The Dubai Government will be putting $9.5 billion itno new funding into the state owned conglomerate. Of this, $5.7 billion remains from loans from Dubai’s neighbour Abu Dhabi. The rest will be funded by the Dubai Government.

With the remaining $14.2 billion debt, Dubai World has proposed converting $8.9 billion into equity. The remainder will be repaid using two new lots of debt maturing after five and eight years respectively. The government will then provide $1.5 billion for working capital and to help cover interest payments.

Most of the funding will go to support Nakheel, the Dubai real estate developer that is widely thought of being the trigger for Dubai’s property woes. The trigger for the property crisis was said to have been started when Nakheel were unable to repay a $4 billion sukuk (Islamic bond) which matured in December 2009.

Nakheel are most famous for their outlandish building projects such as the Palm Islands and The World, a group of man-made islands which are in the shape of a world map and recently have shown major signs of disrepair and slippage.

The group will now be receiving around $8 billion from the Dubai Financial Support Fund to help complete some of its unfinished building projects around the city.

Many of Nakheel’s suppliers have gone unpaid since last year. Creditors have been asked to extend the maturity of Nakheel’s debts however there is no definite date on which these will be repaid.

In the past few months it has emerged that suppliers were asked by Nakheel to accept as little as 50 percent of their contracts. Many firms are owed millions. However under new terms, contractors and suppliers will be receiving small cash payouts to help cover short-term costs.

Forty percent of their agreed claim will then be paid in cash with the remaining sixty percent being paid in a publicly tradable security which is hoped to yield the full remainder of the debt owed in five years time.

The proposal now passes to a committee of creditors, which must seek agreement from Dubai World’s 97 banks.

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The World Islands Developments was a massive project planned to sit in the shallow waters just off Dubai’s coast near the highly-hyped Palm Jumeirah. When it was first launched in 2003, the Press were quick to cotton onto the idea and the super-rich and celebrities were anticipated to flock to buy islands of their own. 11 billion cubic feet of sand and 47 million tonnes of rock later and the foundations for the islands were complete.

However NASA has just released recent images of the development taken from one of their satellites and the picture is not so rosy. Work inside the man-made lagoon stopped late last year and the website has had no new updates in some time. Dubai Properties then asked for a delay in repaying $26 billion in debt leaving many pondering the future of this incredible resort.

Officially, the project has merely been delayed, not cancelled. However the new overhead pictures of the islands show that several are merging together and there are rumours that several are beginning to sink.

Officials from Nakheel have been quick to point out that the Palm Jumeirah is a great success and attracts many tourists each year, however thanks to the recent economic troubles many hotel developers – amongst them Donald Trump – have quietly shelved hotels plans for the resort.

Only time will tell whether these man-made islands really will be saved or whether they will quietly drop back into the sea with little evidence to show they actually existed.

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The steel-ribbed, glass-clad structure also boasts the highest swimming pool in the world which is based on the 76th floor. There are plans for the world’s highest place of worship with a mosque on the 158th floor.

Unfortunately, it’s not the most auspicious time for the Burj to open; Property prices around the world have plummeted in the last year and Dubai property is no exception. The 300,000 square foot of office space in the tower has yet to find any tenants. Mainly residential, the 900 flats (ranging from studios to four-beds) on levels 19-108 were initially snapped up by property investors, selling for between £660,000 and £11 million. Many of these are now worth a lot less meaning investors may have lost millions.

Some facts ‘n’ figures:

• “Burj” means tower in Arabic

• 138th floor: Highest single lift run in the world from ground floor at 1,654 ft
• Double decker express lifts carry 25 people to 124th floor in 60 seconds. They travel up at 25mph but go down more slowly to stop passengers feeling ill.
• 57 lifts service the building
• 124th floor: the World’s highest observation deck
• 158th floor: Plans for a mosque which would make it the highest place of worship in the world
• Weighs 500,000 tonnes

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Nakheel, the island’s developer, and it’s parent company Dubai World are said to have made a request to suspend debt repayments. The request demonstrates the problems in the Dubai property market as Dubai World were one of the key driving factors behind the property boom in the area in the last few years. They have now asked creditors to give them some leeway on the $59 billion loans they have.

Dubai World, and it’s children companies, accounts for most of Dubai’s debt. The cost of insuring Dubai’s debt has seen a massive increase in recent weeks as many people become skittish about Dubai property.

With one of the largest and most prestigious developers in trouble, there are concerns that some of the most well-known developments such as the Palm Jumeriah will stop work leaving many parts of Dubai as a massive construction site and possibly leaving many property investors out of pocket. People who are thought to have already purchased homes on the manmade island include Beckham, Pitt, footballers Andy Cole, Joe Cole, Kieron Dyer, David James and Michael Owen.

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Some Japanese companies have said that they are owed so much money that they are starting to struggle. According to Otsuka, an Abu Dhabi based newspaper, among those companies affected are Mitsubishi Heavy Industries Ltd and Taisei Corp.

