Tuesday, June 09, 2009

RAK Govt. to take-over La Hoya Bay island property project

The RAK Government has agreed to take-over the Dh.2billion La Hoya Bay island property project, which was under threat due to the collapse of its developer.

The decision came as a relief to several hundreds of investors who had invests all their savings on the flagship project of the Ras Al Khaimah Investment Authority (RAKIA), located on the man-made island, Al Marjan.

The Chief Executive of RAKIA, Khater Massaad, Sheikh Saud bin Saqr, the Crown Prince and Deputy Ruler of RAK, confirmed that the investors will not be put into trouble, and that the project will surely be continued.

The investors had urged the Government to come to their rescue, as the original developer of the project, Khoie Properties, became insolvent and stopped construction. A senior board member of Khoie Properties was imprisoned, as it failed to honour a cheque for Dh.57mn, in favour of the Government to pay for the land on the island.

RAKIA has requested the court to designate an official receiver for Khoie Properties. Another developer would be appointed to complete the first phase of La Hoya Bay, which includes seven residential buildings, comprising seven storeys.

Rakeen, a property arm of the Government, may be designated as the new project manager, as it is also the master developer of the whole island. Once this is done, Rakeen will open an escrow account and award construction of the project to a new company within a month, and the project is also likely to be re-named.

Khoie Properties had already received a 30 percent down-payment from investors, worth Dh.280mn, with the balance due on completion. Now, Rakeen proposes to ask investors to pay another 50 percent of the agreed price in five installments to finance construction, with only 20 percent due on completion. Rakeen said it would absorb any loss of initial downpayment, although it is now unrecoverable. However, Rakia will not take up any liabilities of Khoie Properties.

La Hoya Bay project was planned to be developed in three phases. The second and third phases were themed as Business Village and Regency respectively. The land for the two phases may be sold to other developers, if interested.

This RAK project is another instance which indicates the government intervention on the UAE property market, which has suffered steep price declines and growing defaults during recent months.

[Source The National ]

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