Construction Week Newsletter 12th February 2005

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By  Eudore Chand Published  February 12, 2005

Editorial Leader|~||~||~|

Demand cannot be taken for granted, nor for too long

It was one of those pleasant winter evenings than can be so agreeable. I was standing on the balcony of my friend’s apartment, enjoying the balmy weather and the view across the famous Dubai Creek towards the lit-up Sheikh Zayed Road. Hopefully, I was breathing purer air than the clouds of cigarette smoke that were gathering in the adjacent drawing room. A pleasant hubbub of conversation, in thankfully muted and indistinguishable tones, formed a sort of a white noise. I was thoroughly savouring my few seconds of privacy. “Do you think I should go ahead and buy an apartment in that tower that was launched this afternoon?” whispered a gravelly voice in my ear. It was not unlike that rasp made famous by Rod Stewart. Slowly and unwillingly I turned and faced my interlocutor. “I really can’t say,” said I. “Maybe not, but you are the editor of Construction Week. You should know,” he whispered forcefully. How do I go about explaining the way in which real estate development in Dubai — and elsewhere in the UAE and the Gulf — is mushrooming? No one from outside the industry (and few from within) can really say with absolute certainty how the pace of development will turn out in the future. If I could predict five years from now, I would indeed be a fabulously wealthy person. In construction terms, there are so many things that are happening at once and at great speeds. Much more is being announced on a bewildering scale, even while one is in the process of absorbing and digesting what is already off the drawing boards. There are so many factors that one has to take into account. If industry stalwarts can find the situation unprecedented one can only imagine the plight of the man-on-the-street investor who has even less information at his disposal with which to make an educated decision. Sometimes too much choice can be confusing. And I am sure that there are some punters out there who choose in much the same manner as pinning the tail on the cardboard donkey while blindfolded. Perhaps that works. I have even heard of a Saudi buyer who is said to have snapped up two towers some 40-storeys high in the New Dubai area, without even glancing at the design of the property. How many buyers have been offered a detailed contract with specifications about the various fittings? How many investors have bought property after looking at just an artist’s impression or a drawing? In the early days, many people amongst the crowds at one of the leading developer’s frequent offerings did not even bother to look at the papers in hand before signing away their earnings. The fact is that there is no property law in the United Arab Emirates, although there are hopes of one. The real estate market in the Gulf is a young one and carries with it its own peculiar characteristics; one of them being a lack of proper information — usually an essential tool in making any serious asset acquisition. Another major issue is that there is no indication of how much demand is from individuals backed by solid personal equity and how much is purely speculative. Dubai today is a sellers’ market and whatever is being thrown into the ring is being snapped up. But as time goes by, and as more and more units come onto the market, a higher level of maturity (translate that into responsibility) is expected from the developers. More transparency, full disclosure, upfront charges, viable exit strategy and proper legal documentation that allows for satisfactory settlement in cases of dispute — all this needs to be part of a standard system, not a privilege. Demand is what is driving real estate development throughout the Gulf, which in turn is boosting construction activity. But demand cannot be taken for granted nor for a ride for too long. It needs to be nurtured and valued or the proverbial bubble may burst.||**||

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