Middle East: Mideast Developers Put Building Projects on Hold

Emaar Properties, one of the largest developers in the United Arab Emirates, has four projects stalled in Algeria, according to data from the research firm Zawya, based in Dubai.

Zawya’s data show that a $500 million plan to expand the Sabha Airport in southern Libya has also been put on ice. The contractors on the project are Consolidated Contractors, based in Athens, and the Turkish company TAV.

Meanwhile, Damac Properties, based in Dubai, has halted a $16.3 billion luxury residential and tourism development, Gamsha Bay, on Egypt’s Red Sea coast.

Sheikh Khalifa Bin Zayed City, a $100 million project near Cairo planned by the Abu Dhabi Municipality in conjunction with Egypt’s Ministry of Housing and Emaar’s wholly owned Egyptian unit, Emaar Misr, is also on hold.

Other building programs, however, are still going ahead. In Egypt, Emaar has several projects under way or in the final stages of planning.

“Egypt is one of the key markets of Emaar,” the company said in a statement. “Emaar Misr is currently developing three projects — Uptown Cairo, Marassi and Mivida. A fourth project, Cairo Gate, is in the final stages of master-planning.”

“We strongly believe in the Egypt real estate market and the economic prospects of the country,” it added.

Independent analysts agree that prospects in North Africa are bright in the long term.

“There will be delays, but ultimately the projects will get done,” said Chet Riley, a real estate analyst at Nomura Investment Bank in Dubai. “The fundamentals of these places haven’t changed and neither can demand for real estate in the long run.”

Martin Kohlhase, assistant vice president at Moody’s in Dubai, said North Africa remained an opportunity for developers, compared with the overbuilt Gulf states. “If you strip out the noise created by the unrest, it is clear that the fundamental economic factors bode well,” he said.

Still, whatever the longer-term prospects, the wave of unrest has set back the recovery that started late last year in the region’s real estate markets after the slump brought on by the 2008-2009 global financial crisis.

Out of $150 billion worth of projects, more than $23 billion are now on hold in North Africa, according to Zawya’s data for the first quarter of 2011.

“Going forward, we expect more projects to be put on hold,” said Talal Malik, a Zawya analyst in Beirut. “At the moment, it is particularly difficult to get information from developers on progress.”

Egypt is the main country in which Gulf developers operate outside their local markets, according to Ahmed Badr, real estate analyst for the Middle East and North Africa region for Credit Suisse. The medium and long-term potential for the Egyptian property market is supported by a growing population’s strong appetite for housing.

But for now, investors are waiting to see what will happen next.

“Due to the unrest, there is a complete standstill in the Egyptian real estate market,” Mr. Badr said. “There is no buying or selling taking place. People are postponing transactions until the unrest stabilizes and land disputes have been resolved.”

Sweetheart deals allegedly done by members of the government of former President Hosni Mubarak, in which state land was sold at below-market prices to developers without a public bidding process, are now being challenged in the courts. Developers involved in these cases risk seeing the deals declared invalid or having to pay more than they initially agreed — a prospect that analysts say is keeping investors sidelined for now.