Interview: Hesham Abdullah Al Qassim
After the consolidations and debt restructurings of the past five years, how sure are investors that “boom and bust” is a thing of the past?
HESHAM ABDULLAH AL QASSIM: The economic cycle, everywhere in the world, has its ups and downs, and the smart investor will always enter the market when it is down. Nowadays the cycle is down everywhere in the world and there are certain factors that have been influencing this over the past six months; what’s more, they will continue doing so during 2016 and maybe even 2017.
The main factor has been low oil prices, which have affected the economy significantly. The second is interest rates. The third is dollar appreciation, which has hit investment coming from countries whose currencies have been affected, such as Russia or China. The fourth is the euro crisis, which has affected the purchasing power of its residents and has made them less attracted by our hospitality sector. To sum up, there are many factors simultaneously affecting the sector. Moreover, the political turmoil and instability that is hitting the region right now has also played a part.
On the other hand, the regional instability that is harming the economy is also benefitting Dubai in some ways, with the emirate becoming a kind of safe haven for investment. There is less investment and activity in the broader region, but at the same time it is being concentrated in a smaller and more stable area. Thus, it is the right time to invest for those who want to do so.
What areas of legislation could be considered to ensure greater transparency and strengthen confidence in the real estate market?
AL QASSIM: Legislation in Dubai is very mature. At the time when Dubai started developing and offering its first real estate products to the international markets, in 2001 or 2002, the legislation was not very clear. There was no authority to control the relationship between the investor and the developer. Nowadays, the whole framework is in place, so every investor that comes to this market will have their rights protected. They are buying and selling property off-plan, for instance, and all those changes have happened smoothly.
If you go to any mature country – such as the UK, France or Turkey – you know that your investment will be safe. Dubai has now become one of those markets. Furthermore, it recovered very quickly from the economic crisis. Developers have gained lots of experience, which is in turn also giving confidence to investors.
In light of the new public-private partnership (PPP) legislation, which real estate sectors are likely to benefit the most?
AL QASSIM: Every development is always a joint effort; you never have one party standing on one side and the other on another. I see that very clearly in Dubai. The emirate has always been run more as a corporation than a city. So from the public to the private sector, everyone is working in a commercial way. The PPP model can be used across the whole spectrum of development, from the biggest infrastructure projects to the smallest hotel development. In this city we have seen everything in terms of PPP, even before the law was passed.
PPP programmes almost always work in the same way: the government provides the infrastructure while the private sector develops the commercial and business sides that will move the economy. And when does the government enter the commercial side? When there is recession. They will do that to keep the economy rolling by pumping in money. We saw that in 2009 with the metro and other projects. Dubai is moving at a very fast pace, and regulation needs to evolve accordingly if it is to bring stability.
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