Sunday, January 04, 2009

Dubai - An insider's view of the Bubble

Dubai Marina

When in Dubai it's very rare that one gets a chance to interact with a UAE national, also known as Emirati's or "Locals" to the Expat community. Probably because they are extremely few in number, just 2%, when compared to the total population.

So, it was with much delight that I read the comments on Dubai by an Emirati with a PHD, who identified himself as Fairplayer1 in comments on I am reproducing in Full his (or is it Her?) comments dated 3rd Jan 2009:

As a UAE national with PhD in law I have to admit that Sheikh Mohamed has failed to put in place a transparent judiciary and has concentrated more on self PR by anouncing unrealistic project"

" As someone who lives and breathes real estate since its first days here in Dubai, I feel it is necessary to see the cause of the boom and only then we may be able to make some calculated estimates of the future market condition.

1. Dubai real esate growth was based on a promise of freehold, residence permit, tax free benefits for nationalities who have certain restrictions in their countries and saw dubai as a safe secure investment opportunity.

2. Government of dubai removed the residence permit guarantee by buying a property. So automatically no tax free status, coz if you are not a resident of Dubai you can not open bank account & you are still liable for taxes in your country.

3.Nakheel/emaar/dubai holding factor: All these companies hate each other and therefore fight for the attention of sheikh mohammed, which means the greed and ego overtake logic and feasibility!!! result: Excessive lands/properties/ mega projects without proper planning & infrastructure in place.

4. Universal law supply Vs. Demand: nobody realises that the already anounced projects in dubai will need about an extra 6 million people to live in it!!!! (From Lagoons, meydan, dubailand, tatweer, mizin, industrial projects, emaar, bawadi, the world, the universe, palm deira, port rashid, waterfront, arabian canal, dubai world central….)Excuse me thats almost double the UAE population.

5. Loose the Confidence You loose everything: The investors/buyers are wakening up to the reality & there is absolutely no confidence in the market not only because of the global financial crisis but mainly because of the over supply & fear of the crash.

6. Genius Government policies: dubai government is its own worst enemy, at times like this what does dubai do? They launch new mega projects & new development companies like meraas with ambitious projects that will only further dampen market confidence.

7. Investor’s security: Dubai’s judicial system is as good as any underdeveloped country with selective rights depending who the complaint is against.

8. No human rights when it comes to dubai police. infact torture and enforced disappearance has become common in dubai under the umberella of the state security they can attach anything to anyone to reach their commercial targets.

9. Everybody owns 20% of several properties: Paying a few installments does not make you theowner so when the next installments come due and there is no quick sales like the good old days, what happens? Sell below the price or lose your deposit with the developers…. results in what we call “distress sell”

10. Oil prices & Inflation: ofcourse oil prices doubled so did the cost of steel & cement & food & labor accomodation… result abnormaly increase in construction prices on a weekly basis!!!… so an increase in property prices due to rising cost….

11. Decrease in Oil prices: Sudden decrease in everything from food prices, to raw materials….. creating sudden panic as properties are cheaper to build and a fear of further reduction is iminent.

12. There are too many chefs in the tiny real estate kitchen of dubai, have you noticed there aren’t any happy faces in the media anymore!!! what happened to the so called international anouncements about their acquisitions…

13.The Sheikh factor: when the ruling family is desperately getting into everythng from real estate, to owning or managing coffeshops and bakeries, landries…. then the opportunities for the public is becoming less and less which means a lot of unhappy UAE nationals and residents…. which everyone know will not help the already unstable state of dubai.

14. Big brother factor: let there be no doubt Abu Dhabi will eventually overtake dubai for the right reasons. money is not an issue thanks to oil & there is no rush to sell everything just to raise funds for the previously anounced project like in dubai. Dubai’s power in UAE will be reduced due to lack of funds, money talks!!!

15. regulatory body with no teeth: RERA is supposed to ensure that developers/real estate agents/ landlords/ follow the rules and regulations… what happens if a developer or an agent does not follow the law? NOTHING… just a 100,000 fine… comparing to the hundreds of millions at stake its a drop in the ocean.

16. Public Prosecution & Corruption: Everything in public prosecution is relative & variable…. there are cases of misrepresentation by nakheel, for example selling thousands of villas and after 2 years just cancelling the project…. nobody can make a complaint. Likewise several private developers & real estae agents operating in a fraudulent manner are let go off the hook.

