Sunday, May 25, 2008

(This story was originally published on Thursday.)

By Stefania Bianchi

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Real estate speculators and developers seeking a quick buck in Dubai pose a growing danger to the sheikdom's booming $300 billion property market, the head of the emirate's property regulator warned.

"The market needs to slow down," Marwan Bin Ghalita, chief executive of Dubai's Real Estate Regulatory Agency, or Rera, told Zawya Dow Jones in a recent interview. "There are too many speculators and they can hurt the real estate market."

Dubai's real-estate market is at the center of the Gulf region's construction surge. More than one-third of the estimated $1.2 trillion in projects under way in the region are in the U.A.E., according to a report by the London-based Middle East Economic Digest.

Sales and rental prices in the emirate are buoyant and Dubai expects to attract 184 billion U.A.E. dirhams ($50.1 billion) in real estate investment by 2010 but concern is mounting over the levels of uncontrolled speculation.

Ghalita says speculative investors looking to cash in on the sheikdom's real estate are inflating property prices.

"Real estate isn't like the stock market, it's a long term investment," he said. "Only in Dubai you see people flipping apartments to make fast money and this isn't helping the market."

Rera was set up last year to tighten up the emirate's real-estate regulations to attract more foreign investors from places such as the U.K., Russia and India.

The agency, affiliated to the Dubai Land Department, oversees the operations of property developers, property management companies, property financing institutions and property brokers.

So far Rera has licensed 713 developers and 1,567 projects and overseen the introduction of an escrow law, which ensures that any payment buyers make to a developer are used to construct the development, or that a particular stage of construction will be reached before another payment is due.

Four Companies

The agency wants to rid Dubai's real estate market of developers who aren't performing.

"We're looking into four companies that aren't doing very well. They have old projects that aren't progressing," bin Ghalita said, without giving the names of the developers being probed. "We've told investors not to pay them any more money."

An ongoing scandal surrounding Deyaar Development (DEYAAR.AI), Dubai's third-largest traded home developer after Emaar Properties (EMAAR.AI) and Union Properties (UPP.AI), and an embarrassing row between investors and Damac Properties, the Middle East's largest private property developer, has cast a dark shadow over the emirate's entire property market.

Deyaar's former chief executive Zack Shahin is facing charges of financial wrongdoing and the case is likely to take the case to court soon, according to Deyaar Chairman Nasser Al Sheikh.

In the case of Damac, investors who had bought property at the company's Palm Springs project on a Palm-tree shaped island in Jebel Ali, about 40 kilometers southwest of Dubai, threatened legal action after the developer announced plans to cancel the development.

Damac was eventually forced to reverse its decision to axe the project after the incident was widely reported in the international media in Damac's key markets, such as the U.K. and the U.S.

By Stefania Bianchi, Dow Jones Newswires; +971 4 3644967; stefania.bianchi@dowjones.com

Copyright (c) 2008 Dow Jones & Company, Inc.

(END) Dow Jones Newswires

25-05-08 0431GMT