The key factor in Memon’s projection is the federal government’s $20 billion bond programme, which Memon Investments Managing Director Ahmed Shaikhani called “a tremendous development” that will make funds available to cash-strapped real estate firms now burdened by debt.

“It should also provide a more upbeat atmosphere to the sombre tone the economy, particularly the construction sector, has taken,” he said on Sunday. “By helping to ease up the tight liquidity in the Dubai market, the construction industry should pick up, as delayed or cancelled developments are breathed with new life, and plans for new projects start to materialise.”

Another factor in Memon’s forecast is that construction costs per square foot in the UAE have declined by an average of 30 per cent since the onset of the current economic crisis. Lower construction costs should make the prices for completed projects more affordable and eventually help stimulate demand, Shaikhani said.

“Industry experts point to the massive drop in the prices of steel, and other materials including aluminium, wood, glass and diesel. The declining cost of labour and supervision due to recent redundancies and terminations has also contributed to the dip in construction expenditures,” he said.

Emaar Properties, the UAE’s largest real-estate developer, is slashing purchase prices on a Dubai residential project by 25 per cent after cutting its building costs. Emaar has cut costs at its Standpoint residential project in the downtown Burj Dubai area and will pass those savings on to customers, Bloomberg reported Emaar as saying on Sunday. The price reduction will be based on the original purchase prices and will be available to customers who have paid all their installments on time or who can clear all their debt within 30 days from March 5, the report said.

Memon said it expects to meet its completion targets for its own projects, starting with the Dh75 million Champions Tower I, due for delivery by the end of this year. Memon values its overall residential and commercial property portfolio, which includes the Frankfurt Sports Tower I and the Cambridge Business Centre, at around Dh1.34 billion.

“Dubai has been hit by the financial crisis, and is now experiencing correction, with prices getting adjusted as per the laws of demand and supply,” Shaikhani said.  He added, however, that “the fundamental framework of Dubai is still very much intact; hence, there is great potential for the market to bounce back sooner.”

aneela@khaleejtimes.com