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GLOBAL : ECONOMIC BLUES: REPORT FROM GROUND ZERO
Dubai: back from The Brink
The City that once Conjured visions of Grandeur and Globalisation is trying its best to shake off The Misfortunes inherited from its recent debt crush and property bust. Syed Khurram gives a ground-zero walkthrough report
Issue Date - 18/08/2011
 
First impressions usually leave a deep imprint behind. The first glimpse of a city — its buildings, traffic, shops, roads and numerous others things that are part of the urban ecosystem — can convey a lot about its mood and character. So the sight of a stately limousine immediately upon entering Terminal 3 of Dubai Airport only reconfirmed my notions about the city and its multi-splendoured riches. In all these years of living in India, I have never come across a limousine at any of the airports I have passed through.

Driving on Dubai’s smooth roads feels like cruising on a pleasure yacht. The difference is that instead of navigating the vast expanse of sea, you speed past ribbons of smooth asphalt and imposing skycrapers that can make your neck go stiff and your jaw drop. While driving down to the hotel, I couldn’t resist asking the driver: “How are things here?” The driver, a stoutly-built Peshawri Pathan replied in a matter-of-fact way: “Sab theek hai, pahle se ab achcha hai.” Was he hinting at something? Could it be that he was referring to the Arab uprising in the neighbouring Gulf countries, the political hot potato that many Muslim sheikdoms in the region are currently wrestling with? Or was it just a general observation about Dubai’s economy that had lately run up against a great debt wall but is now limping back to recovery?

A short while later, I was back on Dubai’s streets, intent on savouring its urban charms and feast my eyes on its many ravishing landmarks. If ever a traveller is searching for an immersing shopping experience, Dubai is the place to be in. Beyond doubt, Dubai’s array of exotic shopping malls and super-rich wonder stores are a hog-heaven of consumerism. And though one comes across people from all nationalities looking out for the best they can buy, Indians in particular are a common sight. Some places, like the Meena Bazar in Bur Dubai, feel straight out of India and you could be forgiven for thinking that you are taking a stroll in an Indian market.

As you amble along the streets taking in the sights and sounds of the city and its breathtaking cityscape, you cannot but marvel at the ingenuity of the builders for giving shape to magnificent dreams cast in marble and stone. The sheer scale and grandiosity of the edifices around makes you wonder about the kinds of resources and skills that went into their creation. At times such in-your-face opulence leaves you wondering about whatever happened to Dubai’s property bubble bust, and if the talks about the emirate’s once bustling economy now being laid low are just overblown apprehensions.

Dubai’s high rises and exquisite malls are still the cynosure of tourists’ eyes but they probably don’t reflect truly the economic sores that were inflicted in the wake of the property crash. About two years ago, after years of breakneck real estate expansion for which it relied on international borrowing, Dubai found itself on the edge of a precipice as debts swelled to well over 100% of GDP. The $110 billion debt burden and the real estate crash have since exacted a heavy price in terms of stalled economic growth and investors’ flight. And although Dubai has been able to avert a debt disaster, it has not yet fully recovered from the crisis and continues to pay the wages of its past profligacy and reckless property expansion. “The situation has improved slightly and things are not like it was in mid-2008 or 2009. But still there is no economic stability in the real estate and hotel industry” says V.B. Shetty, Group General Manager, Ramee Group of Hotels & Resorts.

 
For evidence one only needs to look around at the vacant rooms lying unused and under-utilised in the hotel industry, which was once at the forefront of Dubai’s thriving and kicking economy. Even a purblind observer cannot miss the various discount deals on offer. Take, for example, the magisterial Palm Jumeirah, Dubai’s latest attraction. An artificial archipelago created using land reclamation by Nakheel, a company owned by the Dubai government, it has not been able to side-step the effect of the slump. The focal point of Palm Jumeirah is its $1.5 billion iconic Atlantis hotel, which boasts of 1,539 rooms and a ginormous 1 million-litre fish tank that has whales and sharks for residents. The inauguration ceremony of the Atlantis, reported to be the world’s biggest party, cost $20 million. But last year, even the Atlantis was touting holiday packages in a tie-up with credit card issuer Visa.

Elsewhere in Dubai, it is easy these days to get rooms in three and four star hotels for just 150 dirhams ($41). Some good hotels with standard amenities charge only 95 dirhams ($25) per day. “The deep cuts in room tariffs show the gravity of the current economic situation and how difficult the hotel industry is finding to sustain itself,” says Shetty. Till 2007, the demand for real estate, including hotels, was very high. As availability and supply of hotel rooms was way below the requirement, investors moved in fast to make a killing. They blindly invested in the hotel industry and banks played an active part in supporting them. As a result, by 2008 and 2009, when the debt crisis hit Dubai, the hotel industry was awash with the supply of hundreds of new rooms. “With the economy under strain, business slowed down dramatically and the hotel industry found itself at the receiving end of the reversal in fortunes,” says Shetty.

Even home prices fell sharply — by as much as 50% — once the property crash came rumbling down on Dubai. House rents nosedived and flats went abegging as they found no takers. “I pay 900 dirhams ($245) as monthly rent for the flat I live in. In better times this flat would have fetched at least 2000 dirhams ($544),” says Ali Kazim, an Indian businessman living in Dubai. Pointing in the direction of Nasir Square in Diera locality of Dubai, he adds: “Before 2008 there used to be huge rush out there and the place served as a meeting ground for Indians. But the crisis has taken its toll: workers have left the city and this area has now almost lost its identity. Hopefully, things are changing and the economy has once again begun chugging in the right direction”. Suleman Jazib, an event manager, echoes Ali Kazim’s sentiments. “The worst is probably over and things are improving though the recovery will not be as speedy as people expect. But, surely, it’s going to happen.”

          

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