A dream, luxury called Dubai
Dubai the Shoppers Paradise
If you ask me to define Dubai, I will say “Shoppers Paradise”. Dubai is all about shopping and trading and businesses woven around it very carefully to become trading hub of the world. Dubai is a miracle in dry desert. If we look back few decades ago, this was desert. Today it is an Oasis. It is a beautiful and luxurious manmade Oasis in the desert. Those who like to visit Dubai, there are only two reasons luxury and shopping.
Today Dubai is one of the world’s biggest transshipment hubs. Dubai is defining the trade line in new global trade environment where more and more people are thinking of east – east trade. At center point of the world, it is controlling trade to G.C.C. and Africa. But it is also positioning itself as connecting point with Europe and America.
Dubai’s Flagship Carrier Emirate is growing. Emirate is growing fast, making money and profits when many of giant old airlines are losing it. Dubai airport is growing flying as one of biggest airport. This airport is expanding.
Event Management is another industry which as core of Dubai’s success. Dubai held Global Forbes C.E.O. meet and world energy summit few weeks ago. Dubai is a major destination for global events.
Horse Racing – Dubai has very beautiful horse racing stadium with huge capacity and racing season. This gives Dubai lot of visitors.
Tennis – Every year Dubai held a major tennis event where most of the top ranking tennis players participate in it.
There are many other major sports events and tournaments are held in Dubai. Dubai is major destination for corporate training events and programs. Every year hundreds of programs and annual, biannual events for the corporate world are held in Dubai. This gives Dubai many thousands foot prints and tourist and increases occupancy.
Man Made Luxury
There may be many places in the world with luxury and beauty. But Dubai is the absolute example of made luxury and beauty beyond imagination.
Beach is absolute beautiful. The Palm Island is a manmade island. This is visible from the space station. This is very beautiful place. This is symbol and address of rich and powerful. This is one of the most prestigious projects of the Dubai and it has successfully done it. This project includes Hotels, apartments, Villas and sports stadium and shopping mall.
There are many big projects. These are free hold properties where foreigners can buy. Development of these free hold properties and luxurious projects has made Dubai a destination of choice for rich and powerful.
There are beach, swimming pool, recreation center gym and walking track, stadium. Everything called luxury is present in these projects.
Burj al Khalifa – This is world’s tallest tower. A big project and this year it is all sold out. This is what said. Market is picking up. They made day almost 2000 bookings in one day for different project. This is one of its kinds of project, a symbol of power and richness for the powerful.
Such residential projects and free zone made Dubai a success story in few years’ time. It has made a name for luxury residential properties in the world.
Free Trade Zone – This is another pillar of story called Dubai. Dubai has developed a very clear path for itself when it developed a strategy more than decade ago. I started working on free zone strategy and it has many free zone today. JAFZA is one of the biggest and most crowded. The open market and easy procedure has made it one of the best destinations to do business. It is one of biggest trading hub of Middle East and handles more than 50% of total trade. It is key connection for trade in G.C.C., Iran, Iraq and North Africa up to Africa.
It is one of most important hub for the businessmen and entrepreneurs in Africa and Middle East. They can find all material at one destination. This has made it a success story.
The Shopping Mania
This year Eid al Adha saw a new dimension to the Dubai’s call to attract more tourists. This is for the first time the shopping malls are opened 24 hours a day. This has given Dubai’s reputation as shopper’s paradise a new dimension. Dubai has changed the way industry works. It has gone far ahead of others in promoting itself as top tourist destination. Their media campaigns at attracting the tourist are best and designed looking at the psychology of G.C.C. populations. These media campaigns are designed for those tourists looking for short duration tourist packages and lot of money to dispose of. Looking at footprints during this period these promotions definitely paid off.
Dubai Shopping Festival
Dubai is all about shopping and shopping is all about Dubai. Shopping with luxury and entertainments is the touristic theme of Dubai. Dubai has started promotion of Dubai Shopping festival as shopping event in 1996, over the years it has become family shopping and entertainment event. Every year it has become better and improved with new ideas. Tourist coming for this event is increasing year over year. This growth is there for last twelve years. This event has become a global shopping and marketing and entertainment event.
