Credit Crisis Hits UAE

We were almost getting into it but now it is too late to realize that we are already a part of it. Yes, global crises are definitely impacting all the countries in the world and UAE is no exception. The property boom is no longer there. I have come to know from my friends who work in the property industry that their sales figures are certainly down and targets are difficult to achieve. Many speculators are finding it difficult to put up their property for sale as there are no buyers in the market. The Financial and Property sector fears job losses. Some of the facts and rumors taking rounds in the market: -

1) Dubai based Damac Property has laid of more than 200+ staff
2) Lloyds has stopped loans for purchase of apartments and dropped its LTV ratio on villas in the UAE to 50 per cent.
3) HSBC has doubled its minimum salary requirement for a personal loan from Dh 10,000 to Dh20,000.
4) Most of the brokers and property developers are planning to lay off hundreds of staff as part of their cost cutting measures
5) Tatweer has had several job cuts
6) Emirates NBD has suspended retail credit to expatriate employees of few real estate firms
7) Most of the banks have frozen their recruitment drive
8) Most of the property developers have rescheduled their upcoming projects
9) Property prices may fall rock bottom
10) There is a speculation that most of the westerners who are loosing jobs may rush to the Middle East for job search; which will lead to further competition for the existing jobs.

Irrespective of these crises I believe UAE economy is strong and the government has taken measures to contain the crises. The impact is due to global recession and not due to the weak economy of UAE. UAE government has committed Dh 120 billion in liquidity to the banking system to ease the liquidity situation. Due to lack of transparency we don’t know if any bank has utilized these funds. Once again I believe it’s a mental game; if we all feel that nothing is going to go wrong and continue to live a normal life, we’ll successfully pass this phase.

Dubai Property Saga

Recently I visited launch of a new property in Dubai. The launch was organized in a very high profile Dubai hotel, which had attracted many prospect buyers. Thanks to the print ads in the newspapers that generate enough curiosity amongst buyers, which ultimately leads to long queues at most of the launch venues. After being convinced by my colleagues that this was a good buy I decided to visit this launch in Dubai and reached there at a decent time. It was understood that the units will be sold on first come first basis therefore tokens were issued to maintain discipline. I managed to get a lucky token no. 111 (thanks to my colleague who had reserved one for me before I could reach). They had got token nos. ranging in the 90’s. Professional buyers had started queuing at the venue as early as 06:30 a.m. My friend was leading the commotion of 5 people including myself and providing us details of the property. There was a buzz about the various other developments that may come up around this property and how soon the price will appreciate.

Many people were gathering in the lobby to view the floor plans and making a note of the best units available. The rumor was that there are 128 units available for sale and the fact was only one unit will be sold per token. I got really excited about the fact that I held the token no 111, therefore fancied a chance of getting my hands on one small unit.

Finally around 10:00am the token numbers were called. People started to queue in to get into the sales zone were the sales men held units on there computer and a person was asked to choose the one they may be interested in. By the time token number 20 was called, it was announced that all the small units have been sold out. I was a little disappointed but decided to buy a medium sized unit (was trying to figure out my liquidity sources). Then determined I was and no one could stop me now (except my financial fitness). Some people decided to auction their tokens, to make some money out of it as they could not afford to but any thing more than a small unit.

By the time token number 31 was announced, most of the medium size units were sold but there was a mixed bag of only 50 medium, large and very large units available. Listening to this announcement all my determination had gone down the drain and I decided to make my way to the exit. My colleagues were equally disenchanted with the entire event and called it a hoax.

To clarify a total of 128 units were available and the condition was that only one unit will be sold per token. Had that been the reality, why were only 50 units left by the time 31st token was announced ? This means a total of only 80 units were available for sale or did many people manage to grab more than one unit?

Well, I am not a property specialist but would like to highlight such issues, where a lot of hype and expectation is created among the prospect buyers in Dubai who just end up wasting a lot of their time at the launches. This is because most of the units are sold well in advance before the property is actually launched. Or to be fair to everyone early bird gets the worm.