Hush money, phantom buyers and feeding the Vegas mentality

The furious response to the cancellation of Damac's Palm Springs project has created a level of investor mistrust that threatens to rock the entire Dubai real estate market, tainting good and bad. One result is that former real estate sales staff are more willing to recount examples of bad practice. The methods listed below are described by one former sales manager as being "common knowledge in the market". Cart before the horse. In a booming market there isn't always time to wait for government approval for the necessary water and electricity supplies to reach a development. Some new projects would require the building of at least one new desalination plant and one new nuclear (or equivalent) power station to supply water and electricity needs to all residents. Don't let that stop you: sell the plots off-plan, the government will take its cut, and if the project goes well it can start thinking about building the power infrastructure. After all, no point commissioning a new nuclear power plant if no one is living there. Hush money. A nine-storey tower in International City, the first for the developer, included a one-bedroom apartment with three toilets, and a two-bedroom apartment with no living room. The solution? Offer the investors a cash lump sum to keep quiet and not talk to the press. Why would they settle for that? The investors are happy as long as the apartment is rented.

Phantom buyers 1. If sales of Phase 1 are sluggish, or you want to create a buzz around a new development (particularly if project is in an undeveloped area), tell potential buyers the entire plot has been sold to 'a Saudi investor'. Off course, there is no such investor. Tell them they can buy Phase 1 off the secondary market, and that Phases 2 and 3 are now ready for release. With Phase 1 apparently sold, buyers should have more confidence the project is viable. Phantom buyers 2. You've hyped the sell-out of Phase 1, and buyers are sniffing around Phases 2 and 3. You announce the release date at short notice, open the sales office early, with a number of 'buyers' (in reality, some of your own admin staff) bulking up the queue. Your buyers start clamoring to be allowed to put down deposits - the louder and more feverish the better - your sales staff need to look suitably harassed. The real buyers, caught up in the fever, spend less time looking at plots, floor plans and contracts. Sand isn't just sand. So construction is 'running behind schedule' (read: hasn't started yet), and your buyer is getting twitchy. If they're an investor, wanting to either rent of resell the property) have your sales people call them saying the land price has risen and, even though the building hasn't come out of the ground, the price has gone up 10 per cent. The investor is placated - his patch of sand is already appreciating - and the property fever continues. Feed the Vegas mentality. So your last project tanked. You sold every apartment without waiting for the proper approval and now, after waiting to the very last minute, you've refunded the deposits to every pissed-off buyer (though not before spending the interest on your new campaigns and showrooms). Your reputation should be in ruins, right? Wrong. This is Vegas. "Ninety per cent of new buyers wouldn't even ask about the company," says one former sales manager I spoke to. "When you're in Vegas and you lose $1,000, do you not go to the casino the next night? This is Dubai. You can make your fortune from real estate." Got your own anecdotes?