Developers begin returning down payments

Investment vehicle RomReal, the local subsidiary of Westhouse Group, a company with Norwegian and British capital, suspended construction work on two of its three real estate projects planned in the southeastern city of Constanta, due to a lack of financing. The company announced it could return down payments made by 25 clients for apartments in one of the projects, worth a total €625,000 (excluding VAT). Amid the financial crisis, several developers, including major ones such as TriGranit, RED Management Capital, River Invest and Fabian, have decided to freeze projects because they have been unable to secure financing. RomReal announced two weeks ago that it has no funds to build its largest project, Central Apartments. According to Westhouse Group’s Sales Manager, Andreea Panache, clients who pre-contracted apartments in the Central project may opt instead for Corallia Holiday Apartments or have their down payment returned. So far, RomReal has invested €3 million in the most complex of all three projects, Oasis Residences, with 15 percent of the apartments pre-contracted, a further €1.2 mln in the Central Apartments project, where 25 percent of the apartments were pre-contracted, and €400,000 in the Corallia Holiday Apartments, where 60 percent of the apartments are already sold. This is the first company to return money paid by its clients. However, other developers are likely to do the same shortly. “It is obvious that there are companies that are unable to carry on their projects. It is likely that other such cases will appear, because these developers relied only on lending and funds from apartment sales,” according to real estate consultancy company CB Richard Ellis-Eurisko’s Residential Department Manager, Ionut Bordei, for Business Standard.