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Dubai boom no bust, but get best advice

By Phil Butler | February 6, 2015

As ambitious and profitable as Dubai's luxury development opportunities are, the growing list of cancelled projects there foretells of typical "boom" real estate markets past and present. For every one of the 150 projects now cancelled, there's probably two more set to make the insightful investor richer. As always, knowing which intel to choose, which advice to take, differentiates winners and losers.

Mohammed Bin Rashid City

Mohammed Bin Rashid City, Dubai Hills properties are highly attractive - Courtesy Capital Value S.A.

In a document first published last summer by the Dubai Courts website, what was a list of 18 developers in the UAE, has now been expanded to list some 150 projects gone belly up. The news,staggering as it may be for a herd of investors, reflects projects like those of Khyool Investment's Abjar Tower and Faras 2, having already been liquidated and settled to compensate in part, some of those investors. In total, news today speaks of some 34 cases in the process of having funds distributed back to investors. Meanwhile, the courts website announced new and pending cases about to be heard and settled as well. I quote from the Dubai Courts' website:

“The committee for the liquidation of cancelled real estate projects in the emirate of Dubai and settlement of rights related thereof, specialises in liquidation of real estate projects, by which a final decision of cancellation has been issued by Real Estate Regulatory Agency (Rera), whereas the judgments, orders and decisions issued by the committee shall be final, peremptory and unappealable by all means of a regular appeal, and shall be executed by the implement Department Dubai Courts."

Just last December the Director of Dubai Courts, Taresh Eid Al Mansouri launched an initiative to help protect investors from unfair business practices with legal consult and guidance. In this we see, part of the growing problem Dubai now experiences, and not unlike other boom real estate regions. Many of the cases we now see cancelled, or in various stages of default or other trouble, they're wildly ambitious projects dreamed up during the quasi Gold Rush moments of early Dubai speculation. One such "heady" fantasy development, the High Rise Properties’ Dh250 million Rotating Residence, which was a 16-storey rotating tower of four town houses and retail areas in Jumeirah Village South, it was supposed to be completed 7 years ago.

Palm Jumeirah

Developments like the successful Palm Jumeirah above still predominate Dubai deals - Courtesy Palm Jumeirah

Other high rise properties on the new list include; the Dorna Tower, Orchid Residences, Waves Business Tower, High Rise Boulevard 1 & 2, The Heights Golden, and several others. The list of investment companies is extensive as well, and developers with multiple properties gone bust permeate the list. Names like Al Zahra Properties, Makaseb Properties, and Bangash Developments stick out, with residences like Royal Delux Villas, Royal Luxury Villas, and Royale Garden Residence and more speaking volumes about investor caution for all projects relying too much on regal names. The full list of cancelled projects can be found at Gulf News.

Dubai investment, as is the case for any "boom" city or region, is really all about wise intelligence, research, and choice. It's safe to assume that investors now seeking to recover their funds made either hasty or at best risky decisions somewhere along the learning curve of understanding the property market there. I spoked briefly yesterday with Johannes Magar, the CEO of Capital Value S. A., a Luxembourg investment council that specializes in Dubai developments. I asked Magar about the "best advice" for those interested in Dubai. Here is what he had to say:

"The best advice any investment counsellor can give a client is to perform due diligence in choosing associations, first of all. Outside of doing one's own homework learning the market, choosing sound and intelligent guidance is particularly wise for foreign investment strategies."

Magar, who's a seasoned expert in start-ups and the domiciling of companies, as well as a family trust management adviser, he ventured to say further; "Potential Dubai investors will want to consult with companies like Capital Value, whose experts do business directly to entities such as Emaar Properties."Emaar, for those unfamiliar, is the most trusted developers not only in the UAE, but in the world. Mohamed Alabbar, the founder and Chairman of that company, has been instrumental in Dubai's rapid growth and icons such as the construction of Burj Khalifa, the world's tallest building.

So, with the right intelligence, connections, and the latest market data in tow, future investment aimed at above average growth for portfolios seem as safe as in the past. The most recent news from the UAE and the region tells of the government earmarking an additional $1.73 billion for new infrastructure projects, this is up over 13% over last year. Gulf News this week speaks of the run up to Expo 2020, and the creation of some 100,000 new jobs over 2015-2021.  Other pluses out of Dubai include the GDP growth in excess of four and one half percent. Real estate mogul, Hussain Ali Sajwani, founder and CEO of DAMAC Group reflects more on the potential in this article this week. One of Dubai's biggest winners profits wise, Sajawani recently told Reuters:

"I see Dubai's property marketing stabilising in 2015, but 2016-17 there could be some shortage in supply."

Dubai Expo 2020

Vie Dubai 2020 Facebook

If the concept of "success breeds success" matters at all, estimates are Hussain Ali Sajwani's group made $937 million for the full year 2014, up from $641.5 million in 2013. Demand for a range of properties in Dubai seems to be the deciding grace of this burgeoning market, and as Sajwani has stated before Dubai is a growth market compared to more static ones like Spain and the rest of Europe. What that means is, every slump in this market we will see recover in a couple of years. At least this is my take on the mid to long term investor outlook, the smart play is to invest taking advantage of soft pricing. But that's a bit of speculation, I admit, I am not the Dubai expert.

To sum up, it's fortunate Dubai has put in place more safeguards that protect investors. 150 projects in the scrap heap would not ordinarily herald a rush to invest in any market. However, all indications are Dubai is still a very safe bet up until just after the World Expo in 2020. I will also suggest, interested investors follow the prevailing good advice, and make sure your due diligence is done.

Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
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