“Get state institutions involved in construction” – expert
CBRE managing director says that Dubai’s construction recovery could be fuelled by state backed institutions investing in projects
Nicholas Maclean says state backed institutions should be encouraged to invest in the construction market.
State backed institutions should get more involved in funding local real estate and construction projects, a regional expert has said.
In an interview with Big Project ME, Nicholas Maclean, managing director of CBRE Middle East, said that with the construction market in Dubai back on the up, he foresees greater involvement from corporate investors to fuel the revival.
“I think some of the large corporate investors are going to be involved in funding developments going forward. There are some, like ADIA for instance, where the Middle East is out of bounds for them, but some of the state-backed investors should be encouraged in providing funding going forward,” he said in an interview with BPME.
“They haven’t previously been active in this marketplace, but I think they need to be encouraged, particularly if the banks aren’t as active as they were historically and if they don’t have off plan sales,” he added.
Maclean said that he had seen indications of speculative development in the market for the first time in three or four years. However, he warned developers that this time around, it would be trickier for them to convince investors to part with their cash.
“One of the conundrums for developers, who see an opportunity in the market, is how they get funding. Historically, a large segment of Dubai’s development, particularly residential development, has been funded by off-plan sales. That component of funding from the market has been discredited.”
As a result, he said that it was now important for developers to put in place structures that protected their investors.
“Unless there are these very important structures in place, guarantees of escrow, guarantees of the recovery of funds if the development doesn’t go ahead, (it will be hard to convince investors to fund their projects),” he explained.
