These days, the most sensational news doing the rounds is that of Dubai in debt and recession hitting dubai. From what I have read, Dubai has deferred payment of its dues and various bonds since it is in debt and don’t have the money right now.
Interestingly, I read somewhere that oil sales in Dubai too has been low of late. But what has been striking about Dubai in the past few years is how they have been building up their real estate in their plans for the future. It is no secret that the oil reserves of the world are set to deplete in the next few decades. When that happens, the only major source of income for the middle east will be exhausted.
Dubai having realized this have gone on a real estate development spree and have in the process created several modern architectural wonders of the world. What else with its Palm Islands, The World Islands, Burj Dubai, Burj Al Arab, and a lot more. The idea behind this all was that when the nations oil reserves are depleted, they can sustain their economy through other factors, most importantly tourism. Dubai and the rest of the Middle Eastern countries have been trying to make their countries a more tourist friendly place. They have even promoted the inhospitable sand by having rallies like Dakkar and built F1 tracks.
It could well be the reason why Dubai has gone into debt/recession. The amount of money that they have put into developing real estate have not quite evened out with the income from tourism and the oil exchange. In fact since the last year, the situation has gotten worse with the amount of spending having reduced drastically. When money is not being spent, then money is not being earned. This is a big domino effect and it has taken its time to hit Dubai.
I sort of feel sad for them. Their are trying to make alternate sources of income, but the alternate source of income relies on people coming over and spending money. However, when people don’t have the money to spend, or are very reluctant to spend big money, then the ones whose income depends on this expenditure are hit badly as well. It remains to be seen what are the repercussion of this Dubai debacle as the world has put it. Though many big financial institutions and ministers have played this incident down, many are definitely wary of what the future holds.
Interestingly, even the US collapse was due to Real Estate. Somehow I feel that the Indian Real Estate scene has been spared until now, but not for long. In Bangalore itself, on the Marathahalli ring road there are score of apartment complexes with many flat lying empty. Maybe it has been bought by NRIs and are left unoccupied, but it is a known fact that many builders are trying to sell off the unsold ones by lowering the cost price to almost what it was 2-3 years back during the time when construction began. It is just a sign of things to come. At least I want a the real estate scene in Bangalore to experience a good shake up so that it wakes up to the needs of the middle class and common man.
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Tagged: debt, dubai, income, middle east, money, real estate, recession, tourism
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2 Comments
I think there was no F1 race held at Dubai. And dubai doesn’t have any oil source.
Nope, Dubai doesn’t have any F1 track. It is in Bahrain. What I meant there was that all the Middle Eastern countries/kingdoms are trying to do something to increase tourism. I don’t know whether Dubai has any oil source or not, but from what I read on various sources, they are not making as much money out of oil as their neighbours. I really don’t know whether that means Dubai doesn’t have oil, or whether they have scare oil.
Nevertheless, the main point here is that most of the middle eastern countries were trying to sustain themselves for the future by resorting to alternate sources such as real estate and tourism. However thanks to the recession, their plans have been hit quite badly. This story that I read today is a very interesting one on the same topic -> http://bit.ly/8pxnRG