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Announcement:

Moody's: Negative Outlook for Arabian Gulf Real Estate Market

08 Apr 2009

DIFC, April 08, 2009 -- The outlook for the Arabian Gulf real estate market for 2009 is negative, reflecting tightening access to funding, declining demand and a need to preserve cash, says Moody's Investors Service in a new report entitled "Arabian Gulf Real Estate Market Industry Outlook". The report expresses Moody's expectations for fundamental credit conditions in the industry for the next 12-18 months.

"Although drivers of demand vary considerably among the Gulf Cooperation Council (GCC) countries, residential and commercial real estate are under pressure due to lower demand, lack of funding, worsening consumer sentiment and risk of over-supply," explains Martin Kohlhase, an Assistant Vice President-Analyst in Moody's Corporate Finance Group. "Saudi Arabia is the notable exception as it benefits from a large and growing indigenous population base and structural under-capacity for residential property, especially for low- and middle-income families."

Moody's notes that obtaining financing has become more challenging since September 2008 and a nascent mortgage industry cannot fully compensate for a funding shortfall from other sources. Negative market sentiment has also kept away many buyers who are no longer willing to acquire off-plan property (or the capacity) and thereby provide a source of funding through down-payments.

"Furthermore, long-term population growth rates -- in excess of 5% for most countries in the region -- are no longer realistic in the short term and may become negative over the coming quarters as investments in commercial activities, including foreign direct investments, are drying up," cautions Mr. Kohlhase.

Companies have also started to lay off foreign employees, which could negatively impact demand for residential properties, as some markets appear to be over-supplied. Thus, Moody's believes that the advanced markets (Dubai and Doha) will be impacted the most as expansion plans in these markets have assumed a steady influx of expatriates. Instead, these markets have witnessed a decrease in property prices and a slowdown in construction activity. Moody's notes that many projects, particularly in Dubai, have been undertaken in anticipation of future demand, which may not materialise.

Moody's also understands that real estate companies have generally put the majority of planned, but not yet commenced, projects on hold, whilst completing or consolidating those where construction has started. Completed but unsold projects will have to remain on the balance sheet. Furthermore, companies with (uncommitted) short-term bank lines -- which are more common in the Gulf region than in more mature markets -- may face increased refinancing risk.

However, Moody's notes that public infrastructure spending remains buoyant on the back of economic stimulus packages, which have been bolstered by government surpluses accumulated during the period of high oil prices. Furthermore, most real estate companies in the region benefit from strong government support, which in turn underpins their ratings. Moody's expects such high levels of support to continue.

Moody's currently rates seven companies in the GCC region that have real estate-related activities. Some are conventional developers, whilst others operate free zones or cater largely to a certain industry. The majority are government-related issuers.

* * * * *

NOTE TO JOURNALISTS ONLY: For a copy of this report, please contact EMEA Press Information in London +44-20-7772-5456; New York Press Information +1-212-553-0376; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +33-1-5330-1020; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7-495-228-60-60; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Hector Lim in Sydney +612 9270 8102; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Leon Claassen in Johannesburg +27-11-217-5470; Jehad el-Nakla in Dubai +971 4 401 9536; or visit our web site at www.moodys.com

DIFC
Martin Kohlhase
Asst Vice President - Analyst
Corporate Finance Group
Moody's Middle East Ltd.
Telephone: +971-44-01-9536

London
David G. Staples
Managing Director
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: Negative Outlook for Arabian Gulf Real Estate Market
No Related Data.
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