Since the global economic downturn in 2008, Dubai has sought to display signs of financial improvement. And the glitzy sheikhdom of the United Arab Emirates (UAE) has begun to demonstrate growth -- officials expect foreign direct investment to increase 30% this year -- except in real estate. What was once the world's fastest-growing property market has seen values fall 62% from their 2008 peak, according to a February report from Deutsche Bank. Largely prolonging the pain has been oversupply, as thousands of additional residential and commercial units are expected to enter the market, when roughly 40% of homes and offices remain vacant, according to Bloomberg.
Despite the pessimism pervading the market, Dubai launched a Shariah-compliant real estate investment trust (REIT) in November. Emirates REIT, jointly developed by Dubai Islamic Bank and Eiffel Management, a French REIT specialist, joins a number of Shariah-compliant REITs that have been set up Asia and the Middle East over recent months. Governments and Islamic financiers alike hope the new products will spur investment from Muslims and non-Muslims into these regional real estate sectors.
Officials have been quick to tout some encouraging signs. While European buyers have not returned, Dubai has remained afloat on purchases by real estate investors from India and China; according to the Abu Dhabi-owned newspaper The National, Indians were the biggest bloc of expatriate investors, buying US$2.4 billion worth of properties last year, while Chinese investors bought properties worth US$157 million last year, a 700% increase from 2008. On the heels of the Emirates REIT, the National Bank of Abu Dhabi plans to launch a trust this year.
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