Will The World be saved? UAE attempts to rescue collapsed real estate market in Dubai.
The massive world-shaped islands off the coast of Dubai have been an environmentalist’s nightmare. With little regard to marine ecosystems, and the future impact of these buildings, Dubai ‘s building of The World has been brought to a halt due to billions of dollars worth of debt, much of which is held in UK banks, we reported last week.
But Dubai’s real estate debt crisis may not be as serious as people think, according to comments made over the weekend by CNN’s Jim Boutin and Financial Times correspondent Simon Kerr.
Speaking on a CNN financial new program, dealing with the effects of the so-called “Dubai Domino Effect” Kerr said that Dubai is “set to start a press campaign, headed by senior members of the supreme fiscal committee and department of finance aimed to reschedule the $25 billion in bad debts around Nakheel and Istithmar, developers of the Dubai World island project.”
The plan involves issuing special bonds, known as Sukuk or Islamic bonds, in order to defer the debt on assets that have a current estimated market value of more than $75 billion over the next few years.
When interviewed by CNN, Kerr said that “what will happen in the next week or two will determine what will happen in regards to solving Dubai’s debt crises.”
Later, when interviewed by an Israel Channel 2 newscaster, Kerr said that properties in Dubai have gone down as much as 50% in the past year, and the “investors will now only purchase something actually completed, and not in the process of construction.”
Other blogs like TreeHugger on “Dubious Dubai” have reported “fake” completed units being sold to investors and private real estate buyers in the Western world.
The Independent reported that further defaults are possible and that credit-default swaps across the region, including Saudi Arabia and Abu Shabi rose by many percentage points. The article also noted that Dubai World will ask its creditors for a ‘standstill agreement’ in order to renegotiate the maturity date on its revenue bonds, including $3.52 Billion in bonds due on December 14.
Meanwhile, Dubai’s oil rich neighbor, Abu Dhabi, authorized its central bank to loan money to Dubai financial institutions to help calm the financial crises that became international breaking news last week.
A statement by the UAE Central Bank spokesman said his bank “will stand behind Dubai’s disastrous finances.”
The article in The Guardian went on to say that there were fears that investors would “pull their money out of the system” when the financial brokerage houses opened on Monday at the end of the Eid al Adha Muslim holiday. Sure enough, the Dubai stock market sank more than 8.3% when financial trading resumed.
It all appears that things just “developed” a bit too fast in the Emirate, which has tried to make its money in tourism and financial trading.
Dubai’s many grandiose projects, including the world’s tallest building Burj Dubai which we’ve covered; its unique vertical farms; and of course its island real estate projects, especially Palm Island and The World have not been too kind on the region’s environment, especially that of marine life in the Persian Gulf.
Perhaps the reverberations of the Dubai Domino Effect could be nature’s way of saying that it might be best to slow down a bit, and consider “bailing out” the region’s environment as well.
Photo via www.theguardian.com
Article sources: CNN, Channel 2 News, The Independent, The Guardian, Financial Times
Read more on Middle East construction projects:
On Abi Dhabi’s Reem Island
Burj Dubai and the Tower of Babel
Dubai’s Wind Powered Skyscraper Is Building In Motion
Skyscraper Farming The Wave Of The Future In The Middle East?
Dubai Vertical Farmers Use Seawater In Skyscrapers To Water Crops
Urban Islands Mega-Projects Dubious Building Projects In Middle East
A Dubai Disneyland Coming to Lebanon (Fake Islands Project)?