The Dubai government formed a high-level committee to tackle the impact of the financial crisis on the emirate’s property market. Amid signs of a deepening real estate correction, Mohammed Alabbar – chairman of Emaar Properties, the region’s biggest developer – said the committee was exploring options to restore confidence in the market.
Real estate agents report a slump in activity and price cuts of up to 40 per cent. The formation of the committee is the latest measure aimed at protecting the United Arab Emirates from the global credit crunch. The finance ministry is also pumping Dh70bn ($19bn, €14.9bn, £12.2bn) into the financial system to help shore up banks’ balance sheets and allow them to continue lending to local projects and companies.
In a clear signal that Dubai is considering limiting the future supply of property to stem a slide in prices, Mr Alabbar said the government would « revisit our development pipeline to ensure that demand remains robust ». Analysts have long predicted that the government would ensure a soft landing in the event of a real estate correction, which has come more quickly than expected because of the global financial crisis.
The government has blessed a merger between the leading mortgage providers Amlak Finance and Tamweel. Bankers have said they are also looking at consolidation among developers.
The Central Bank of United Arab Emirates has set up a task force to help the country’s financial industry deal with the global economic downturn. The task force, known as the Financial Stability Unit, will « keep an eye » on potential threats to the financial system of the country. The central bank also issued a statement saying that its board is studying proposals with the Ministry of Finance to introduce « financial vehicles » to back up real estate loans.
« The board discussed proposals for introducing financial vehicles for dealing with real estate loans, to ensure their continuity, in consultation with the Ministry of Finance, » the bank said. « Real estate exposure is a potential problem as banks may not be able to weather the drop in value of real estate ».
Mr Alabbar, who is a senior government official, said he was confident these measures and the resilience of Dubai’s economy would help revive the faltering sector, which had seen some developers cut staff. « The real estate success story of Dubai is now over a decade old and continuing demand will sustain its growth over the long term, » he said, pointing to the region’s role as a centre for trade, tourism and services.
Source: The Financial Times and Business Emirates – Syndication: RIBH.
Emaar reschedules mortgage repayments
Customers of Emaar Properties have been given a breather in terms of extending the time for repayment of mortgages, a senior official of the company told Gulf News, acknowledging that buyers were facing difficulties for securing home loans from banks and finance companies amid the liquidity crunch.
Eisam Galadari, chief executive and managing director of Emaar Dubai’s international operations, said the company introduced the facility one week ago and intends to continue it until the situation eases. « The credit crisis faced by the banks has made it difficult for our customers, » said Galadari. « Extending the time will help them to pay their money. Earlier banks used to give loans on the same day the application was made. But now they have become very cautious. It’s hard to get a loan. It takes more than a month to get a loan. »
In the overall context of the ongoing and announced projects, he added that there is no slowdown in sales and most of the units have already been sold out. Reuters reported that Galadari said Emaar was planning to launch two projects in Dubai worth $5 billion (Dh18.35 billion) each, subject to market conditions.
Source: Gulf News, November 07, 2008
Syndication : RIBH