Monday, 7 December 2009

Dubai World - what was built with borrowed money

Are you wondering where 60 bn borrowed by Dubai World was spent?
Here is a video that will show you the bright ideas that have been turned into real things by Dubia World.

Friday, 4 December 2009

Dubai crisis - a person at a glance

Typical was the case of British developer Arthur Fitzwilliam, an affable 58-year-old polo fan from London. He had lived in Dubai for two decades, dabbling in real estate and other ventures. In 2004, he inked a deal to develop a 14.5 million-square-foot plot of desert acquired from a government-controlled company.

The Plantation Equestrian and Polo Club would have air-conditioned stables for 800 horses, four polo fields, facilities to host horse shows and a five-star hotel. Mr. Fitzwilliam sought partners to help finance the project. A British banker agreed to provide financing, in exchange for a 30% stake, Mr. Fitzwilliam said in an interview.

But in June 2008, authorities detained Mr. Fitzwilliam, the banker and one other. Then in September, Dubai Islamic Bank, or DIB, foreclosed on the land for the project. It also seized more than 100 polo ponies, Mr. Fitzwilliam said. For almost a year, he sat in jail before charges were filed. In March 2009, authorities charged seven men with scheming to defraud DIB, according to a bill of indictment filed by Dubai's public prosecutors. Mr. Fitzwilliam was accused of aiding the scheme.

Last month, he was transferred to a Dubai hospital to undergo tests for cancer. Four Dubai police officers stood guard outside his room.

Mr. Fitzwilliam denied any wrongdoing, as did the British banker he was working with. "I want a fair trial, and I'm prepared to go with the system," he says, shackled to his hospital bed. "Anyone who knows the case knows I'm not guilty."

A spokesman for the Dubai prosecutor's office didn't respond to requests for comment.

Amid the uncertainty surrounding the arrests, the crisis roiling the rest of the world was catching up with Dubai. When global credit markets froze up in late 2008, international investors stopped buying Dubai property. Some who had already bought stopped making installment payments. Nakheel and others shed staff and scrapped or delayed dozens of projects.

Last February, the troubles touched Ms. Chana's plan for a new home in Dubai. Nakheel halted work on the Palm Jebel Ali. Though dredging had been done, little construction had.

Ms. Chana says she has sunk about $550,000 into her still-unfinished home. Earlier this year, she flew to Dubai to try to salvage the investment. She is living in a hotel-apartment with her daughter, helping to organize other investors and petition Nakheel for rebates. "I just won't let this drop," she says. "It's become my obsession."

In October, Nakheel proposed that Jebel Ali investors transfer their contracts to property elsewhere that is already finished or close to it.

Simon Murphy bought a $240,000 ground-floor apartment in the Palm Jumeirah in 2002 and moved in five years later. He is now a "resident representative" to Nakheel, like being part of a homeowners board. He says that in recent weeks, Nakheel has cut back on maintenance, including tree trimming.

Since Dubai's debt-standstill announcement, Mr. Murphy says, many apartment residents have stopped paying management fees, typically around $700 a month. Nakheel declined to comment. "Most people fear that their money will go into the bottomless pit of Nakheel debt," Mr. Murphy says.

Thursday, 3 December 2009

Freehold definition is under scrutiny in Dubai - Jumeirah Lake Towers is the first

The Dubai Municipality's latest statement regarding the free-zone status of Jumeirah Lake Towers (JLT) has marred the hopes of several thousands of residents who were under the hope of gaining housing fee exemptions.

According to an official at the Municipality, the status of JLT needs to be clarified by a decree, and that free zone claims by a developer does not imply exemption of housing fee for its residents.

The Head of Housing Fee Section at the Dubai Municipality, Abdullah Hashim, confirmed that JLT is not officially a free zone.

The residents of towers in the 'mini-Manhattan' around the man-made lakes by Nakheel have been questioning about housing fee exemption to the developer.

"Although several areas have been claimed to be free zones, they are not free zones. Media reports had stated that the free zone areas are exempt from housing fee, and JLT has been wrongly named as a free zone. But, we never said that, and this has created lot of confusion. None of the buildings there are considered to be part of a free zone," Hashim said.

He added that municipality is however, waiting for a list which could clearly stipulate the areas designated as free zones. The concerned authorities are likely to come up with such a list shortly.

Wednesday, 2 December 2009

Dubai Shows What A Property Plunge Really Looks Like

Here's essentially what caused Dubai's debt extravaganza to finally come to an end.

Far too much easy money flowed into Dubai during previous years, fueling a massive construction boom financed with debt. For awhile this debt looked sustainable to those involved because it was ostensibly backed by valuable property.

Yet when the global financial crisis hit, property prices fell in many parts of the world. Dubai property prices were hit especially hard.

As shown below by the skiing Emirati, Dubai property rates per square foot fell 45% from Q3 2008 to Q3 2009 according to Colliers International.

Thus just as many American's went underwater on their mortgages due to the American property crisis, owing more to the bank than their house was worth, the same thing basically happened to the Nakheel property business of the Dubai state-owned conglomerate Dubai World.

Combined with near-term cash flow constraints, this finally forced Dubai World to admit to its creditors that it would not be able to meet all of its debt obligations.