It starts with grand opening ceremony in mid-January and continues till mid-February. It has many events in it for family entertainment every day. The whole month is full of events, shows and entertainment. It has given it a unique identity in world.
This is not the only shopping event it has more to offer across the year. Mainly it has three more events.
- Dubai Summer Shopping Festival
- Eid in Dubai
- Ramdan in Dubai
These all projects have one point that is attracting maximum number of tourist and entertaining them as per the needs and time. The Dubai has built economy very successfully around its tourism, it shopping tourism. Where tourists come, enjoy, get entertainment and also buys products. Many tourists come just for shopping. This is marvelous economy.
- Dubai New Dawn
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False Dawn - Dubai
Dubai Revival in Tourism – Miracle of Arab Spring
Arab Spring has seen many up and downs. It has destroyed many powerful. Arab spring changed the Arab World forever. Arab Spring has increased tourist flowing to Dubai. Arab spring has revived Dubai faster than anticipated.
Bahrain which is in turmoil for last more than two years is a important Tourist Destination. Because of political unrest in Bahrain this sector is worst effected. This has helped Dubai to attract weekend travelers. Weekend G.C.C. travelers are going to Dubai instead of Bahrain, specially Saudi and Kuwaiti tourist who use to visit Bahrain regularly are going to Dubai.
Egypt – The revolution in Egypt has big effect on its tourism sector. The revolution has almost shut the tourism Industry for more than a year and still struggling. Cairo and Sharm Al Shaikh the two main tourist attraction were deserted. This has directly benefited Dubai.
Tunisia and Morocco – The Arab spring started in Tunisia and it affected Tunisia. The tourism is almost shut for more than a year and yet to recover from that punch.
Syria and Lebanon – The present unrest in Syria and Lebanon has shut its tourism industry. The unrest in Syria is going on for more than 18 months. Lebanon is in political turmoil for some time now. These are two major destinations for travelers.
The present surge in the tourist and number of people visiting Dubai has is basically a result of Arab spring. This increase in tourist has done very good job for Dubai and has increased the occupancy at Dubai hotels and everything related to tourist economy.
This has resulted in feel good factor in Dubai.
Emirate Airline the flagship carrier of Dubai has done extremely well. This is despite slowdown in Europe. The number of travelers and transit passengers has increased. This is big achievement. This is because of two reasons, more number of tourist are arriving in Dubai. Especially passengers travelling from Asia to Europe and America are using Emirate. The quality of service, availability of service and affordability of service has helped the emirate to achieve this.
Logistics and Transportation Rebound
Dubai is doing well as transshipment hub. It is also at center of growth for G.C.C. countries. The strong growth in G.C.C. countries has helped Dubai in increasing its performance in Logistic and transportation hub. The high Oil prices and strong infrastructure project in G.C.C. has helped Dubai to come up very fast from the slack three years ago.
Dubai New Dawn
Dubai’s Land Department Data shows increase in property transaction by 50% in first six months of 2012. NEW grand developments are being built. A Grand Replica of Taj Mahal is proposed. This complex will have hotel and swimming pool and commercial center. The Arab Spring and high spending by the GCC governments has helped Dubai to recover compared with others.
Residential properties in best locations are gone up by almost 15 to 20%. This demand is very selective and only at the particular location. The total transaction value has crossed Dhirham. 83 billion in first nine months of this year. Burj Khalifa top the list of sell. The total units sold are 27,452. The total land sell has reached 5,488 transactions with DH. 54 billion.
Indian did the best buying and top the list seconded by Emiratis. In value terms Emiratis top the list of buyers seconded by Indians. 68% of land lords are Asians. 20% land lords are Indians 35% are UAE nationals.