Dubai property development firms have struggled in recent months after the global economy took a beating, helping cause the property bubble in Dubai to burst. The Dubai property market has seen mortgage lending slump, property prices slump up to 50 percent in some areas, and a lack of people looking to buy.

Some Dubai property developers have requested discounts of up to 35 percent on existing invoices in a bid to slash costs and reduce the amounts they owe. There is now also a $20 billion state fund in place to help state-related companies through the Dubai property slump and it is expected that this fund will be topped up with a further $10 billion later this month.

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Dubai has suffered in recent months with buy confidence taking a severe blow despite several high profile developments. Many Dubai property investors are reported to be struggling to make their payments and this has resulted in falling property prices. According to a recent report by Egyptian investment bank EFG Hermes, some Dubai property prices have fallen by as much as 50% from their peak last Autumn.

Despite this, rental market values are still strong with rental prices holding fairly steady.

Many overseas property investors had hoped that the strong rental demand coupled with a weak property market would provide them with an excellent opportunity for property investment. However the latest report showing a gloomy outlook for the Dubai property market means that buyer confidence is unlikely to return any time in the near future and prices may fall even further in the next few months.

EFG have commented that they expect to see more distressed property transactions over the next 6-12 months and this may further weaken the Dubai property market and prolong any rut that it has fallen into.

The lack of investor confidence also means that many Dubai property owners are now looking to rent their properties rather than sell and this means a glut of rental properties are likely to appear on the market in the coming months. The increased number of properties is likely to drive rental prices down and this means a decreased ROI for any property investor.

In short, the Dubai property market outlook is currently not a particularly attractive proposition. With both property prices and rents expected to fall in the next few months, although many Dubai properties look to be bargains, the team at ForeignPropertyBuyer.com believe that any prospective investor would do well to wait for 6 months and then re-evaluate the property market to see if the Dubai property market is showing a more positive outlook and therefore represents a better property investment opportunity.

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80 percent of the homes at the City of Arabia are reported to have already been sold. Much of the remaining residential properties and commercial space is deliberately being held back and will be put up for sale when the development is nearing completion.

Despite widely reported problems in the property market in Dubai, investors around the world appear to be excited about the City of Arabia’s development and many believe that it will be an excellent place to invest – and is tipped by many property experts to be one of the strongest property development options in the area for property developers.

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Recently, Dubai property developers have announced the difficulties they have had in the region, with news about cancelled and delayed projects a common topic of conversation. However despite the doom and gloom predicted by some, not all developers are sharing the same pessimistic outlook.

The new developments are being aimed at locals, rather than overseas offplan investors, as it is widely believed that the offplan developments were largely to blame for the current state of Dubai’s property market. It is hoped that by targetting locals, it will create a more sustainable, stable property market.

Around 10,500 villas are planned for South of Shamkha, with around 5,000 villas planned for Al Falah, as well as numerous other small developments around the country.

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According to Building magazine, the arbitration court is said to be ‘swamped’ thanks to disputes over unfinished contracts and outstanding payments. Claims are expected to triple during 2009.

Last year, the Dubai International Arbitration Centre (DIAC) is said to have heard around 100 disputes. This year, DIAC has seen 180 cases already and is expecting to see around 300 cases over the course of the year. DIAC currently employes just six case workers however the massive increase in the number of disputes means they are now looking for a further two employees to help with the case load.

Developers, engineers and construction firms are now concerned that DIAC won’t be able to cope with the number of cases leading to long delays before the cases are looked at, and therefore compensation is paid.

Around 80 percent of the arbitration cases as said to be construction disputes with most of the remaining 20 percent involving real estate.

Dubai’s construction industry has taken a massive hit in the last 12 months. The normally popular Cityscape event exemplifies the issue with venue room rates cut as much as a quarter in an attempt to entice property investors to the event. Cityscape Abu Dhabi, held in April, also saw a 25% reduction in the number of visitors to the event.

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The property company has had a turgid year so far, with complaints from many investors that work on their Hydra Village project is well behind schedule and has cost more than was originally agreed. Investors were also upset when Hydra Properties sent property investors who have been late paying letters threatening legal action. Payments have been rescheduled however up until recently, Hydra have denied that they were having problems with investors defaulting.

However Hydra have now admitted that around 20% of property investors are having difficulties keeping up with payments on their properties.

Property investor confidence in Hydra Properties has dwindled over the past few months. Although Hydra Village was meant to be completed this year, only a handful of show homes have actually been completed. The company is currently assessing their current developments and if the sales don’t pick up, they may ditch some of their development projects which have sold 10% or under of the property units. However there are currently no firm plans to stop development on any of their sites.

Hydra are not the only Dubai property developer to face problems with investors defaulting. Earlier this year Dubai Pearl revealed that up to a third of their property investors on their $4.1 billion development had had to have their payments rescheduled because of defaulting issues.

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