Developer calls for real estate rating agency

Dubai: A top Dubai Government-owned developer has sought the creation of a real estate credit rating system that could ensure more clarity on the performance of the industry players.

A "real estate credit bureau" would help industry stakeholders "behave and deliver better results", Farhan Faraidooni, the executive chairman of Sama Dubai, told Gulf News.

"This would be something similar to the way the credit rating agencies rate a particular country or company with A, B, C, etc which indicates the strength of a country's economy or company's fin-ancial position," Faraid-ooni - four senior officials of whose company are being probed by police for alleged wrongdoing - said on Saturday.

"Real estate is a safe long-term investment. However, some speculators have turned it short-term and unsafe. A credit bureau will help the industry stakeholders behave and deliver better results," he said.

The bureau will help bring in more transparency into Dubai's real estate sector - where investor confidence has been affected by the latest crackdown on corruption and speculation.

Portfolio

Dr Khater Massad, the executive chairman of Rakeen, a Ras Al Khaimah Government-owned developer, said: "Retaining investor confidence has been a major challenge for the developers."

Sama Dubai has a project portfolio worth Dh202 billion ($55.2 billion) in the pipeline at various stages of planning and development - most of them facing delays.

"The major developers should lobby to create a credit bureau to rate developers, contractors, consultants, investors, sub-developers and suppliers, so that one gets a clear idea who he's dealing with. The government should create an independent body to carry out rating that will help strengthen transparency," Faraidooni said.

Experience

"Until you really deal with them or experience their performance, you wouldn't know. By the time you experienced their performance, it's too late," he said, adding that a credit bureau would solve this as the rating would help newcomers to have a ready reference. Faraidooni said he has initiated talks with some of the industry players on this subject. "We have initiated talks, nothing has been finalised yet. This is for the good of the industry. But the government will have to create the independent body."

The call comes at a time when speculation, mismanagement, delays in delivery, and inefficiency coupled with corruption and lack of adequate tools to protect investors from speculators are collectively taking their toll on the industry prompting worries of a slump in the sector.

The global economic meltdown that prompted some institutional investors to siphon billions of dirhams off the UAE economy, suddenly created a liquidity crunch in the local market, that prompted the UAE Central Bank to inject Dh50 billion into the system.

A credit-rating authority for the real estate and construction sectors are not common in the industry. "What we are facing in Dubai is also not common. It's a unique situation, needs unique solution," Faraidooni said.