What Is True/Slant?
275+ knowledgeable contributors.
Reporting and insight on news of the moment.
Follow them and join the news conversation.

Jan. 26 2010 - 4:22 am | 302 views | 0 recommendations | 5 comments

Dubai Growing Up Just Fine

One of the big stories in the global economic downturn has been the immense amount of scrutiny given to Dubai’s burst real-estate bubble, much of it without providing any context. The shrieking, often schadenfreude-filled, coverage of Dubai’s economic woes, lasted through the majority of the winter of 2009. (It got so bad that I saw astrologers evaluating Dubai’s bust). One of the main themes that I noticed in much of the so called analysis was the concern among Western banks and lenders regarding Dubai’s legal system. It was alleged that Dubai’s corporate law was arcane or out touch, and therefore, the main culprits in the real estate bust, would end up evading any accountability.

This has not come to pass. Dubai’s legal system is demonstrating its internal cohesiveness and ability to evolve, and proving that most of that western “concern” was really just ignorance mixed with panic mixed with soft bigotry of lowered expectation. Dubai Informer reports that Dubai recently had its first foreclosure case, and it involves a Western bank.

Barclays recently won Dubai’s 1st foreclosure case in a local courtroom. The decision, based on a 2008 law, paves the way for others to pursue claims. Lenders hold $16 billion of residential mortgages. Tamweel P. J. S. C., Dubai’s largest home loan bank, has a number of foreclosure cases pending. ” Banks will be more aggressive, ” says Antoine Yacoub, a Dubai – based banking analyst at Moody’s Investors Service. ” As soon as they see a precedent has been set, they will be encouraged to push more cases through.”

The article goes on to point out that foreclosure is probably not going to be the preferred way of going further:

Lenders might be selective in applying the new law. Britain’s Standard Chartered Bank, a big mortgage lender in Dubai, says foreclosure is “a legitimate course of action” but not its “preferred approach”. As in the United States, financial institutions are reluctant to dump foreclosed houses on the market for fear of driving down prices, says Saud Masud, a Dubai – based real estate analyst at UBS. New projects, started before the bust, will add up to 30,000 housing units to the market in 2010, according to Deutsche Bank. ” Mass auctions might reprice the real estate market in a meaningful way, ” Masud says. ” It’s a slippery slope.”

The place where Dubai’s real estate boys really went wrong was not necessarily in dreaming big, but in relying on a Wall Street CEO to lead their investment arm, a guy who just happened to have learned his trade at, you guessed it, Lehman Brothers. (A firm that doesn’t exist any more). This CEO leaves his job with his former company, Dubai World, $22 billion in hole, off to “pursue other opportunities.” Dubai World, meanwhile, will avoid going into bankruptcy.


2 T/S Member Comments Called Out, 5 Total Comments
Post your comment »
  1. collapse expand

    Competence has never really been a factor in a banking career above the teller level. The ability to look good in a suit, shovel your mistakes off onto other people, and get away with it; these are the key skills of investment banking.

  2. collapse expand

    I am guilty of being gleeful over Dubai’s problems, but only because I keep hoping the crash will make Dubai less annoying every time I have to go there.

  3. collapse expand

    It will be very encouraging for global markets in general and the Middle East in particular if Dubai can retrench and rebound. Maybe outsiders have been eager to document the downfall to make up for the fact that the UAE press is actively discouraged from reporting bad market news?

  4. collapse expand

    Dubai real estate was bound to bust. The hottest thing about Dubai real estate was to buy units before a complex was built at introductory pricing and then to flip the property before construction even began. What is perplexing is although the practice slowed somewhat with each hiccup, it still didn’t end with the real estate market bust or even the credit crunch here in the US.

    Considering the values of units in Dubai, I highly doubt that foreclosures will be common place – rather it is more likely that short sales will be encouraged, but I guess I’d most like to know about Dubai real estate law and reporting practices about such sales. As for the statement that US financial institutions were worried about driving down prices with foreclosures – uhhh – u kidding me? Nothing has been selling besides short sales and foreclosures. Prices are down, way down, in the gutter – god help those who bought in the heat of it all, especially with the lack of job security.

    Reading the tea leaves, I would have to say that such sales (foreclosures and short sales) are going to be top-secret, or made top-secret through law, in order to protect the market values or .. as the cards are reading .. Dubai bailout, anyone? Someone get Obama on the phone, quick.

Log in for notification options
Comments RSS

Post Your Comment

You must be logged in to post a comment

Log in with your True/Slant account.

Previously logged in with Facebook?

Create an account to join True/Slant now.

Facebook users:
Create T/S account with Facebook

My T/S Activity Feed


    About Me

    I am the author of the prose work Children of Dust published in 2009 by HarperOne. It was called "compelling" by Washington Post and "a heavenly read" by Oprah's O Magazine which placed it on its Fall Reading List. It was also picked as one of New Statesman 2009 Books of the Year ("a funny and frightening narrative of life").

    See my profile »
    Followers: 46
    Contributor Since: April 2009

    What I'm Up To

    My Book


    Buy on Amazon