The oil-rich Gulf region was considered to be immune to the problems of the financial meltdown. However, the global financial crisis is knocking on the doors of the Gulf region and the first tremors are causing a panic in the job market. The Indian expats are the worst affected with thousands losing their jobs already, according to some reports. In UAE alone, there have been about 800 job cuts in the real estate sector whereas banks have laid off a few hundred more. The impact of the financial meltdown is bound to spread to other countries in the Gulf region causing more lay offs in the near future.
Due to the economic recession, prices of real estate have crashed and Dubai, being the largest market for speculative buying, is the worst sufferer. Dubai boasts of the most ambitious real estate development projects; it is known for its tallest building, the largest airport, the biggest mall and the largest port.
The recession has taken off some of the glitz and glamor of Dubai –the banks are reviewing their credit policies and its biggest financial institution Amlak, has stopped giving home loans. Till now, Dubai has been the envy of the neighboring nations due to its fast growth. However, at present, Dubai has an outstanding debt of US$80 billion -10 billion of the loan is owed by the government while 70 billion is owed by government affiliated firms. Since it does not possess gas or oil reserves, it depends on trade for its survival. But Dubai is reacting fast. A Supreme Financial Committee has been set up to study the situation and propose solutions to the problems in the banking and real estate sectors. Abu Dhabi, the capital of the UAE, which is considered to be rich in oil reserves, is stepping in to lend a helping hand to Dubai.
The employment scene in Dubai is not looking too good. The biggest real estate developer, Nakheel has begun to cut jobs as it is scaling down development projects. In general, 80% of construction workers in Dubai are Indians. The Indian economy was being supplemented by the remittances made by the workers in the Gulf. These remittances touched a record high as the rupee fell against the dollar and it was expected that Kerala alone would receive remittances of Rs.42,000 Crore during this fiscal year.
But the situation took a downturn. Employees of real estate firms are not being sanctioned personal loans. Salary limits to procure loans have been raised, with HSBC setting a salary limit of 20,000 Dirhams for any type of loan. Easy credit is no longer available on credit cards. The Kuwait Stock Exchange fell by 30% at the commencement of the year and the government has had to step in with a 12 billion dollar bailout package.
The Gulf boom is definitely on the wane and the situation may worsen in the months to come.
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