Dubai Real Estate Vis-À-Vis Global Credit Crisis

Dubai real estate experts wonder whether the state of global markets recently can fuel the real estate boom in the emirate or dampen its spirits. August has been a phenomenal month for global capital markets as they witnessed a credit crisis. Dubai has been no exception. However, the effect on Dubai real estate market is something that still needs to be seen.
View – Dubai real estate slowdown was inevitable
Some real estate experts feel that the slowing down of the real estate boom in Dubai was inevitable, more so with the coming up of the new law that necessitates opening of escrow accounts for Dubai real estate developers. This means that the funds of off-plan buyers will only be released on the permission of the Dubai Land Department.
In this context, the global credit crunch last month has resulted in making borrowing difficult. This can have major implications for real estate sector in Dubai. Even the Dubai government, which is the largest real estate developer in the region, will now have to pay more for obtaining debt through Islamic bond issues.
Implications of soaring cost of money on the Dubai real estate sector
For real estate developers, money means a cost to be juxtaposed against the probable returns on investment on a particular project. The corollary to this is that the higher the cost of money, the lower the returns and a lesser probability of the project reaching an end.
The double impact of tight account rules and the difficulties in obtaining credit will give a tough time to real estate developers in Dubai. One offshoot of this can be a slowdown in the coming up of new construction projects in the Dubai real estate market.
It still remains to be seen whether this will have a good or bad effect on the house prices in Dubai. On the one hand, there can be a rise in the value of the present homes in the Dubai real estate market. On the other hand, there may be a dent in people’s confidence in the real estate sector in Dubai.
Steps Dubai Government can take to curb rising difficulties for real estate sector
Real estate analysts hope that the Dubai government, with its pivotal role in the real estate developments across the emirate will take prompt steps to counter the current circumstances.
A few options:
o Special mortgage offerso More focus on the rental market
The present situation being a little vague, it will take some time before the dust settles after the storm and things can be seen in a newer light. For now, all we can do is to hope the best for Dubai real estate market in the coming months.