Dubai, gearing up for a new development boom, will need to prove to lenders and investors that this one won’t end like the last.
With the same bravura that turned the desert sheikhdom into a hub for finance, tourism and real estate, the government is pitching massive projects in the hope of inspiring investment even as banks and builders remain buried under debt from the property-market collapse in 2008.
Dubai government officials were unavailable for comment, a spokeswoman said yesterday.
The property crash pushed Nakheel PJSC, the developer of Dubai’s palm-shaped islands, to the brink of bankruptcy and led former parent Dubai World Ltd. to clash with about 80 banks as it pushed to renegotiate terms on $25 billion of debt. Concern over Dubai World in late 2009 caused equity markets including the New York Stock Exchange to drop and hurt crude oil prices.
The postponements came after Emirates NBD PJSC, the U.A.E.’s biggest bank by assets, and second-ranked National Bank of Abu Dhabi PJSC did not meet the September deadline to comply with the new lending rule.
Asian banks, meanwhile, “have been burned very badly and many don’t want to have anything to do with Dubai real estate developments anymore,” Chehayeb said. “European banks have been treated poorly throughout the debt restructurings and are having significant problems back home.”
“Banks shouldn’t be caught out again,” AlixPartners Managing Director Claudio Scardovi told reporters in Dubai on Dec. 11. “Certain banks remain crippled by a real estate overhang, asset quality concerns and a post-credit bubble legacy.”
Mohammad Bin Rashid City is the biggest of the new and revived mega-projects. Located on 5.1 square kilometers (2 square miles) directly east of the world’s tallest skyscraper, the development will include 100 hotels, residential areas and the biggest cluster of art galleries in the Middle East and North Africa region. Its “Mall of the World” would cater to 80 million shoppers a year.