Dubai, Asian realty’s Promised Land, is showing symptoms of acute financial strain, causing big property developers like Nakheel to lay off hundreds, tycoons like Donald Trump to delay multi-million dollar projects, and average property buyers to balk at regulations that fail to shield investors from global fluctuations.
The oil-rich Gulf region, many had expected, would be spared the financial turmoil enveloping the rest of the world.
But crude oil prices fell from a peak of nearly $150 per barrel to less than $50, weakening Dubai’s financial backers and leaving the emirate, with little mineral wealth, in the doldrums.
“Unlike any part of the world, guys like me can’t walk out of a mortgage here,” says Abhy, a part-time property investor from Kochi, who wanted to protect his full identity. In July, Abhy, who works as a business consultant, invested 15% in cash in a 1,200 square feet flat that cost Dh 1,700 per square feet, in addition to getting a mortgage. His plan was to sell the flat in 2010 at a much higher rate. Today, he’s not sure he’ll get Dh 1,400 per square feet even if he is lucky enough to find a buyer.
Abhy also had to give his bank an undated cheque for Dh 3.5 million, which the bank would cash in case he defaulted on his mortgage payments. That cheque would bounce, Abhy says. And most unsettling, his bank considers a change of job a default. A slowdown in Dubai’s economy
could mean a fall from grace.
A recent report by UAE property assessment agency RichVille blames Dubai for doing little to protect investors such as Abhy.