Arab Spring and Refugee’s
Dubai’s real estate market revival, which recently saw queues of buyers lining up at the launch of high profile new off-plan developments, is being driven by ‘refugee capital’ from buyers in countries such as Iran, Pakistan and Egypt, according to a new report. Most of the demand is coming from ASIA and North African countries, because of collapse of the Europe they do not have enough choice or alternative. It is the only place with peace and stability.
Is Revival Real
How real is Revival
More than 33% office space is still empty in Dubai’s central Business District. The vacancy rate is higher than 33% in adjacent areas. About 13% new commercial space or 900,000 square meters will be added in 2013. 25,000 will be added to the existing supply, will increase the empty space in residential category. The sale of 12 billion DH is 74% lower than the sale of 46.7 billion in first half of 2008.
Dubai is yet to pay $113 billion in debt. This year almost $15 billion will be due other than the $20 billion provided by AbuDhabi government and U.A.E.’s central bank, this will also be due in 2013 and 2014.
Looking at present debt and the capacity of banks and financial institutions it may not be easy for Dubai to get financing for these projects. It is just not possible and financial institutions do not have enough appetite for the new debt for the restructured entities and other companies.
Dubai’s Problems lies into four core issues.
· Corporate Structure
· Project Finance
· Islamic Finance
Unless and until these problems are solved there can not be revival of Dubai.
The restructuring must come from the source of problems. Restructuring is not an easy exercise, very painful, difficult and time consuming.
- Structure – Restructuring must start with corporate structure. Make the structure fully transparent and independent of government in article of association itself. The organization must be fully professional with very high ethical standards and moral values. Separate the companies with very clear business line and synergies. These entities should have very clear distinction between the corporate entities and their debt, and laws governing these entities, their debt and bankruptcies. The assets of these companies should not be considered as assets of Ruler. The assets of Ruler under present law cannot be publicly auctioned. All these laws and their provisions must be clean.
- Leveraging – Define the core business; put all non-core assets into a single SPV under escrow account with the lenders. Make the lenders more transparent and give them transaction right on these assets with full ownership. These assets will be sold over the time frame in three to five years and proceeds paid to lenders at base value and any thing above the base value shared in agreed terms, UP and Down both way sharing.
- Separate Operating Business, calculate their DSCR and keep the debt which is affordable. These are cash cows and should not be burdened.
- Project – All ongoing projects must studied and lenders should be given maximum equity in them, without considering any inflow during execution period, on debt should be converted to long term Project Finance, based on project to project. These should be 15 to 20 years plan.
- The last but most critical is Islamic Finance – The Dubai World must create a separate entity whose complete business is according to Shariah. The best hybrid structure of project finance should be used for financing these projects. Istisna along with Ijara can be used. Sukuk structure which is fully compliant with Shariah of long maturities can also be used to refinance.
Present Global economic Conditions and Recovery
Dubai has seen Real Estate collapse and collapse of Dubai. It has given jitters to the market across the world. Even after more than 3 years the problem is not solved. Only Dubai World restructuring is agreed with the lenders and is being carried out. Still other two government entities are yet to finish restructuring i.e. Dubai Holding and Investment Corporation of Dubai. This will be biggest drag on revival of Dubai.
Unless and until this restructuring is completed there will not be availability of new financing and this will stop the major projects. This is first and most important reason for slowing down of Dubai in time to come.
The second important reason is present global economic situation. India the biggest traveler and buyer of the Dubai properties is slowing down, this will have substantial impact of Dubai. Whole of Asia slowing down and it has 68% of total sale value and volume. This will have impact on the new sales.
Europe is crumbling. Austerity is everywhere. The economy is stalled and will remain same over the next year. There will not availability of finances, investment and sale from the Europe.
Similarly America which is yet to come out of crisis will be in difficult position looking at its debt. The slowly growing American economy can stalled all together in the coming year. This will have substantial impact on global economy. This slowdown will have negative impact on Dubai.
The present euphoria about the rebound of Dubai will be short lived. There will be slow down of Dubai Real Estate Market in 2013. The market will see the substantial down turn in 2013.