Proceed with Caution
ME PoV Fall 2014 issue
Better controls for a burgeoning development market
During the previous Middle Eastern development boom, consumer confidence was high, investment was of a staggering scale and all aspects of economic life appeared to be on an upward trajectory. Reports of tickets, used simply to gain access to the offices of some of the major developers to purchase units, were exchanging hands for hard currency, and lavish launch events were held for virtually all new development projects.
Forward to 2009/2010 and the picture is markedly different. The world economy is in crisis, the debt market is in turmoil and real estate development is on life support. The days of profligate spending, extravagant lifestyles and speculative development were ended virtually overnight. The causes of such failures are well documented, but ill-considered, highly leveraged and over-engineered developments were always likely to fail in a market as dynamic as this.
Between 2009 and 2014, the number of cancelled developments in U.S. Dollar value alone is truly staggering, peaking at US$3.5 billion in the summer of 2011. This statistic applies only to the UAE but it could be extrapolated across the entire region and produce similarly startling results.