News from Dubai Property Markets 1500 work visas a day being cancelled

Latest news from Dubai is confusing to say the least. At the one end of the scale, the Dubai government is canceling 1,500 work permits and visas a day as the slowdown continues and developers shed staff, at the other end of the scale, developers keep on putting our press releases claiming that it is business as usual.

The number of canceled work permits is expected to continue rising with developments being stopped across the UAE. An official from the Ministry of Labor told Arab News that they started seeing a rise in the cancellation of visas in late October. "On some days, we cancel more than 2,000 permits," he said.

The official, who spoke on condition of anonymity, said the ministry is dealing with an unprecedented number of complaints from workers. "The ministry is swamped with complaints from workers who have not been paid, or forced to take unpaid leave or who were fired but not paid their dues. Only after settling their cases can their work permits be canceled," he said.

At the Ministry of Labor's Visa Cancellation Section, human resource representatives of companies complain of long queues. "It takes hours to get the cancellation paperwork processed," Naser Ahmad, an employee for a construction group.

Ahmad, who was carrying 10 passports, said his company started layoffs in September. "Up to now, we have cut down 25 percent of the work force," he added.

Another employee said his company has already fired 500 of its 5,000-strong work force. "At the moment, the bosses are waiting to see if the situation improves in a few months. If things do not change there will be more redundancies," he added.

Estimates as to just exactly how many foreign laborers are in Dubai vary quite considerably, but there are already murmurings in India, Pakistan and Bangladesh as to how to deal with a massive influx of labor back into their countries. These countries are also facing their own issues and India is still reeling from the Satyam scandal, with no less than 6 high profile property companies in India seeing their financial officer resign unexpectedly in the last month, presumably to avoid any government investigations in the aftermath of the scandal.

In the meantime, a press release disguised as an interview states that the "UAE real estate sector to see prices leveling off this year." As if. Prices have fallen anywhere from 40-60% in 2008 and are still plummeting, despite assurances from Colliers International that Dubai property prices fell only 8%.

Sunland's Atrium project, a Dh6bn luxury mixed-use development with a sculptural glass façade, located in Madinat Al Arab, has just been delayed by a minimum of six months. "We are not isolated from the current markets," said David Brown, Chief Operating Officer Sunland Group, "But the plan is to initiate site mobilisation works within the next few months and get the site ready by mid-2009. It will take another four to five years after that to complete the project."

The confusion regarding Dubai's rent cap law also gets worse. Since the introduction of the rental index which requires mandatory registration, RERA, Dubai's Real Estate Regulatory Authority has announced a "surprisingly incomplete" rental index with no residential prices or criteria mentioned. No surprises there I'm afraid and the rent cap situation is still not resolved, although with 1,500 work permits a week being canceled, I have a feeling rents are going to get a lot more affordable over the next few months.

The other current issue is developers not paying laid off staff due compensation, and if you are interested in some ex-employees opinions on Damac Properties' failure to pay full settlement. Here is a sample:

I came across another web blog today that listed out what’s said to be numerous projects in Dubai that DAMAC has recently cancelled. If this is true, it makes very disturbing reading for the thousands of investors who’ve already paid DAMAC their money for property on these projects. What chance is there of these investors ever seeing the billions of Dirhams they’ve alreday handed over to DAMAC for these projects?! Who’s looking into this?? Nobody. If DAMAC goes bust, as is possible, what will happen to all this money??