Bank boss casts doubt on viability of mega projects

Credit conditions for real estate projects are worsening and the viability of some developments needs to be re-examined, the head of Dubai Islamic Bank (DIB) said on Sunday.

"The days of cheap money are gone, be prepared to pay more," Khaled al-Kamda said at a real estate conference. DIB is one of the Gulf's biggest lenders and a key player in the massive developments in the United Arab Emirates.

"Real estate will suffer, big real estate projects will be revisited ... put on the back burner," he said. "The viability of these real estate projects will need to be revisited."

Kamda's comments are one of the starkest reminders to date that the credit crisis sweeping the United States and Europe will not pass the Arab peninsula by, despite billions of dollars of petrodollar inflows and strong economic growth.

Analysts expect growth in the Gulf to slow but remain robust as the energy exporting economies invest in infrastructure and real estate developments, using recent windfalls from oil and gas exports.

But tightening conditions on the international credit markets are affecting the Gulf financial sector and have led the region's biggest central banks to launch emergency measures to provide bank funding or guarantee deposits.

"With tightening credit, the developer has to revisit the fundamentals, the whole basics (of projects)," Kamda said.

The UAE, home to tourist haven Dubai and its artificial palm-shaped islands, needs to raise 50 billion dirhams ($13.61 billion) for real estate projects in 2009, he said.

Meanwhile, Oman's Chamber of Commerce and Industry called on the government to inject cash into local banks so they can finance development projects, the Ministry of National Economy said on Sunday.

Participants of a meeting hosted by the chamber's economic committee made "an appeal for financial liquidity to be provided to local banks operating in Oman, so they can cover the needs of current and future developmental projects," the ministry said in statement on its website.

Gulf Arab governments are taking measures to help their banks stave off the effects of the global credit crisis, including cutting interest rates, providing emergency funds, loosening lending curbs and guaranteeing deposits. (Reuters)