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Mon 20 Jun 2011 02:40 PM

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Dubai turns over a new leaf

Post-crisis, Dubai's real estate market is a more sober and sensible place, says Gerhard Hope

Dubai turns over a new leaf

The recent bond prospectus that Dubai posted on the website of the London Stock Exchange revealed a fascinating glimpse under the hood, as it were, of the economic engine keeping the emirate ticking over. The construction sector accounted for $7.5bn and 9.4% of GDP in 2010. It declined 19.5% in 2009 and 14.7% in 2010, after growing 23.1% in 2007 and 18.2% in 2008.

In its review of 450 projects as at 31 May, RERA reports that 237 are expected to be completed in due course, while 217 registered projects have been cancelled. The agency adds that 129 projects have been completed since the beginning of 2009.

For those who are interested, the projects section of the RERA website contains a detailed assessment of all projects in Dubai and their current status, ranging from ‘under way’ to ‘cancelled’. In particular, if one looks at the list of projects that did not even get off the drawing board, does one realise how high on Cloud Nine the emirate was at the peak of its boom period. Nevertheless, the real estate and business services sector accounted for $11bn, or 13.7% of GDP, in 2010.

The prospectus also outlines Dubai’s Tayseer initiative, launched last year. A total of 114 projects were selected for this programme, under which the Department of Land and Properties certifies projects according to due diligence criteria. These include having adequate infrastructure ‘either planned or in place’, a ‘properly-managed’ escrow trust account and ‘full and timely’ financial reporting. One can only wonder why such common-sense criteria were never applied from the outset. However, no matter how belated the hindsight, these measures will go a long way to restore confidence in the property sector, which will have a resounding knock-on effect on the construction industry as well.

Hot on the heels of the prospectus followed the news that the Dubai government had put up the funds to allow master developer Nakheel to complete Jumeirah Golf Estates, an ambitious 306-villa development on the edge of ‘New’ New Dubai. At the time, such projects seemed to indicate the emirate’s seemingly inexhaustible appetite for expansion. Having conquered the beachfront and even the sea, it now seemed determined to urbanise the desert as well.

‘New’ Dubai, which includes such developments as the International Media Production Zone, home to various Damac projects such as the three-tower Crescent and Lago Vista, has been languishing since the property bubble burst. Residents were suddenly able to migrate to previously unaffordable high-end areas such as Dubai Marina.

By allowing Nakheel to complete Jumeirah Golf Estates, the Dubai government is sending a strong signal that the development of the emirate will be completed. There is also a lot of construction activity on this side of Dubai in terms of infrastructure.

Whether or not the renewed interest will benefit local contractors or suppliers, who mostly have set their sights on Abu Dhabi and further afield to keep the home fires burning, remains to be seen.

(Gerhard Hope is the Editor of Construction Week. The opinions expressed are his own.)

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Interested 8 years ago

Gerhard, you say: ‘For those who are interested, the projects section of the RERA website contains a detailed assessment of all projects in Dubai and their current status, ranging from ‘under way’ to ‘cancelled’.’
Thousands of investors are very interested… and have regularly been checking the RERA website over recent years, but sadly the info is not in any way ‘detailed’ or ‘current’. Referring to project status, you mention ‘cancelled’. Would you be able to give an example of one project that is classified as ‘cancelled’ on that website. Perhaps I am not looking hard enough, but I can’t find any..

Roy Dovaston 8 years ago

I couldn't agree more with the above, i'm a smalltime investor in 1 studio unit from 2007 and with a 2 year completion you'd have thought i'd be the proud owner of a nice little studio apartment but due to the complete lack of non development by many so called 'developers' i'm not and it doesn't look like i will be anytime soon either.

I too haven't heard of any cancelled projects and would certainly welcome some more transparency with which ones have been cancelled and why. All i can hope for now is that RERA actually do some regulating and rid the market of bad developers giving the Dubai a bad name.

Anonymous 8 years ago

Infrastructure projects are taking forever to complete whereas 3 to 5 years ago these were 24 hour construction sites. How long will the mess in front of the Dubai Mall/Burj Khalifa be there. That road network has been under construction for 4+ years and does not appear to be progressing but at a snail's pace. Now the government is giving money to finish off a few hundred luxury golf villas? The government should prioritize where their money goes and golf villas is a bad decision....

One project I would complete is the dead hotel project in Healthcare City. Every single visitor to Dubai sees this dead project when they drive over Garhoud and Maktoum bridges. Finish the building so the eyesore of a dead construction site is removed.

Richard 8 years ago

Dear Mr Gerhard
Rera gives us hope that they will cancel the building that I have been buying in for the last 4 years if they do not cancel, it will take another 2 years to build that will be 6 years.
If I held your money for 6 years would you think the same way.
If I held your 467000 AED for 4, 5 or 6 years what would you be saying now,
If I had my money in my hand, I could buy an apartment now,
But my money is just held some where in a bank that I know nothing about,My wife said where is the money for our home in Dubai,I just say I think the land department has it because I have no idea,
I phoned RERA again this weekend and they said I must wait until the end of the year to see if my apartment is canceled,this is 4 years on,and they said they can not tell me how much there is in the Escrow account,
So what would you do Mr Hope?

Mike DeLonghi 8 years ago

Knight Frank is adding fuel to the illusion that things are looking up for Dubai Real Estate. Anyone with half an ear to the ground will confirm that recovery is years and years away.

As for listening to the experts may I remind you that Goldman and Co. paid Ivy League professors to warmly endorse the subprime products only a few months before the crash. Experts with nothing at stake matters little, especially when their sense of reality is skewed by the interests of their patrons.

Marcus 8 years ago

The key word for the market to ever pick up again is TRUST! It doesn't matter if you looking into buying, already bought or is renting. There is nothing here that protect you when things go wrong. I'm only renting in JBR but that experience have for sure put me off from ever buying in Dubai. I started renting being told there was a gym. 4 years after the hand over the developer hasn't been bother to build one. All they are saying is that "It's our intention to build one". There should be a gym accordingly to my land lords buying contract. The maintenance in JBR is also laughing matter. Once a week the fire alarm goes of in the middle of the night for no reason waking up and creating panic in the whole building. Am I supposed to walk down the whole 22 stairs with my whole family just to find out there is no fire, more or less a night every week? What will happen when a real fire starts and I can't be bothered? And the list goes on... I'm just happy I'm not stuck owning a flat in JBR.

Telcoguy 8 years ago

Why are you complaining? Walking the stairs is a perfectly fine exercise that more than compensates for the lack of gym!

Funnily I just moved out of JBR after 1 year and experIence was equally poor, in my case it was the oversupply of six-, and four-, legged pets:)

ScotsExpat 8 years ago

"By allowing Nakheel to complete Jumeirah Golf Estates, the Dubai government is sending a strong signal that the development of the emirate will be completed."...

One swallow does not a summer make, Mr Hope.