Dubai Not Safe for Investment?

A report from Zawya of Iran...  warning its citizens of investing in dubious companies in Dubai dated 17 March 2009

"We welcome all the dear Iranians for whom the UAE is a second home. We welcome you with open arms and offer you commercial, tourist, economic and social benefits."

The above is a translation of a message in Arabic written on a billboard at the entrance of a recent three-day exhibition at Tehran's International Faregrounds. The event was first held more than five years ago to entice investors over to the Arab countries on the opposite side of the Persian Gulf. 

According to Peyvand News, the Arab sheikhs of the UAE are wise to the capacity of Iranian investors.
 
The promise of a three-year residency permit, plus easier travel to Europe and the United States is as appealing to Iranians and their families as the financial returns promised by construction companies and estate agents.

Five years ago, the promotional films on the huge monitors at the exhibition looked more like something from a Hollywood special effects department than real life, but all the various projects have since come to life, as the new Dubai was born. 

Talks of Dubai being built with Iranian money perhaps is not very far from the truth. Certainly, Iranians have been involved in Dubai's property boom from the word go. The flight of capital out of Iran has been on the rise and many Iranians have settled in Dubai. 

According to a report by the Iran Commerce Council, Iranians run 10-30 percent of all property companies there. Another report from the Iran Cultural Press states that 400,000 Iranians control $200 billion worth of assets in Dubai, a figure that could top $500 billion over the next two years. 

With the rise in property prices in Iran, it became possible to buy an apartment in a fabulous Dubai high-rise, paying far less than you would for something similar in Tehran. 

However, some investors who rushed in have ended up the victim of fraud. 

"All my friends have invested in Dubai, but of course they bought from more credible companies and they have not had any problems. One has to be very careful. Laws in Dubai are different from the laws in Iran and companies exploit our ignorance," said an Iranian investor, who has not seen a written contract since making his investment two years ago. 

"People who invested in property in the UAE have sustained losses. With the new economic downturn, some of the projects are not worth even half the price that was paid for them." 

The investor, who spoke on condition of anonymity, has since moved some of his money into Malaysia. 

"Iranians have rushed into Dubai and it's no longer the calm, attractive place it used to be. Now in Dubai there's heavy traffic, inflation and other problems that we left Tehran and came here to avoid," he said. 

Reports show that the value of the UAE economy has shrunk by more than 50 percent compared with 2004. Falling oil prices have damaged its once flourishing property market. Prices have dropped from 200,000 to 50,000 dirhams per square meter in some parts of Dubai. 

"Before the crisis, you could buy and sell property in Dubai in a matter of a few days, or even hours, and make a huge profit, but it is not like that anymore. I cannot sell my apartments. I cannot even cancel the construction contracts," said another man. 

Experts say Dubai is no longer the safe haven that it once was and that Iranians will have to keep their options open in the search for a stable place for investing their money.