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Wed 27 Feb 2008 02:23 PM

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Analysis of Gulf real estate 'extremely' difficult

Lack of information and inconsistent market estimates a problem, Moody's says.

Analysis of the Gulf real estate sector is "extremely" difficult due to a scarcity of consistent information, Moody's Investors Service said on Tuesday.

In its first report on the sector, the ratings agency said the broad outlook for the market was positive, but cautioned that a lack of information and regulation, and inconsistent market estimates made accurate analysis a problem.

"...accurate analysis of the market is made extremely difficult by the still sketchy nature of official information, only gradually evolving regulation and the significant differences in market estimates, depending on the source," said Philipp Lotter, senior credit officer at Moody's.

However, the agency said ratings were likely to remain stable thanks to strong government support for the sector, the availability of land and sustained growth in the market.

Many master developers in the Gulf are owned wholly or in part by governments.

“The two overriding features [that need to be considered when rating companies] are the large-scale availability of land, which is made available to many master developers either for free or at very favourable prices, and the significant growth of the markets, fuelled both by speculative investors but also more sound fundamental factors," Lotter said.

Moody's said one area holding back ratings was companies' heavy exposure, both regionally to a certain country or even city, and operationally to a handful of large projects.

"This exposure to a single market acts as the largest constraint on companies' creditworthiness," Lotter said.

Moody's currently rates six companies that directly or indirectly engage in the Gulf property industry.

Four of these are based in Dubai, one in Qatar and one in Saudi Arabia, with five of these government-related issuers, meaning their ratings incorporate government support in the hypothetical event of financial distress.

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