The laws broken by sheikh maktoum hasher (winner of world scam award 2008) to elevate himself from a poor sheikh to be recognised as a real sheikh:
1. Misrepresentation/ False promotional campaign (showing photos of construction of JBC1,2,3,4,5 for the sales of Ebony Ivory project) while there is no contractoron site, no building permit…. this is a criminal offense under uae law. (But RERA & SHEIKH MOHAMMED HIS UNCLE R SLEEPING!!!)
2. dynasty zarooni who is a real estate broker has been collecting money into their own account this is 100% illegal… infact in some cases they have even sold properties with 100% down payment, imagine the poor buyers when they realise te photos shown in gulfnews were lies!!!
3. ofcourse no escrow/trust account… No construction…
4. Threatening investors and staff of al fajer properties. Investors in JBC1 are forced to move to another building s that sheikh maktoum hasher the wanna be poor sheikh can make a few millions through his friends who will sell the property to new buyers.
5. There is no immunity for sheikh maktoum hasher or his father sheikh hasher maktoum, sheikh mohammed is just too busy counting the money he has lost so he is a bit distracted now. he pretends as if he is above the law, but in reality he is a coward who can only threaten drivers and junior staff in al fajer"

As a matter of interest here is Dubai's strategic vision as laid down by it's Ruler Sheikh Mohammed AL Makthoum. It's interesting to see page 20 where he identifies Trade & Transportation as the main drivers of Dubai's growth.


Property Developers Dubai said...

Paphos developers are facing some red tapeism with government regulations. roperty developers point the finger of blame at the planning authorities, local authorities and the government, while the government, planning authorities and local authorities point the finger of blame at the property developers.

Dubai Properties said...

This would certainly be hurting Dubai and other oil producing nations. In India on 29th January the government has reduced petrol prices by Rs 5 as a result of dip in crude oil prices.
Dubai Properties

John Denver said...

DUBAI -- Amid the movers and shakers of this glittering city, Shahram
Abdullah Zadeh cut a wide swathe. He cruised around town in a white Bentley
and dined with royalty as his company developed one of the emirate's premier
office complexes.

But last February, a phone call from Dubai's state security effectively
ended it all.
Hauled in and locked up for 60 days, Mr. Zadeh says he was interrogated
about his role in Dubai's freewheeling real-estate sector and his business
relationship with the brother-in-law of Dubai's ruler, Sheikh Mohammed bin
Rashid Al Maktoum. When released, Mr. Zadeh says he had been frozen out of
the real-estate company he had helped start.

Mr. Zadeh's experience, compiled though court and company documents, offers
a rare window into the murky business world that helped transform this city
from an empty coastline into a metropolis. It also may offer a cautionary
tale for investors lured to the city, which bills itself as the modern face
of a new Middle East. Dubai is one of seven semi-autonomous emirates that
make up the United Arab Emirates.

The U.S. government and human-rights groups have long criticized the
judicial system in the U.A.E for a lack of independence and oversight. In
the good times, investors didn't fret much about these shortcomings. Now,
some of the same deals that helped build Dubai are coming undone -- in
particular, a tradition of off-the-book business partnerships between
Emirati citizens and elite expatriates like Mr. Zadeh, who was born in Iran.

Mr. Zadeh claims his detention came after a business dispute with his
partner at Al Fajer Properties, Sheikh Hasher bin Juma'a Al Maktoum and his
son, Sheikh Maktoum bin Hasher al Maktoum. Both men are members of the
extended family of Dubai's ruler, Sheikh Mohammed bin Rashid Al Maktoum. Mr.
Zadeh alleges the two men took control of the firm while he was in custody,
according to a lawsuit he filed with Dubai's public prosecution office last

Mr. Zadeh has not been charged with a crime. But for the past year,
authorities have held onto his passport, making it impossible for him to
travel or find work.

"I used to believe in the miracle of Dubai. But now I see it all as a
mirage," said Mr. Zadeh, 37. Sheikh Hasher denies any wrongdoing. He says he
was not responsible for Mr. Zadeh's jailing and that he removed him from the
company because Dubai authorities said he had offered bribes, an allegation
Mr. Zadeh denies.

"I don't need to defend my reputation. He does," Sheikh Hasher said in a
telephone interview. "This man is crazy. He is a crook with a sweet tongue."

