Dubai, with its glittering towers and artificial islands, struggles to emerge from a real estate crisis that has lasted five years and exposes the small players in a sector that has made the reputation of the city-state at risk of bankruptcy.
In order to attract customers, developers are price-cutting and offering very advantageous financing plans, while the authorities offer incentives and new regulations to revive this vital sector.
Before Expo 2020, which Dubai expects to generate economic windfall and some 300,000 new jobs, hundreds of mega real estate projects have been launched in recent years, leading to oversupply and falling prices.
During the 2008 crisis, the authorities had already intervened with measures including the simplified granting of visas and long-term residence permits for large investors.
- Rebalance the market -
A high level committee was set up in September to rebalance the market with oversupply.
The rating agency Standard and Poor's estimated that the sector, which represents 7.2% of Dubai's economy, may not stabilize before 2021.
"After a while, a certain correction will occur," predicted PNC Menon, president of Sobha Group, an international real estate group based in Dubai.
This process, which will leave only the strongest companies in place, should last another three or four years, said Mr Menon this week at AFP on the sidelines of the annual real estate show Cityscape Global.
His group presents a multi-billion dollar project: luxury apartments and villas by the sea.
Like Sobha, dozens of local and international property developers are offering unprecedented payment terms during the show to attract customers.
Buyers must give a deposit of 5% of the value of a property, against 25% during the prosperity period, with the possibility of paying the rest over ten years directly to the developer, without the obligation to take out a bank loan.
The promoters also propose to cover registration fees, which amount to 4% of the value of the property.
The real estate property in Dubai, which has the most diversified economy of the Gulf region, is open to foreigners.
But real estate transactions plunged 21.5% to $ 60.7 billion last year, according to government data. Real estate prices and rents have been falling since mid-2014, with a decline of about one-third.
- "The lowest to come" -
"In terms of the downside, it has lasted much longer than most of us expected," said Lukman Hajje of Property Finder, in an analysis.
"With the amount of goods being launched, built and delivered, it is unlikely that we have seen the lowest in the market yet," he added.
Real estate prices fell 5.8% in the second quarter of 2019, down for the eleventh consecutive quarter, according to data from the Central Bank.
Last year, some 22,000 new units were completed, according to consulting firm JLL, the largest number of new properties to enter the market in the last five years.
JLL predicts that up to 117,000 units could be added to the building stock by 2020, putting additional pressure on prices.
The rising cost of living in Dubai, a city of 3.3 million people, of which more than 90% are expatriates, is seen as an important factor affecting demand.
The city-state was ranked the 26th most expensive city in the world for expats in 2018 by the US consultancy Mercer, second in the Middle East after Tel Aviv. In 2013, Dubai ranked 90th in the world by the same firm.
Proponents, who have seen their profits melt, are also turning to more affordable projects.
Raymond Khouzami, CEO of promoter Al-Thuriah Group, offers a 47-storey tower with mostly studios and small apartments. "We have to adapt to the market, we have to lengthen our payment plans and lower prices according to the needs of the market," he said.
© 2019 AFP