Dubai Hit Hard by Global Crisis

prithvi.k

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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.

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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

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FTSE latest: Dubai crisis unnerves traders
 

prithvi.k

on off on off......
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.

Police have found more than 3,000 cars outside Dubai’s international airport in recent months. Most of the cars – four-wheel drives, saloons and “a few” Mercedes – had keys left in the ignition.

Some had used-to-the-limit credit cards in the glove box. Others had notes of apology attached to the windscreen.

“Every day we find more and more cars,” said one senior airport security official, who did not want to be named. “Christmas was the worst – we found more than two dozen on a single day.”

When the market collapsed and the emirate’s once-booming economy started to slow down, many expatriates were left owning several homes and unable to pay the mortgages without credit.
:d lolz

“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.

Heading home

3.62 million expatriates in Dubai

864,000 nationals

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



Sources: arabbusiness.com
 

prithvi.k

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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
 
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