Some of Mr. Zadeh's claims are impossible to verify independently. His only
copy of the real-estate partnership agreement is missing, and official
company documents show the Sheikh Hasher as sole owner. Dubai's security
services, the public prosecutors' office and the Dubai ruler's court all
either declined to comment or didn't respond to repeated requests for

Last fall, the Emirates' Human Rights Association, a government body, wrote
to authorities asking for an explanation about why Mr. Zadeh's passport was
being held. The group did not receive any response, according to his

Mr. Zadeh grew up in Dubai, attending school with the children of some of
the city's top families. He managed his family's hotel and retail holdings
and decided to go into business himself in 2000. Real-estate development was
off limits to foreigners, even longtime residents like himself. So, he
turned to a common practice -- a silent partnership with a U.A.E. citizen.

Typically, such partnerships involve an Emirati acquiring a business license
and then granting his foreign partner management control. The foreigner
either pays an annual fee to the Emirati or the two share profits. The terms
are set forth in a parallel set of documents, separate from those submitted
to the government. Such contracts are so common that courts here have upheld
them in disputes, according to commercial lawyers here.

In 2004, an old friend of Mr. Zadeh's father brokered an introduction with
Sheikh Hasher. The sheikh owns Al Fajer Enterprises, a conglomerate that
includes a large construction and contracting arm.

In affidavits filed with Dubai's prosecution office, Mr. Zadeh contends that
he and Sheikh Hasher verbally agreed to a partnership, signing a contract on
Feb. 1, 2006. The partnership, Mr. Zadeh says, established the two men as
co-owners of Al Fajer Properties. The men would split profits equally and
would invest equal amounts of capital. The contract named Mr. Zadeh as chief

Mr. Zadeh provided $335,000 in start-up capital, and he invested another
approximately $30 million in the company, according to bank documents
reviewed by The Wall Street Journal. Mr. Zadeh's affidavits contend Sheikh
Hasher didn't contribute any capital. Sheikh Hasher denies the equity
partnership ever existed.

Business took off quickly. One of Al Fajer's biggest projects was a planned
$750-million development of five office towers, set just inland from Dubai's
man-made, palm-tree-shaped island. Mr. Zadeh bought three of the five plots
for the 40-story towers with his own money, according to financial
documents. With investors lined up for units, he then awarded $215 million
worth of contracts to the construction arm of Sheikh Hasher's Al Fajer
Enterprises, according to company documents.

But by late 2007, the contractors were behind schedule, according to company
documents and former employees. Al Fajer Properties was facing fines for the
delays, and buyers were starting to complain. Sheikh Hasher wanted payments
to continue to his companies, but Mr. Zadeh claims he said no. The sheikh
complained in a series of text messages that unless Mr. Zadeh released more
cash, his contracting companies would go bankrupt.

On Feb. 21, 2008, Mr. Zadeh claims, he received an unusual phone call from
State Security, asking him to come in that evening for a talk. When he
arrived, , he claims that police blindfolded him, put him into a
sport-utility vehicle and drove him to a detention center.

In the eight weeks he was jailed, Mr. Zadeh says he was never accused of a
specific crime or shown an arrest warrant. Instead, he says, he was
repeatedly interrogated about his personal life and Al Fajer's operations,
and gave his interrogators the combination to the company's safe after they
asked for it. "They told me that if I did not cooperate that they would ruin
me," Mr. Zadeh said.

Mr. Zadeh contends the only copy of his partnership agreement with Sheikh
Hasher was in the safe. Former employees of Al Fajer say the company safe
was emptied while Mr. Zadeh was jailed.

On March 6, Sheikh Hasher's son, Sheikh Maktoum, was named the new chief
executive of Al Fajer Properties. Sheikh Hasher hired international
accountants to audit Al Fajer's books, according to former employees. He
then presented the findings to employees and select clients, accusing Mr.
Zadeh of embezzling funds. Phone calls and emails sent to lawyers and
accountants of Al Fajer Properties were not returned.

Sheikh Hasher says Mr. Zadeh stole money from him, but did not provide
evidence, or the audit, to back his claim. Mr. Zadeh denies it.

Prosecutors refused to investigate the case, citing an order from Dubai's
attorney general, an official appointed by the ruler. In November, Mr. Zadeh
tried one last option. He approached the ruler's diwan, or court
administration, and asked for mediation from Sheikh Mohammed himself.

So far, there has been no reply.

Original: WallStreetJournal

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