Dubai Hit Hard by Global Crisis
Dubai Hit Hard by Global Crisis
Shinning Star of the United Arab Emirates Losing Luster
By Lucy Farndon and Graham Smith
Last updated at 12:12 PM on 27th November 2009
David Beckham and Brad Pitt are believed to be among the stars caught up in Dubai's spiralling credit crisis.
The pair have seen the value of property they bought in the Gulf plummet as Dubai struggles under a mountain of debt.
Things have now gone from bad to worse after Nakheel, the island's developer, and its parent company Dubai World yesterday made a request to suspend debt repayments.
Under construction: Palm Jumeirah in 2007. Property developer Nakheel and its parent company Dubai World have made a request to suspend debt repayments
The Dubai government has been forced to call in accountants Deloitte to advise on a financial restructuring, as its economy buckles under $80billion of debt.
Dubai World, the conglomerate which was the driving force behind the emirate's rapid expansion, is asking creditors to give it some breathing space on the $59billion of loans racked up by the firm and its subsidiary Nakheel.
The concern is that Nakheel will be unable to continue developing the Palm Jumeirah and other neighbouring projects, leaving Dubai a construction site.
The request for a 'standstill agreement' on the debt has raised fears that the state could default on some of its loans.
David Beckham and Brad Pitt are believed to be among the stars who bought villas on the Palm Jumeirah
This could cause a major crisis of confidence in the region at the time when the global economic recovery remains fragile. It may raise the prospect of further losses at banks that have loaned to Dubai World.
As well as Beckham and Pitt, footballers Michael Owen, Joe Cole, Andy Cole, David James and Kieron Dyer are all thought to have bought homes on the manmade island.
Dubai World accounts for the bulk of Dubai's debt, having geared up to invest in property and finance. It also owns DP World, owner of the former P&O ports operator.
It has been widely assumed that Dubai's neighbour Abu Dhabi, the capital of the United Arab Emirates, would provide further loans. But now investors are not so sure. It has already bailed out Dubai with $10billion this year.
Towering above the Dubai skyline, the world's tallest man-made construction edges closer to completion
Work on the tower has slowed in the wake of the credit crisis, but developers insist it will open 'soon'
Workers take a break on the 125th floor in the Burj Dubai. In addition to the tower itself, the Downtown Burj Dubai development, which includes The Dubai Mall - the world's largest
The cost of insuring Dubai's debt against default soared yesterday. Also in Abu Dhabi, the price of insuring its own debt rose, so it now costs $134,600 per year to insure $10million of its sovereign debt.
Deloitte has flown out a specialist team from London to work on the restructuring.
A spokesman said: 'We can confirm that Aidan Birkett, managing director for corporate finance at Deloitte, has been appointed chief restructuring officer to Dubai World.'
Dubai World is likely to be forced into asset sales after the credit crisis triggered a crash in the value of its property assets and decimated finance and tourism in the state. House prices in Dubai slumped by 47 per cent in the second quarter, compared with a year ago.
The World in Dubai, as seen from a satellite, on the 14th of May 2009. A multi-billion pound development designed to make Dubai the envy of the world has ground to a halt
The Dubai government last week removed the chairmen of Dubai Holding and Dubai World, two large state-owned firms.
The emirate is due to repay $4.3billion in loans next month and another $4.9billion in the first quarter of 2010, according to Deutsche Bank.
Shakeel Sarwar, head of asset management at SICO Investment Bank said: 'It's shocking because for the past few months the news coming out has given investors comfort that Dubai would most probably be able to meet its debt obligations.'
They have abused a lot of Indian , Nepali ,Bangladeshi ,sri lankans etc poor workers to build world class infrastructure for themselves. Let them go bankrupt.Btw Nostardamus pridiction is comeing true !... the ruin of all middle east states...but it was starting frm 2012 hmmm these symptoms r showeing like that only
Re: Dubai Hit Hard by Global Crisis
February 5, 2009
Driven down by debt, Dubai expats give new meaning to long-stay car park
For many expatriate workers in Dubai it was the ultimate symbol of their tax-free wealth: a luxurious car that few could have afforded on the money they earned at home.
Now, faced with crippling debts as a result of their high living and Dubai’s fading fortunes, many expatriates are abandoning their cars at the airport and fleeing home rather than risk jail for defaulting on loans.
“There were a lot of people living the high life, investing in real estate and a lifestyle they couldn’t afford,” one senior banker said.
