Light at the end of the tunnel

This week there was a worrying report in Abu Dhabi's daily newspaper The National about a rise in property litigation in the UAE capital, with more and more irate tenants seeking to take developers to court to either recoup their initial investment or to make good on unfulfilled promises.

Is there a danger that the Abu Dhabi real-estate market could implode like it did in Dubai? And why has Abu Dhabi not learnt from the painful and costly experience of Dubai?

Recently an abandoned building site near to where I stay in Dubai's Marina district suddenly erupted into a hive of activity, banging and clanging away and pouring concrete as if it had never even stopped. I would like to think this is linked to the announcement by the Dubai Land Department (DLD) that it has appointed an engineering consultant to prepare technical and financial reports on 100 stalled projects. That is a lot of real estate sitting idle.

The DLA has termed this project its ‘Tanmia’ initiative, which is Arabic for ‘development’. One can ascribe a measure of irony to such a name, seeing as the aim of the initiative is to address the lack of a lot of development on many sites, but Dubai has taken giant strides in addressing the fallout of the downturn.

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It is amazing to recall that it was only in June this year that the Dubai government unleashed the bombshell in its LSE bond prospectus that, as of 31 May, 217 projects had been canned. However, to put this into context, 129 projects have been completed since 2009, with 237 out of 450 “likely to be completed in due course.”

It seems as if the latest action taken by the DLA will give substantive heft to the latter statement. Islamic Architects Consulting Engineers (IACE) will focus on technical surveillance, reporting and security auditing for projects registered under Tanmia.

As far as can be understood, the first step – a simple cataloguing of all projects – has been completed, which will be followed by more detailed investigation on the part of IACE. Technical aspects are likely to include caretaking and long-term maintenance issues.

However, what is particularly heartening is the DLA’s stated aim to enhance the transparency and credibility of the real-estate industry, which has taken a real beating. After IACE has compiled its reports, the DLA will use this information to determine the best means of obtaining funding for stalled projects.

It's an exceptionally important process that brings clarity and confidence back to an industry that has suffered greatly over the past few years.

What happened in Dubai after the crunch was as much an evolutionary outcome as it was due to an overheated property market. It seems as if Abu Dhabi is following along the same path, albeit at a bit of a delayed pace. A lot of contractors and consultants turned to the Abu Dhabi market after the steam went out of Dubai, both as a source of fresh opportunities, together with a renewed start – but perhaps failing to realise that the problems they were trying to escape are endemic to the industry.

Dubai gives one hope though that there is, indeed, light at the end of the tunnel.