheel’s long term projects suffered a decline of 32.4%. These liabilities have fallen down to Dh 6.67 billion from the original amount of Dh 9.88 billion. Credit notes issued by Nakheel to the buyers during the economic downturn are increasingly being held onto.
It seems that the investor confidence in the recent moves on the real estate development side by Nakheel is rising, since the number of the credit notes put up for sale and the discounts on them have come down. Nakheel says that a considerable portion of the liability has been dealt with through third party consolidations with the help of brokerage firms. It also says that it successfully swapped purchases into properties ready for handover.
It also highlights that in transactions, sellers have to offer discounts, which can range from 20%-50%, on the face value of credit. During the downturn, developers issued credit notes to the investors of the stalled or delayed projects. At that time, these credit notes were offered at steep discounts but this is no more the case.
A spokesperson from Nakheel says that this is the result of increased confidence in Nakheel’s products, since the feedback from the customers and brokers reflects the same. So far, Nakheel has handed over 1,171 properties to the investors in 2012 and the final instalments are settled through credit notes. This is also playing a key role in boosting the demand of credit notes.
Currently the rate of discounts on these notes is as low as 10% but long term investors are holding on to investments because they are expecting a decrease in the discounts or an increase in the potential returns. According to a partner at the SPF Realty, the discounts on the credit notes a year ago used to be 40% to 50%.
Nakheel’s liability for the cancelled or stalled projects also reduces whenever a credit note is bought and sold and it is happy that this is creating a win-win environment for its stakeholders.