Real estate crisis in Dubai

The emirate will abandon its grandiose projects, too dependent on foreign credit.

In early September, guests were prepared for the worst. "The emir is ill, had accused her bodyguards. Surprisingly, it is a "Sheikh Mo" everything is on fire tumbling, that day, to inaugurate a run at the Dubai Metro, the first of its kind in the Arabian Peninsula. To this man of vision, leading actor of the meteoric rise of this small piece of desert bordering the Gulf, nothing ever seemed insurmountable. Today overtaken by the crisis, he must now move to the lower speed. "After the delusions of grandeur, new binding arbitration," a Western diplomat breath.

For years, Dubai has built most of its foundations on the debt. Football stars, movie stars, but also small investors looking for quick profits have not hesitated to invest, everything is in real estate in pre-sold their property and plan on taking advantage of the credits offered by many local and foreign banks. Speculation helping some goods were resold dozens of times even before the first stone is laid.

Trapped by the financial crisis that has dried up capital flows, recent arrivals are now cornered. Their house will never land. As for their chances of being reimbursed by the sponsor, is paltry. The Dubai airport, a true international hub, may also soon crumble under the weight of thousands of workers from South Asia-West real craftsmen building anything goes in Dubai, who fear losing their jobs and d 'be sent home overnight. Without social protection or compensation. "The crisis has revealed some legal loopholes in procurement contracts and hiring. It will force Dubai to make necessary adjustments, "said Philip Tartaglia, Vice-President of French Business Center in Abu Dhabi.

The "zero fault" is over

Convalescence looks painful. Banking institutions and service providers now think twice when they are presented with a draft dubaïote. "In these times, I do not take clients based in Dubai. The trust is broken. The culture of "zero fault" that we were regulars are gone, "says the co-manager of an Australian advertising agency, based in Abu Dhabi. Connoisseurs of the region still trying to play down the magnitude of this crisis. "Everyone was terrified of speaking in" bankruptcy "of Dubai it is a nonsense. It is just a conglomerate certainly state, Dubai World, with a real estate subsidiary having trouble paying its debts, is the Jordanian economist Ibrahim Saif.

"There was a big communication problem. The sudden announcement last week, a moratorium on debts of Dubai, followed by silence bound the festivities of Eid, has caused reactions sometimes excessive, the judge diplomat. Supporting evidence: after several days of panic, the markets began to subside after the announcement in the middle of last week pending a meeting between representatives of the conglomerate and its creditors.

If the crazy years of real estate have gone by, Dubai can still count on other levers and stronger as the port of Jebel Ali, which continues to attract 20% of world container traffic, or the airline Emirates, which serves all major capitals of the world. "Obviously, Dubai does soars as before. But this crisis has had the merit to clean the market, "says Philip Tartaglia. Located in the region for six-seven years, he predicts a "gradual recovery", which will be on bases less extravagant. "Dubai had bet on luxury tourism - a mainstay of its economy. Today we get new ranges such as hotel or Easy Ibis hotel, which adjust to smaller awards, "says he. The end of an era.