Last Updated: Tue Nov 02, 2010 17:38 pm (KSA) 14:38 pm (GMT)

Global financial crisis reaches the Gulf

Dubai's booming property market sees drastic slump (File)
Dubai's booming property market sees drastic slump (File)

The Gulf Arab countries have not been as heavily hit by the credit crisis as Europe and the United State but the contagion has led to stock market routs, tight lending conditions and a range of government and central bank attempts to mitigate its impact.

In the United Arab Emirates, home to the glitzy financial hub of Dubai where shopping is virtually a national sport, a frisson of fear has seeped into consumers' minds.

The UAE's Bin Hendi Enterprises"Business is 20 percent down in the last week in retail," Mohi-din Bin Hendi, president of Bin Hendi Enterprises, told Reuters Thursday.

Bin Hendi, whose retail-based conglomerate operates in the Gulf Arab region and India and offers everything from jewelry to sofas, said the firm would take steps to ready for a further decline in consumer spending and would "cut the desirables, go to the essentials."

Asked whether he would cut jobs, he said: "Absolutely. We have not come to a figure as yet."

Companies are quietly shedding jobs or not hiring, according to recruiters, while the Arab world's biggest listed developer, Emaar Properties recently gave buyers more time to pay for new homes given difficulties in obtaining mortgages.

Sama Dubai, a property developer owned by the ruler of the emirate, said on Thursday it is considering job cuts and reviewing its project pipeline as the global credit crunch bites the Gulf Arab region's trading hub.

The UAE's biggest bank Emirates NBD has stopped lending to foreigners who work for top Dubai property firms on fears a slowdown could jeopardize their jobs and income and an Islamic mortgage lender, Amlak, has suspended new loans altogether for now.

Palm properties drop

Meanwhile, Dubai is feeling the pain of the global financial crisis, and prices of real estate on the much-vaunted Palm Jumeirah are plummeting. Distressed sales of Dubai property are on the rise as investors rush to offload homes, under pressure from the global credit crisis, real estate agents say.

Properties on the emirate's Palm Jumeirah island have fallen as much as 40 percent since September, brokers say, while government-owned Nakheel announced in October it had scaled back dredging work on its massive Palm Deira Project, the largest of three palm archipelagos planned to house more than 1 million.

The once-booming property sector of the emirate is facing a slowdown in loan growth and real estate activity as it grapples with the fallout from the global financial crisis.

Distressed sales are increasing, a further signs that Dubai's property sector is facing a meltdown, as mortgage lenders suspend loans, prices tumble and developers scale back on large projects.

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