EFG-Hermes on Monday cast doubt over Nakheel’s plan to build a tower more than one-kilometre high, stating the timing was not “ideal” and questioning how the $38.12 billion project will be funded.
The Egyptian investment bank said in a Dubai real estate note that the launch of mega projects such as the Nakheel Harbour and Tower and $95 billion Jumeirah Garden City redevelopment of Satwa coincided with reduced investor appetite and tighter credit conditions.
“While these projects received a lot of attention due to their scale, we believe their timing cannot be considered to be ideal given reduced appetite for new projects as a result of the global confidence crisis,” the bank said.
“Moreover, the tighter liquidity picture raises the question of funding, which was not particularly addressed.”
Nakheel maintained the global economic downturn would only have a limited impact on the Middle East, but added it would “monitor the market closely” and “build to meet future needs”.
It said the scheme would be funded by private land sales and “other project funding”.
“Globally, we are witnessing a downturn in the market cycle. This will have an impact on the Middle East, but it is likely to be relatively small in comparison with other markets,” Nakheel said in a statement to Arabian Business.
“The Nakheel Harbour and Tower development will be built over ten years during which will see more economic cycles. As always, Nakheel will monitor the market closely and make decisions that are appropriate to the market environment and build to meet future needs.”
In its research note EFG-Hermes said anecdotal evidence showed sales and the number of deals made at last week’s Cityscape real estate exhibition were down on previous years, given the more cautious approach from some investors and uncertainty in the markets.
However preliminary transaction figures provide a less gloomy picture, with deals registered with the Dubai Land Department during Cityscape totalling nearly 2.5 billion dirhams ($681 million) in 2008, up from 2.05 billion dirhams last year and 657 million dirhams in 2006, EFG-Hermes said.
The bank said Abu Dhabi-based developments recorded a strong uptake among investors during the show, with all 230 units released by Sorouh Real Estate within its Gate District project selling in three days.
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