The chief executive of one of the country's biggest developers has called on banks to cut mortgage rates to kick-start a housing market recovery.
Khalid Al Malik, the group chief executive of Dubai Properties Group (DPG), urged lenders to lower the cost of financing to stimulate the depressed Dubai property sector, where homes have lost as much as half their value since the market peak three years ago.
"They need to lower their rates," Mr Al Malik said in an interview at the Cityscape property show in Dubai yesterday. "The problem is that many investors bought near the peak. And when you add high interest rates to that, it doesn't make any sense for them."
Global interest rates have fallen to record lows as governments have sought to encourage consumers to spend more to help avert recession. Interest rates have fallen to 1.5 per cent in the euro zone and 0.25 per cent in the US.
The Emirates interbank offered rate, known as Eibor, has fallen 36.6 per cent in the past year to 1.48 per cent.
But mortgage rates in the Emirates have remained comparatively high, in the range of 5 and 9 per cent depending on the ratio of debt to equity and the status of the development. "We are struggling because of that," said Mr Al Malik.
"We are hoping the banks or the mortgage companies come up with new packages. Of course banks had many issues at the time of the crisis. But now things are becoming stable, they should look at this again."
DPG is a unit of Dubai Holding, one of three big Dubai Government-related conglomerates. DPG, which was formed in 2004, was one of the largest developers during the emirate's boom years, building the vast Jumeirah Beach Residence and Business Bay developments.
But even those projects were dwarfed by the 278 square kilometre Dubailand development, originally intended to include a series of sprawling theme parks such as Universal Studios and Six Flags. More than 40 projects were planned for the development, which was launched in October 2003.
But just a few housing schemes have been delivered as the global financial crisis sapped the market of funds needed to build projects such as the US$1.8 billion (Dh6.61bn) Aqua Dunyatheme park announced in 2004 or the $136 million Astrolab Resort announced the following year.
The Dubailand development is under review by DPG, and the developer has not yet disclosed which elements will be built.
Mr Al Malik said serious negotiations were under way to restart some projects, including City of Arabia, that stalled during the financial crisis that began in 2008.
But he said the development would grow in response to demand and in tandem with the growth of the wider economy.
"We need to be careful and learn the lessons of the past. As long as we respond to the economic needs of the city, we should be fine," he said.
DPG has delivered about 5,000 housing units this year, mostly in Dubailand. That is expected to slow next year as the developer switches focus to handing over apartments in its Business Bay development in downtown Dubai.
That includes the Bay Avenue development, which comprises about 53,340 sq metres of retail space and 140 shops.