Credit crunch risks hurting UAE developers

Sorouh CEO says problems in financial markets could slow expansion plans.
Credit crunch risks hurting UAE developers
By Stanley Carvalho
Wed 17 Sep 2008 01:48 PM

The credit crunch could hurt developers in the United Arab Emirates, slowing expansion plans, Abu Dhabi-based Sorouh Real Estate Chief Executive Mounir Haider told reporters late on Tuesday.

The emirate's No.2 developer by market value said he was unsure whether property stocks, that have fallen sharply recently, have bottomed, but he was optimistic the stock market downturn will end soon.

"The health of the financial markets worldwide is linked to the UAE and we are hoping this would be over soon. Definitely this could have an impact and before we invest in some projects outside the UAE, we must consider all these factors," he said.

"Due to the current crisis, each project will be driven by supply-demand rules and right now I cannot say whether we will put them on hold. We will wait and see."

The developer is looking at developing property in Morocco, Egypt and other markets, and will launch the third and final phase of its 11 billion-dirham Gate Towers on Reem Island during the upcoming Cityscape real estate exhibition in Dubai, he said, adding that the firm is developing projects in excess of 50 billion dirhams ($13.61 billion).

Third quarter profit growth is expected to equal or exceed its second quarter profit rise due to improved sales, Haider said.

The company posted a record net profit of $167.6 million in the second quarter, up 39 percent from the same period last year.

"We are very positive about third quarter profits and we have promised our shareholders the same rate of growth as we saw in the second quarter. Sales are strong and increasing in each quarter," he said.

"The market in Abu Dhabi is very strong, demand is growing and we are confident of our policy of providing new products."

Demand for property in the emirate's capital is projected to be in excess of 100,000 units for the next decade, he said, citing experts' forecasts, adding that Sorouh will provide between 7,000 to 10,000 residential units during this period.

Property shares in the UAE have fallen sharply recently as fears of an economic slowdown sweep the Gulf, and the Dubai authorities step up efforts to regulate the real estate market with a series of ongoing police probes in firms, including property companies.

In Dubai, shares of Emaar Properties have fallen almost 30 percent since the beginning of August.

In Abu Dhabi, Aldar Properties has slumped nearly 40 percent while Sorouh has fallen by almost 36 percent.

Shares in Sorouh were up 0.7 percent at 5.60 dirhams by 0841 GMT. (Reuters)

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