4.

Can excessive real estate and properties development defend

Dubai economy?

Excessive real estate and properties development would not be able to

defend Dubai economy because the cash loaned by developers were too

much, even the major lender would face bankruptcy or illiquidity

encountering the bubbling stage of Dubai economy. Major lenders of Dubai

world project were taken over by the government during the fall down.

The financial state of Dubai real estate industry is not liquid anymore. With

the decline of Dubai’s reputation, many buyers and investors are

shorting out. Buyers and investors are waiting for the price of properties

to hit the ground and gain profit from “buy low sell high” concept. Many

ongoing projects were not completed and buyers were not refunded even

after the contracts were outdated because developers were using the

funds to outsource other development. Any new development

would hardly gain its buyers and funds, thus causing a slowdown in

economic growth. Despite the funds reimbursed from Abu Dhabi and the

government, the fall would only slowed down but not stopped until a

balanced point were reached. This is known as the bubbling stage.

Many labors of project development were not paid but not allowed to leave
the state at the same time. Ahmad (name changed upon request), a civil

engineer, who worked for the company for 18 months, said his contract

was terminated on November 10 and that he had to chase the

management for four weeks before receiving his final settlement, in which

the notice pay was calculated on the total salary.

(http://internationalpropertyinvestment.com/damac-properties-in-dubai-

fail-to-pay-employees-full-settlement-on-dismissal) These irresponsible

actions will bring Dubai world’s reputation and credibility lower than

expected. In our (group) opinions, excessive real estate development

without proper risk management is disastrous and would negatively

impact the economy of Dubai as in drop in real estate and property price.

6. Dubai government and official’s actions to Dubai World

financial performance and results.

Dubai’s property prices are falling like the proverbial rock and the

government of Abu Dhabi has stepped in, in an effort to prevent a

complete meltdown in Dubai’s property market. Dubai’s two largest

mortgage lenders, Tamweel and Amlak Finance have reached the point

where they are untenable and Abu Dhabi’s state owned “Real Estate

Bank,” will take over both lenders.

Dubai has already borrowed an undisclosed amount of money from oil-rich

neighbor Abu Dhabi, and this is the next logical step. Both Amlak and

Tamweel’s stock value has fallen over 80% in year 2010, and neither

company is in a position to raise financing from outside the UAE. Amlak

has suspended offering new home mortgages, and several foreign banks,

including HSBC and Lloyds TSB have tightened lending criteria.

Abu Dhabi Finance has recently (April 26 2010) announced that they are

reducing their interest rates to a minimum of 5.5%. This has been

seen as a positive move by many of Dubai’s property agents who believe

that if the Dubai banks follow suit it could lead to an increase in market

activity. It is obvious that the key factor in business is cash flow and if the

cost of a mortgage and maintenance is higher for the landlord than the

rent he is receiving for the property, it undoubtedly causes inequality and

restrictions for the market place. Furthermore it does not encourage

future buyers to enter the Dubai real estate market. Currently the

lowest available interest rate in Dubai is 7.5% which may not be allowing

existing and new landlords to maintain or grow their business.

Dubai released lawsuits governing the property industry. The Government

published Law 9 of 2009, an amendment that introduced a sliding scale of

refunds for buyers who defaulted on their purchase plans for property in

off-plan developments. The whole purpose is to put the purchaser in a

situation of security.

Despite all the actions took to cope with the fall of real estate and

property industry in Dubai, our group would define them as not effective

and slow. Most of the supports and funds given to Dubai real estates

industries were nullified by the succeeding drop of properties and stocks

prices. Scams were not controlled and labors were treated unlawfully. The

government failed to take immediate actions and the reputations of the

states continue to fall.