Dubai warned on new, large projects
Dubai, July 13, 2014
The recent announcement of large, ambitious projects by Dubai could lead to another boom-bust real estate cycle, particularly as there has not yet been major deleveraging in the economy, a report from BofA Merrill Lynch Global Research has warned.
The report cited the recently announced Mall of the World project. The project will include the largest shopping mall in the world, a climate-controlled street network, a theme park covered during the summer and 100 hotels and serviced apartments.
Dubai Holding is to develop the complex, which will require Dh25 billion ($6.8bn) in financing over 10 years. Dubai Holding expects half of the financing to come from internal resources, and the rest to be accumulated through the debt market, sales of some parts of the project, revenue from leasing, and partnerships, it said.
"We worry about potential policy making complacency and that such ambitious projects could lead to another boom-bust real estate cycle, particularly as there has not yet been major deleveraging in the economy," the report said.
The latter is consistent with news that Dubai World is seeking to extend the maturity of its 2018 restructured loan by another four years, it added. - TradeArabia News Service