DUBAI - Kabir Mulchandani, an Indian property tycoon detained by police in Dubai, says people who are accusing him of fraud are trying to get out of investments that turned sour because of the property downturn.
The chairman of Dynasty Zarooni is being held because more than 25 investors, with claims worth Dh280 million (US$76.2m), have accused him of fraudulently selling them property and running an illegal investment scheme, a lawyer for the investors said. Mr Mulchandani, 36, denies the accusations and says he is being targeted by a group of investors who are unable to meet their obligations as the property market deteriorates.
"I am the victim here," he said. "After Lehman Brothers went bust the world changed... The system is being misused by certain individuals who are just wanting money and wanting to get out of commitments they have made that they are not able to fulfil because the market has turned."
Mr Mulchandani said his case was likely to be a predecessor to a rash of similar cases caused by the decline in the property market. Dubai property prices have fallen by about 25 per cent since hitting a peak last year.
"It is going to turn into a bloodbath of attacks by investors who just want to get out of obligations," he said. "Do you think I would be sitting here had the market been OK?"
Dynasty Zarooni, a joint venture between Mr Mulchandani and Hilal al Zarooni, an Emirati businessman, is one of the highest profile property companies to come under scrutiny by the authorities since the property market began to fall late last year. The company was the top newspaper advertising buyer in the Emirates last year, spending $14.6m and topping the likes of Nakheel and Emaar Properties, according to figures from the Pan Arab Research Centre. Its advertising spending ranked 10th across the Middle East.
The company, founded in 2005, is a property resale and marketing operation. It has bought entire buildings off-plan from developers with a bulk discount and re-sold floors and units to investors at a premium. Then, as a service to these core investors, it would market the buildings prominently around the country to facilitate their resale to retail buyers. Usually, Dynasty Zarooni would play a middleman role for the first payments and then contracts would be issued between the buyer and the developer, cutting the company out of the deal.
It sold 29 buildings in this way last year, according to executives. The business was profitable, with Mr Mulchandani planning a foray into New York City property before his arrest.
He lives in the Emirates Hills development in Dubai.
A group of investors, however, allege Mr Mulchandani built his company by misleading investors, according to Salem al Shaali, a lawyer representing several investors.
One of the allegations is that Dynasty Zarooni displayed one building and sold another.
Investors said they were shown buildings that were several storeys high, and told that they were the Ebony and Ivory towers. They bought dozens of units, and in some cases several floors, of the buildings. The buildings were also misrepresented in advertising, the investors say.
One advertisement in a daily newspaper on July 23 last year showed 24 photographs of "round the work" progress on the Ebony and Ivory projects. A caption for the photographs reads: "Shot at location on 10th June 2008. Ebony & Ivory - Jumeirah Lakes Towers."
In fact, the images showed other buildings in the Jumeirah Business Centre complex that were further advanced in construction. Work on the Ebony and Ivory towers plots still has advanced only to shoring and piling. A contractor has yet to be chosen for the Dh2 billion project.
Al Fajer Properties, the developer of Ebony and Ivory towers, said a construction contract would soon be signed for the towers, which it said were to be finished between next year and 2012. An Al Fajer spokesman declined to comment on the issue.
Mr Mulchandani said the advertisements were meant to show the larger Jumeirah Business Centre complex and depict Al Fajer as a hard-working developer.
"I don't believe it is misrepresentative in any way," he said.
He said the company had sold the entire building in April and that the investors involved in claims against him had signed contracts that detailed which plot of land the buildings were to be built on.
Claims have emerged involving other projects that were bought and resold by Dynasty Zarooni, including the Sheffield Classique and Al Qoraishi Tower, according to Mr al Shaali.
Imran Karim, the son of an investor taking action against Mr Mulchandani, said his father, Abid Karim, was sold units in the Classique and Al Qoraishi Tower under the impression that Dynasty Zarooni was the developer.
Mr Mulchandani said he never represented himself as a developer.
Officials from Sheffield Real Estate and Baiti Properties Development, the developer behind the Al Qoraishi Tower, declined to comment.
Another allegation against Mr Mulchandani is that he created an illegal "investment club" where 12 investors were invited to pay Dh300,000 a month for 12 months for a guaranteed return of up to Dh1m a month. After six months, they expected to redeem their investments, but Mr Mulchandani did not pay, investors said.
One such investor, Mohammed Arif, who also invested with Dynasty Zarooni in several properties, said he had Dh25m with Mr Mulchandani and projects sold by Mr Mulchandani.
"I invested a lot of money with him," he said. "I fear the money is gone."
Mr Mulchandani said the Dh300,000 was actually a membership fee for 12 investors who bought from him in bulk. The fee would give the members the first right of refusal to buy up to 5 per cent of buildings that Dynasty Zarooni acquired, as well as use of the Dynasty Zarooni offices for resales. The fee also contributed to advertising, he added.
Marwan bin Ghalita, the chief executive of the Real Estate Regulatory Authority (RERA), declined to comment on the accusations against Dynasty Zarooni. In November, RERA stated that there were no complaints against Dynasty Zarooni, after allegations in two Indian publications that the company had sold projects while representing to investors that they were buying another project.
Officials from the Dubai Public Prosecution declined to give details on the cases, but confirmed staff members were investigating the claims.
By Bradley Hope
© The National 2009
