WRAPUP 1-Dubai firms eye new projects despite credit crunch

By John Irish

DUBAI, Oct 6 (Reuters) - Gulf Arab property firms launched $100 billion of new projects on Monday, but the news failed to restore investor confidence as fears grew that the global credit crunch is biting and the local real estate market overheating.

From a 350 billion UAE dirhams ($95 billion) beachfront project to a kilometre-high tower, developers at Dubai's annual Cityscape exhibition launched the usual raft of mega-developments that have propelled the Gulf Arab commercial hub to international fame.

Dubai mortgage lender Tamweel TAML.DU said it would launch up to 2 billion dirhams of Islamic bonds in 2009 despite the liquidity squeeze gripping world markets and Abu Dhabi's Sorouh Real Estate SOR.AD said all its projects were on target.

But investors in the United Arab Emirates shrugged off the upbeat news to extend weeks of declines, with shares in Emaar Properties (EMAR.DU) ending 10.7 percent down while Aldar Properties ALDR.AD and Sorouh SOR.AD lost more than 9 percent.

And Kuwait's Abyaar Real Estate (ABYR.KW) postponed the sale of its $1 billion Islamic bond due to the global credit crunch.

"The UAE is not an isolated link from the chain, from the global financial system," said Sorouh CEO Mounir Haidar.

"However the UAE does enjoy slightly different dynamics. The UAE is an emerging economy and demand is strong. Economic policy is encouraging for people to invest in the region."

MORE MERGERS?

The Gulf's oil-fuelled boom has so far protected the region from the major upheavals that have shaken the financial and property sectors in the United States and Europe.

But the global credit crunch does mean tighter liquidity in the Gulf, and that could already be speeding up mergers.

Tamweel and fellow Dubai-based mortgage lender Amlak Finance AMLK.DU said on Saturday they were in talks to agree a $2.4 billion merger. A report by Zawya Dow Jones suggested that Union Properties UPRO.DU and Deyaar DEYR.DU, which said on Monday that the liquidity crunch could slow its international growth, were also considering a merger.

Union and Deyaar declined to comment and the report failed to lift their shares, which fell 11.5 and 9.9 percent respectively.

Real estate consolidation plans come in the midst of a government crackdown on corruption in the sector, which has already hit market sentiment and the shares of major developers.

But developers at Cityscape said property demand remained strong despite mounting fears that the UAE real estate boom has turned into a bubble and that the worst economic downturn since the Great Depression was spreading.