Bahrain’s deputy ruler has intervened in a heated row between developers building a $1.5 billion man-made island near Manama.

Several of the circa-22 investors building on plots of land at the 3,000-home scheme have accused the ‘master developer’ LuLu Tourism Company of imposing “unfair” penalties for late completion of work.

The Reef Island Homeowners Union claims external factors out of their control, such as the global financial crisis, have prevented contractors from delivering on time.

One of them, Marina Reef Real Estate Development, is reportedly filing legal action against LuLu – although the developer would not comment on this when approached by Arabian Business last week.

LuLu has already accused investors of failing to meet construction deadlines or comply with rules on scheme design, layout, quality and landscaping, and said it was contractually obliged to seek to recoup outstanding service charges.

But Gulf Daily News reported on Tuesday that Bahrain’s deputy premier Sheikh Khalid bin Abdulla Al Khalifa has called on parties to seek an out-of-court settlement to resolve the ongoing dispute.

Sheikh Khalifa, who is also head of the government’s construction and infrastructure committee, publicly deplored the dispute in a statement issued on Monday, saying he wants a cordial colution so that Bahrain’s real estate and investment reputation is not harmed, the newspaper reported.

“Failure to deal with this occasional problematic issue adequately could result in detrimental and undesirable results,” he was quoted as saying.

He added that Bahrain’s real estate laws do not give the authorities sufficient powers to deal with disputes rising between property owners, investors and developers.

The parties must only enter the courts if they fail to reach an out-of-court settlement.

“The right place to deal with such disputes is the judiciary, which is mandated to rule in such cases and issue final, binding and enforceable resolutions,” he said.

The Reef Island scheme comprises 3,000 homes and is 50 percent complete. A 100-villa beach resort is scheduled to open in two months, and there are also plans for a five-star hotel, luxury shopping mall, medical centre, marina and yacht club.