Global Investing

Dubai pride helps Nakheel to save face

    

By Jason Benham

 

It’s the property face of the Gulf’s business and tourist hub and the developer of palm-shaped islands visible from space – so Dubai will simply not allow property firm Nakheel to default on its huge $3.5 billion Islamic bonds which mature in December.

 

Just think of the bad publicity it would bring to the region, and there’s already been plenty of that. Another kick in the teeth is certainly not what Dubai needs. Plenty of critics have joined the ‘bash Dubai” bandwagon and several more are set to join the ranks at some stage. 

 

But any default would mark a failure for Dubai World, the state-owned conglomerate, and a castrophe for Dubai’s government, which has ploughed billions of dollars over recent years into making Dubai what it is today.

 

That leaves two more options – repayment or restructuring.”I would lean towards the repayment scenario,” said Fahd Iqbal, GCC strategist at EFG-Hermes in Dubai.”It would send a better signal to the market, and ultimately, I don’t think Dubai’s government has serious financial restraints since it should have recourse to the federal government. Dubai wants to avoid bad publicity and Nakheel is one of the key cornerstones of the Dubai story.”

 

A restructuring is also a possibility but appears to come second to a repayment, with some bankers and analysts saying the window of opportunity to restructure is diminishing.

from Funds Hub:

Western investors fear Dubai’s Wild East reputation

By Jason Benham

Glitzy Dubai's property market is in trouble, there's no doubt about that. Just take a look at the hundreds of motionless cranes, unfinished projects and the expats who are leaving in droves as they lose their jobs.

Dubai's future cloudedAnd prices and rents which soared during a six-year boom have crashed since late last year. According to one resident who recently moved in the City, it now costs 150,000 dirhams to rent a three-bedroom flat on the Palm, a man-made island off the coast of the emirate, around the same it would have cost to rent a one-bedroom appartment there a year ago.

It's not just the global downturn thats the concern for Dubai's once-booming property market, but also the lack of transparency and need for greater regulation. And that's what's going to keep the western investor from splashing the cash.

Dubai dream over for western investors

Real estate prices are in freefall. Billions of dollars worth of projects have been cancelled or put on hold and expats are leaving in droves as they lose their jobs. Once a playground for the rich and super-rich, the seaside emirate — home to palm tree shaped islands, mega malls and luxury sky-rise hotels — has lost its lustre. And bargain-basement assets are not yet cheap enough to tempt buyers back. 

European investors, who once clamoured to Dubai, reckon they can land better deals closer to home or elsewhere in the Gulf. Some analysts are predicting that the more stable markets in Abu Dhabi, Doha and Saudi Arabia to recover faster than Dubai.

 “Dubai is not one for us. I prefer long-term established locations with underlying intrinsic attractions or clear, sustainable competitive advantages,” Bill Hughes, managing director, Legal & General Property, told Reuters.

Clear road ahead for depressed Dubai

Dubai’s deepening real estate slump has brought unexpected benefits to its time-poor urban residents.

Speaking at the Global Islamic Financing Summit, Dr. Humayon Dar, CEO of Shariah-compliant consultancy BMB Islamic, said Dubai was a much nicer place to live now that the immature infrastructure system was not overwhelmed with construction traffic and armies of property speculators.

“When you got to Dubai you will find that right now, traffic is actually much less but people like me like it because I used to be stuck in that traffic all the time,” Dar said, eyes agleam. ”But now, going from A to B is so fun - I like it.”