Tuesday, August 5, 2014

The magnificent win to become the host of an international event World Expo in 2020 has boosted up Emirate confidence. Government officials and analysts have indicated expected rises in population by the end of 2020. As more people will be moving to live and work in the land of opportunities. Urban Plan 2020 predicted the rise in population between 2.8m and 3.2m. Furthermore the event is expected to double the number of visitors choosing Dubai as their destination to visit. The City is expected to receive 25m visitors for 6 months long event. Having considered the overall boost, real estate developers are focusing to invest on residential, retail and hotel projects to provide uninterrupted supply for residential buyers and tourists. State leading developers have announced the launch of various mega projects during the first quarter of 2014.

Why IMF warns on the launch of consecutive mega projects in Dubai?

Despite showing economic strength, huge supply of mega projects can be risky for further economic growth in future with fresh debts and overcapacity. To avoid such risks it is essential to execute these projects wisely with suitable regulatory measures.  Irrespective to the warnings by IMF, State Government officials of Dubai announced the launch of another gigantic mega project to develop Entertainment and Hotel District to serve tourists during the scorching season of Gulf summer.Emirates ruler Sheikh Mohammed bin Rashid Al-Maktoum told that the mixed use mega project will comprise world’s largest shopping mall, the Mall of the World spreading over the area of 8-M sq ft, theater, theme park, medical tourism facilities, 100 hotels and serviced. Furthermore the whole project will be interconnected with more than 4 miles long temperature controlled promenades that will be open during winter but remain covered and air conditioned during the scorching temperatures in summer. Upon its completion the project will be capable to tackle 180-M visitors every year. 

Dubai efforts to manage the expected risks

State Government officials are very confident to handle all associated risks of expected boom-bust cycle. It is expected that strong economy will help government linked firms to restructure their debt. Analysts predicted that it’s not wise to construct mega projects just because of single event. Oversupply of retail stores and hotel units may suffer when expo ends and visitors depart to their homes. Residential property in Dubai becomes very expensive with prices reaching to upper limit of affordability for many buyers. Besides this price rise of residential real estate newly launched projects are being offered at 5-30% premiums. However, developers are offering relaxed payment plans to drag buyers’ interest. The practice of selling off plan units to deposit funds for properties that are not going to be built for many years can fuel potential weakness in the market in near future.

Other mega real estate projects that are announced recently include Deira Islands (a 15.3-km waterfront cluster of hotels, residential areas, resorts and retail) and Mohammed bin Rashid City District One ( a residential projects of 1,500 villas). On the other hand renowned developers like Emaar, Nakheel and Dubai properties have also announced the extension of their existing project.


After analyzing and considering the latest market trends it has become clear that oversupplying the similar property units like apartments, villas, mall and hotels have strong risk to create a new boom and bust cycle in real estate Dubai.

Tagged: , , ,


Post a Comment