Lack of lending continues to cripple Dubai’s property market, stalling or stopping many projects, according a grim prognosis from a recent Middle East Investment Summit. Plans for new development are scarce, even in the comparatively thriving capital of Abu Dhabi. See the following article from Property Wire for more on this.
Large scale lending to real estate projects in the United Arab Emirates, and particularly in Dubai, is unlikely in the short term as banks remain selective in their financing, according to industry executives.
Dubai’s once booming property sector has been hardest hit in the Gulf Arab region, with billions of dollars worth of projects put on hold or canceled while financing for real estate projects all but dried up.
But the attitude of lenders is not going to suddenly change, the Reuters Middle East Investment Summit was told.
‘Banks are still reluctant to lend to real estate. We see a slow return to very selective mortgage lending and where we see it, it is lending where there is very limited risk. Major real estate lending by the banks, I don’t see that coming,’ said Sameer al-Ansari, chief executive at investment bank Shuaa Capital.
Investors my be cheered by conglomerate Dubai World’s debt deal reached last month and the restructuring of Dubai’s flagship property developer Nakheel, expected by the end of the year, but executives at the summit were reluctant to give a timeframe for a Dubai property recovery.
‘Clearly the issues on the real estate front are not behind us. I think we’ve got some way to go to plough through that. I am sure that there will be a recovery at some point. The question is the timing of that recovery,’ said Abdul Kadir Hussain, chief executive at Mashreq Capital.
Residential property prices in Dubai have fallen some 60% from their peaks in 2008 largely due to oversupply, but there is some interest in Dubai again.
‘We have been asked to price new projects or projects in Dubai again,’ revealed Ziad Makhzoumi, chief financial officer of Arabtec, the largest construction firm in the UAE.
‘There will probably be more work coming, probably more in infrastructure,’ he said, adding that Arabtec’s project backlog in Dubai represents 20% of total current projects, down from 95% in 2007, as the firm expands to diversify its revenues.
In neighboring Abu Dhabi, capital of the United Arab Emirates, which has fared better than Dubai during the downturn, 2011 is seen as another year of consolidation, with developers focusing on completion and handover of projects.
‘In Abu Dhabi there were lots of projects that were suspended and there were many projects that were re-tendered, but very few have been awarded,’ Makhzoumi said.
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