Mounting debt, falling property values and tightening credit are cancelling many grandiose plans in Dubai, and even larger, government-backed developers are in danger of going bankrupt. For more information, read the following article from Property Wire.
The real extent of the halt in developments in Dubai has been revealed by an international bank which estimates that projects worth £53 billion ($77.6 billion) have now been put on hold.
According to HSBC 59 projects have been severely affected by the global downturn and of these eight have been cancelled and the rest put on hold.
In a report note the banks says that high end residential projects and commercial developments are those at most risk in the current economic conditions.
“The worst is the cancellation of entire projects even though they appeared to be in advanced stages of construction,” it says.
The situation is having a knock-on effect on contractors who say they are owed millions of dirhams by state-linked developers and some may face bankruptcy as credit dries up and major projects are cancelled or scaled back.
“There has been a marked increase in the number of contractors asking for help to obtain payment, including payments certified months ago on some of Dubai’s largest projects,” said Michael Grose, a partner at legal firm Clyde & Co LLP.
“Whilst there is definitely an upswing in restructuring advice, no construction businesses are coming through the door wanting to put themselves into liquidation, yet,” he added.
Of the projects under review two were being developed by Damac Properties, one of the Middle East’s largest private developers.
Amongst the companies to cancel or delay a number of projects is government-owned developer Nakheel with six projects on hold, including its Palm Deira project and the $790 million Trump Tower project on Dubai’s Palm Jumeirah.
Nakheel said in January that it was postponing construction on its Nakheel Harbour & Tower, a one kilometre tall tower marketed to be the world’s tallest. Nakheel said the company was re-adjusting its plans to better reflect the current market trends and match supply with demand.
In November, Limitless, another government-backed developer, said it was reviewing the pace of a $61 billion canal development.
In December, the government-backed developer Meraas said it was taking another look at the phasing and rollout of a $95 billion re-development programme in the heart of Dubai.
The HSBC report says a number of projects at the $110 billion Dubailand development, which was destined to be the pinnacle of the emirate’s tourism draw, have been cancelled, including The Falcon City of Wonders project that was to include a replica of the Eiffel Tower, the Tower of Pisa and the Taj Mahal among other wonders of the world.
This article has been reposted from Property Wire. View the article on Property Wire’s international real estate news website here.