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Crisis crisis discord

01.09.2009
Author: Egor SHARAI
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The situation in the Dubai real estate market is ambiguous: for some, the consequences of financial unrest turned out to be no worse than seasonal fluctuations, while some developers and investors fully felt all the hardships of the crisis. Naturally, where it is thin, it breaks there.
For sale – for sale. Such signs look hopefully from almost every building at those passing or passing by, urging them to become owners of such scarce square meters once. This word in Dubai has replaced the widespread and widely used Luxury. A decrease in the pace of construction, low demand, and falling prices are just some of the negative consequences of the global financial crisis, which have manifested themselves to one degree or another in the UAE real estate market in general and Dubai in particular. But it would be a mistake to say that such a situation is widespread and panic. The real estate market of the Persian Gulf once again proves the correctness of the statement that the East is a delicate matter.

Delayed start
According to the research group of HSBC Bank, the total number of problematic projects in the United Arab Emirates has reached 59. Of course, this is nothing compared to thousands of construction sites, but still a cause for concern. Eight projects were canceled completely, and the remaining 51 projects were suspended, and most of them are located in the Emirate of Dubai. These are mainly elite residential and commercial buildings.
The most expensive in the list of suspended projects is the grand Nakheel Harbour and Tower from Nakheel, worth $38 billion. This is followed by the Al Salam City project from Tameer Holding Investment, located in the emirate of Umm Al-Quwain, worth $8.2 billion, as well as a large hotel project by Tatweer - Asia–Asia Hotel worth $3.3 billion. which is part of the 27 billion Tatweer resort called Bawadi Resort. He was supposed to add 6,500 new rooms to the Dubai hotel sector.
Nakheel Harbour and Tower is not the only painful project of Nakheel, one of the most powerful developers in the region. The company's plans to create four theme parks, including The SeaWorld Centre on one of the artificial "palm trees", have been postponed for 12 months. According to the previous construction schedule, the first phase of the project – SeaWorld and Aquatica – was scheduled to open in 2012, the second phase – Busch Gardens and Discovery Cove – was scheduled to open in 2015.

The confident tread of the crisis
But the reduction has also befallen the developers themselves. According to the Dubai Real Estate Regulatory Authority (RERA), the number of developers officially registered in Dubai has already decreased by 40% over the past few months.
"At the moment, 500 real estate developers are registered in the emirate, although back in November 2008 there were more than 800 of them," says Marwan bin Galeita, head of RERA. – After the onset of the crisis and the appearance of a shortage of cash on the market, some companies decided that they did not want to engage in construction anymore. Others were forced to cancel their projects because they were sure that their implementation would never be possible. We are currently developing a system that would allow us to classify Emirati developers according to their financial stability and experience in the real estate market. This information will allow buyers and investors not to worry about the stability of the developer company and choose the most reliable ones."
But that will be later. In the meantime, analysts are inconsolable: "The value of real estate in Dubai (UAE) may decrease by up to 60% by the end of 2009," the Emirati investment bank Shuaa Capital panics. The basis for such a gloomy forecast is a decrease in the population, the expected launch of 35,000 new apartments on the market this year, problems in the mortgage lending market, rising unemployment and the cancellation of visa guarantees for home buyers.

Natural selection
But anyone can make a big deal out of a molehill. In addition, there are many pessimists trying to make money from bad news during the crisis. According to many major market players, the crisis is quite an expected and even necessary phenomenon.
"There has been a dropout of unscrupulous market players. It was they who sowed panic and a share of uncertainty in investor circles," said Ismail Shangareev, head of the Dubai Real Estate Agency (DAN). – But what could be more successful than a situation where the trumps are in the hands of buyers, which means that they dictate all the rules themselves?! And now it is promising to invest in the UAE real estate, which is either under construction or already ready. The demand from Russian customers is not weakening, and this interest is becoming more serious."
There are also clearly positive figures. Thus, the total value of transactions in the Dubai real estate sector in 2008 amounted to 70.2 billion dirhams ($19.1 billion), that is, 47.5% more than in the previous year, 2007, when, according to the Dubai Land Department, this figure was 47.6 billion dirhams.
"The downturn in the real estate market in the Persian Gulf region, which developed so rapidly until recently, which scared off many investors, will not last indefinitely and will be limited, while the UAE will try to protect its banking system from risks and protect it from future crises. And measures on this issue are already being taken," said Viktor Lebedev, head of the representative office of the ITAR–TASS news agency in the UAE.

Despite the difficulties
I must say that the government of Dubai is not idle, creating new effective mechanisms for the anti-crisis program. For example, a few months ago, the Government of Dubai established a special committee to overcome the crisis, whose main task is to develop a strategy to combat the negative impact of the financial crisis on the economy of Dubai and the country as a whole.
In order to protect investors from the consequences of unscrupulous developers, the developer must purchase a construction site and complete at least 20% of the work, after which he will be able to obtain RERA permission to sell the object. In addition, the payment schedule for the purchase of unfinished real estate should be linked to the construction process, and the down payment should not exceed 20% of the total cost of the object. Both of these bills will be put into effect in the very near future. A decree is also being considered that real estate developers will be struck off the Real Estate Register if they do not begin construction of the project six months after receiving a sale permit.
Many investors are also reassured by the fact that even during the crisis, Dubai's most ambitious projects, symbols of the emirate's pride and prosperity, continue to grow. Thus, the construction of the world's tallest building, the Burj Dubai Tower, has reached a final height of 818 m. The official opening ceremony of the skyscraper is scheduled for September 9, 2009. On the same day, the Dubai metro will open, the construction of which does not stop even at night.
The financial crisis has not stopped the construction of two rotating Dynamic Tower skyscrapers in Dubai, work on which will begin in the emirate in the coming months. According to the experts of the Real Estate Agency IMEXre.com The construction of a rotating skyscraper for $700 million will take about 22 months from the start of construction work and the laying of special prefabricated blocks, which are now being prepared specifically for this project in Italy.
Summing up, it is important to note that many Dubai realtors predict an increase in interest in local real estate from Russians. This trend is mainly due to the fact that while Europeans or Americans are worried about the crisis, seasoned Russians will no longer miss the opportunity to buy a house "over the hill" with their favorite discount sticker. However, some experts have taken a wait-and-see position and believe that it is too early to draw any conclusions and make forecasts, since the crisis has not yet said its weighty word.
Well, let's wait and see, as the old proverb says. Although, perhaps, this approach will not really suit real estate agents, for whom, in an economic downturn, every transaction is worth its weight in gold.

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20 of Dec 2009, 20:19:46
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