Real estate hits hurdles to keep growth steady

Sunaina Rana / Emirates Business

Fluctuating oil prices have triggered diversification in the UAE market. However, the Economist Intelligence Unit (EIU) forecasts real GDP growth in the UAE to an average 3.6 percent per annum between 2015 and 2019, marking a decline from the 4.6 percent growth experienced in 2014.
The Deloitte’s ‘Real Estate Middle East’ report predicts that the downturn in global oil prices will prompt fiscal reform. In 2015, the fuel subsidies were removed across the UAE, which together with inflation, is expected to trigger stagnant salaries and is likely to lead to lower disposable incomes for some households.
Cayan Group, Ahmad Alhatti, the chairman, responded to the EIU forecasts real GDP growth. He said, “I believe achieving such growth in the current global economy situation is an outstanding achievement. It’s really challenging, but with the smart planning and diversification the government is doing such figures are achieved.”
It has been reported that despite the UAE’s forecast budget balance of -0.9% of GDP in 2016, any significant scaling back of key infrastructure projects should be eased by Federal reserves and the new Law No. 22 regarding Public Private Partnerships (PPP), passed in November 2015, which aims to boost private infrastructure investment and drive development.
“Fluctuating oil prices have caused some instability in the market;
however our planned projects are proceeding accordingly without
any significant setbacks. We have managed to plan according to mitigate of the fluctuations and carry on with our investors and contractors to ensure our planned projects
are on schedule,” Alhatti, told Emirates Business about the complexity market.
However, the year continues to be complex and the lenders will continue to carefully scrutinise their real estate exposure in the region.
Non-recourse structures are likely to be limited to projects and investments with quality tenants and long term, reliable rental flows with lenders requiring greater equity contributions (in addition to land) and other forms of security to support higher-risk lending.
“Yes with the influx of businesses into Dubai during and after the Expo 2020, the construction and real estate industry will definitely see a boost along with other industries,” he added. It has also been estimated that the base rate is expected to increase in the next few months.
Deloitte also predicted that the hedging of benchmark interest rates will become more common in finance packages.