Major Bahrain housing development Riffa Views suffered another setback, when one of its main builders began pulling out of the project.

G P Zachariades (GPZ) terminated its contract effective Tuesday due to alleged non-payment.

A senior company official told our sister newspaper Gulf Daily News (GDN) that it was owed BD4 million ($10.6 million) and had not been paid since February.

He added the decision to remove staff and equipment from the Lagoons Estate area of the development, which GPZ was working on, was taken after lengthy negotiations failed to produce an agreement.

'We have been left with no option following numerous attempts to come to a mutually-beneficial agreement with the client to right the debts outstanding since March and provide comfort that future dues would be paid when due,' he said.

'Unfortunately, it is reported that the client could not provide this due to their current and longer-term financial outlook.'

He said that although GPZ was currently owed BD4 million, this figure could 'easily rise' to more than BD10 million depending on the final 'demobilisation account' yet to be agreed with Riffa Views.

GPZ had been brought in to construct more than 300 villas at the Lagoons Estate section, but the official revealed only 135 of those homes had so far been completed - with an estimated 275 sold. He added that the decision to pull out of the project meant more than 1,700 people employed directly or indirectly by GPZ at the site would now be forced to search for other work, or return to their home countries.

Some 25 subcontractors and 80 suppliers will also be affected by the demobilisation, he added.

One of those subcontractors involved in the project described it as 'disastrous'.

The GDN has previously reported that Riffa Views, along with other property developments in Bahrain, had faced various challenges over the past two years - such as a shortage of construction materials and a rapid rise in construction costs, followed by the global economic downturn.

Riffa Views managing director Yasser Abdulrahman Al Raee declined to comment on GPZ's withdrawal from the site.

However, he said the company had done its best to address challenges faced by the project - admitting the effect had been a delay in the handover of villas to homeowners.

'Our determination to bring Riffa Views to completion has led to an amended development plan, whereby wherever possible we have directed our construction resources to give priority to completion of the villas that have been sold,' he told the GDN.

'This has allowed us to continue progressing construction work and, to date, more than 400 villas have been completed and handed over from the contractors to Riffa Views - and of these, 280 have been handed over to homeowners.

'We expect further delivery of 100 homes through the summer months.'

Recovery

He added that a programme to remove construction debris and accelerate landscaping work across the development was now underway. 'We acknowledge that the situation continues to be challenging, but we are starting to see indicators of modest recovery in the market,' said Al Raee.

'Real estate projects across the world have had to respond to a very difficult environment and the fact that construction and villa handover continue to progress at Riffa Views stands as living proof of our commitment and determination to deliver the project to our homeowners, investors and Bahrain.'

Meanwhile, a spokeswoman moved to reassure homeowners who had bought property in the Lagoons Estate that necessary measures were being taken to ensure its commitments are fulfilled.

However, the decision by GPZ is another setback for Riffa Views, which was supposed to be completed by the middle of last year.

Spanish development company Layetana pulled out of its management deal with the development in January, having lasted only nine months on the job. The Barcelona-based firm was brought in under an earlier management shake-up, but said it decided to end its association to concentrate on projects in Poland.

Riffa Views was first launched as a 28 million square feet luxury development in 2006, incorporating almost 1,000 homes surrounding the Royal Golf Club.

However, homebuyers continue to face delays in receiving their property and at least one is taking Riffa Views to court - claiming the developer offered her compensation of three per cent of the value of her home, even though her contract allegedly states she should receive a 10 per cent discount for late delivery.

Arcapita, the investment house behind the project, yesterday referred the GDN's enquiries to Riffa Views management.-TradeArabia News Service