Under Sharia, which prevails in Dubai, the punishment for defaulting on a debt is severe. Bouncing a check, for example, is punishable with jail. Those who flee the emirate are known as skips.
The abandoned cars underscore a worrying trend. Five years ago the Emir, Sheikh Mohammed bin Rashid Al Maktoum, embarked on an ambitious plan to transform Dubai into a hub for business and tourism. A building boom fuelled double-digit growth, with thousands of Westerners arriving every day, eager to cash in on the emirate’s promise of easy living and wealth.
Many Westerners invested in Dubai’s skyrocketing real estate market, buying and reselling homes before building was even complete. But, as the recession took effect, property and financial companies made thousands of workers redundant and banks tightened lending. Construction companies have delayed or cancelled projects and tourism is slowing.
There are increasing signs that the foreigners who once flocked to Dubai are leaving. “There is no way of tracking actual numbers, but the anecdotal evidence is overwhelming. Dubai is emptying out,” said a Western diplomat.
International schools are having to be flexible on fees as expatriate parents run out of cash. Louise, a single mother from Britain, said that her son’s school had allowed her to pay a partial fee until she found a new job after her redundancy in December. “According to the headmaster, a lot of people had come into the school saying they had lost their jobs so the school was trying to be a bit more flexible,” she said.
Most of the emirate’s banks are not affiliated with British financial institutions, so those who flee do not have to worry about creditors. Their abandoned cars are eventually sold off by the banks at weekly auctions. Those recently advertised include BMWs, Porsches and Mercedes.
Simon Goldsmith, a spokesman for the British Embassy in Dubai, said that that there were approximately 100,000 Britons living in Dubai last year. However, the embassy has no way of tracking how many have fled back to the UK. “We’ve heard stories, but when somebody makes that kind of decision, they generally keep it to themselves,” he said.
Police have issued warrants against owners of the deserted cars. Those who return risk arrest at the airport.
3.62 million expatriates in Dubai
8% population decline predicted this year, as expatriates leave
1,500 visas cancelled every day in Dubai
62% of homes occupied by expatriates 60% fall in property values predicted
50% slump in the price of luxury apartments on Palm Jumeirah
25% reduction in luxury spending among UAE expatriates
Re: Dubai Hit Hard by Global Crisis
UAE under debt burden of $184 billion'
LONDON: The United Arab Emirate (UAE) has total debt amounting to $184 billion at the end of 2009, according to estimates by Bank of America-Merrill Lynch, which said the region faces a heavy redemption schedule until 2013.
Dubai's shock announcement this week that it is seeking to suspend payments on debt of its state-owned conglomerate Dubai World and property subsidiary Nakheel has roiled global markets, raising fears that the emirate which funded a spectacular building boom on a mountain of debt could default.
BofA-Merrill Lynch said in a report that the restructuring undertaken by Dubai would be a serious blow to the Gulf region's economic recovery prospects, adding that the scale of the region's debt was now the issue.
"The lack of official debt data may add up to uncertainty and cause higher risk premiums," it said. Of the $184 billion UAE debt, Dubai holds $88 billion while Abu Dhabi accounts for $90 billion. BofA-Merrill Lynch said the debt servicing cost will be higher than these estimates as their numbers only include the principal payments.
The bank said Dubai faces almost $50 billion of debt amortization in the next three years — $12 billion in 2010, $19 billion in 2011 and $18 billion in 2012. "We estimate the total debt for Dubai World as $26.5 billion, 80% of which needs to be paid back in the next three years," added BofA-Merrill.
Dubai concerns not to impact India, says Anand Sharma
NEW DELHI: Notwithstanding the UAE being India's top destination for exports, the government on Friday put up a brave face stating financial concerns in Dubai would not impact the Indian economy and the country's real estate sector.
"I don't think," said commerce and industry minister Anand Sharma when asked whether the confidence erosion in Dubai would have ripple effect in India.
Sharma said the Indian economy is large and "I don't think developments in real estate sector in Dubai are going to impact it...Besides, the Indian real estate is doing well," he said.
The UAE, which has a large Indian population, is the country's largest export destination with shipments of about $24 billion in fiscal 2008-09.
Asked whether exports to the Middle East could be impacted, Sharma told reporters, "I hope not."
Global financial markets plunged after Dubai World, the government investment firm burdened with $59 billion liabilities, sought rescheduling of its debt.
Most of the stock markets tanked on concerns of the global impact of the crisis of confidence in UAE