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Editor’s Desk
CONSOLIDATION PHASE
The much touted real estate index, which RERA was supposed
to revise and bring out in April, has been delayed reportedly
due to delays in gathering data. As per agency spokesperson,
the index would now be published at a later date, after a
survey to be carried out sometime in summer.
Dubai’s first rent index was issued in January, aimed
at providing more transparency to the rental market and to
replace a rent cap issued annually. The January index reflects
figures from the latter half of 2008 when rental prices were
at their peak. It has drawn fire from real estate agents and
residents alike for giving numbers way above averages in the
market today. During the economic crisis this needs to be
expedited, as making housing more affordable is an immediate
challenge which needs to be resolved in restoring stability.
As per a leading project consultancy firm “retendering”
is becoming common. From three projects in October, the number
of projects in the civil sector being retendered has risen
to 28 in March. Similarly, the value of these tenders has
risen by 2,024.39 per cent to $28,743 million in March from
$1,353 million in October. Many big projects are being retendered
to benefit from the fall in construction materials in Dubai
and also Abu Dhabi (in projects such as Yas Island and Liwa
phase 2). Also tender awards will only now see an escalation
in activity after Ramadan. Projects, in all likelihood, will
be scaled down meeting with current project economics.
Sultan Bin Saeed Al Mansouri, the UAE’s Minister of
Economy, at the Arab Steel Summit, held recently, reiterated
that the UAE’s strategy is to support the economy by
directing large investments towards the industrial sector
in order to increase industry’s contribution to the
national GDP and decrease the country’s dependence on
oil. Oman, Qatar, Kuwait and Saudi Arabia have been adopting
a conscious focus on industrialisation, what about the UAE?
Al Mansouri informed that the industrial sector’s contribution
to GDP has increased to 27 per cent and industrial investments
have reached over Dh 77 billion indicating that amidst the
rush for realty the efforts at industrial growth had not been
neglected. Hussain Al Nowais, Chairman of ESI, confirmed that
the Abu Dhabi government was keen on pursuing all development
projects without delay. The steel industry would go ahead
with all expansion plans, despite a global steel demand slowdown
due to the world economic crisis. Al Nowais announced that
ESI was investing Dh 10 billion over the next five years,
with aims to boost overall production to 6.5 million tonne.
He further stated that ESI was currently negotiating the acquisition
of several steel companies in line with its plans to become
the region’s leading steel producer.
Andrew Charlesworth, Head of Corporate Finance Advisory Jones
Lang LaSalle MENA, commented, “The rebuilding of investor
confidence is critical to institutional and fund based real
estate investment. We are beginning to see the return of investor
interest in discretionary funds that provide sound investment
strategies, professional and credible management and proprietary
deal flow”.
Like in all bull markets, prices skyrocket to unrealistic
levels, in bear markets prices dive down steeply to irrational
levels. While the doomsayers may write off Dubai’s prowess
forever, I believe that this sharp correction will see a rebound
as soon as prices hit absurd levels on the downside. There
is a resistance for prices to slide below 2006 levels as has
been pointed out in our story in March but as global fund
flows are making an impact on economics, the sentiment keeps
suffering due to the sway in the fund tide. Although, the
construction materials price fall has favoured the cost structure,
the greater dampener for realty firms has been interest on
leverage. But we are near the bottom and a further fall will
not be of any magnitude in comparison with the drop which
has already taken place. The fall is consolidating, and as
per reports, post-Ramadan will bring in positive tidings.
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