If it is more than six, ‘watch out for complaints’July 7, 2015 12:00
Should the government rescue the real estate sector?
The property sector in the region is pushing for financial help from the government to help get back on track.
February 10, 2009 1:18 by Aarti Nagraj
A recent report by Reuters says that property and construction executives across the Gulf are asking for intervention by the governments and sovereign wealth funds (SWF) to help revive the regions real estate sectors, which have been hit by the credit crisis.
“Now there’s a role for the government to stimulate the sector as it did with the banking sector. It must stimulate the construction economy,” Fatima Obaid Al-Jaber, CEO of UAE’s Al Jaber Group said at a recent conference. “We in the UAE have the biggest SWF. A part of it should be invested to move the cycle forward and give confidence to the economy,” she added.
“The Saudi SWF has invested in the Kingdom but we need more. We need SWFs to invest and be able to finance as well as be partners in shareholdings,” Khalid Al Zamil, managing-director for strategic planning of Al Zamil Group told Reuters.
Governments in the Gulf have announced multi-billion dollar rescue packages for the financial sector; Kuwait just approved a $5 billion stimulus package, Saudi Arabia’s authorities pumped about $3 billion into the banking system, the UAE Central Bank promised a stimulus of around $32 billion last year, and Abu Dhabi injected more than $4 billion into its banks earlier this month.
A report issued by Standard Chartered says that the bailouts in Kuwait and the UAE are inadequate; it says that the UAE needs to put in at least $27 billion more to enable sufficient lending.
While a recovery of the financial sector will automatically help the real estate sector gain some ground, the latter might need more financial injects in order to stabilize. According to recent report from HSBC, around $75 billion worth of projects in the UAE have been suspended or cancelled.
Furthermore, a report from Kuwaiti investment bank Markaz claims that a high proportion of the Gulf’s population is engaged in the construction and real estate sector: 37 percent in Oman, 35 percent in Qatar, and 8 percent in Saudi Arabia. The delay and cancellation of projects, therefore, has had a tremendous impact on the region’s economies.
Reports blame excessive speculation and greed as some of the causes behind the UAE’s real estate bubble burst, particularly in Dubai; however, isn’t the government also partly responsible for allowing it to happen? If yes, shouldn’t it be helping the sector financially?