Mothballing is 'complex' way to restrict supply: developers

Process involves stopping construction and weatherproofing of completed sections

The option of “mothballing” projects in Dubai will restrict excess supply entering the market, but sealing them will depend on their construction stage and approval from authorities, according to a property developer.
“It does make sense as there is already excess supply in the market. Holding back new supply through mothballing is a good option. However, the option needs to be carefully studied and will totally depend on the construction stage of the project,” Abid Junaid, Executive Director, ETA Star, told Emirates 24/7.
On Sunday, Jones Lang LaSalle (JLL) suggested that developers should consider the “mothballing” and “consolidation” options to reduce future supply.
Mothballing involves stopping the construction of projects where development has already commenced, with the filling in of holes in the ground and the weatherproofing of partially completed buildings. According to JLL these techniques were widely used by developers in Bangkok, Jakarta and other South Eastern Asian cities upon the onset of the Asian financial crises in the late 1990s.
A number of half completed projects were mothballed (sealed up) with completion only occurring in recent years, up to 10 years beyond the original schedule. In some cities, completed but unoccupied office buildings have remained closed up for over a decade before being refurbished and restored to the market.
Junaid said mothballing projects would also require approval from concerned authorities (Land department of Dubai, Real Estate Regulatory Agency, Dubai Municipality, etc) and most importantly — customers.
“It is a complex process and will require approvals from many. Moreover, customers need to endorse the move and guarantee staying put with the developer till resumption of work.”
Darshan Hiranandani, Director, Hircon International, echoes the same sentiment.
“It [mothballing] depends on the status of the project. Although we are not certain about how much is the oversupply, it does make sense to hold the project if work hasn’t started on it.”
Asked if developers could benefit from such a move, Hiranandani said if banks don’t become aggressive in lending, then mothballing is one good option.
“It is no good stretching the pain if there is no bank funding,” he added.

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