Pakistanis lost heavily in Dubai real estate sector collapse

[Naveed Yaseen]

By Faryal Najeeb
KARACHI: A recent trip to Dubai has helped me understand the extent to which Pakistani investors have suffered in the country as prospects for the real estate sector not only remain bleak, but it also appears that worse is yet to come.

Having discussed the situation with some experts there during the visit, I was able to conclude that Pakistanis were stuck in the middle of the crisis given their lack of in-depth research on investment prospects, poor planning and greed to make quick profits.

I learnt that Pakistanis had invested up to Rs190 billion in the real estate sector of the United Arab Emirates within a span of a few months. Their aim was to act as middlemen between the developers of a project and ultimate buyers of the property, thereby buying it at the cost price and eventually selling it for hefty profits, as the value of the asset appreciated.

The problem began when recession hit the US and most European countries, leading to an increasing number of defaulters. Foreign investors lost interest in the UAE’s real estate market and pulled out in a hurry. Moreover, those living in Dubai made a quick exit, packing their bags and returning to their countries which left scores of houses occupied by them deserted.

The prices of properties began to crash and the real estate sector faced a dilemma. On the one hand, there were projects which were 80 per cent complete but did not have the cash to move ahead, while on the other hand the 20 per cent complete projects had no buyers.

In fact, here is a little maths for you. One real estate agent informed me that one project had 200 flats in a cluster and the entire project had approximately 156 buildings. This is just one project that we are talking about. Dubai alone has over a hundred building projects, all of which are skyscrapers. And remember, there are other states too.

Pakistanis returned dejected to their homeland as they had invested millions of dirhams in properties in Ajman where freehold was more affordable as compared to Dubai. Also there was the potential of increase in demand.

No one had expected the global financial crunch to come along, destroy major economies and take the UAE along with it too. As Dubai real estate prices dipped by 25 per cent last year, with more drops expected this year, people are even less interested in Ajman, which is yet to develop when compared to Dubai.

The consequence is that there are thousands of super luxury flats waiting for buyers but no one is interested. Most of the money that Pakistanis invested there is probably lost forever as a piece of property worth Dhs3.2 million is now available for Dhs1.4 million. Yet, it has failed to spark interest.

The question is what will eventually happen to all that property? One observer said if the UAE government promised permanent residency visa once again and reassured investors about a concrete policy, then matters may take a turn for the better.

“But till then no one can really predict the future,” he commented. “On the one hand, there are hundreds of flats waiting to be taken up and on the other, people are rapidly moving out of the country as a lack of job security and daily visa cancellations are compelling them to look elsewhere,” he added.

http://www.thenews.com.pk/daily_detail.asp?id=171526