The chips are in and the stakes are hot. They should be, for in contention is one of the world’s most beloved cities-the emirate of Dubai. Just at the start of this week, Dubai World emerged from a first meeting with its creditors- asking them for a standstill on US$22 billion of its debt for at least six months. In fact the whole affair was conducted under an atmosphere of strict secrecy and security, with attendees asked to be tight lipped about the proceedings. What has emerged is that the Dubai World executives formed a Committee to make a presentation for their case in requesting the moratorium. They were presumably assisted by executives from Deloitte and other auditors. What will happen now is that the request will be considered in the light of the presentation and the recouping of their assets and liabilities, undoubtedly redrawn to show their ability to remain solvent even after the debt has been repaid.

Meanwhile, most of the world already knows that the neighboring emirate of Abu Dhabi has given US$10 billion to Dubai World to help meet its current debt obligations on a US$4.1 billion Islamic Sukuk bond. What is amazing is that even this has not sent enough positive signals through the region. In the end it just might be required to pay off the debt or part of it in order to stop the negative sentiment that has echoed all through the world.

If that happens, the next question is whether Dubai will recover from its present crisis and will that recovery be for a short or a long term or will Abu Dhabi Property market oversee Dubai Real Estate market. Analysts are divided on the issue, but it is clear that Dubai’s Government will itself have to do something in this regard, rather than to wait for the interaction of market forces. It is known that market forces are driven by consumer and business sentiment, and when that sentiment remains negative or there is uncertainty about future action, markets are going to see a loss of value. If anything, the Dubai Government could have supported Dubai World in this time of crisis and given a positive signal to the world. By first announcing that it would support the entity and later withdrawing its support, it caused mass confusion and in fact set in motion rumors that the emirate itself was in danger of defaulting due to overextending its plans in the boom period. Nothing could be further from the truth as both Dubai World and the Government of Dubai are well equipped to deal with any financial emergency.

That said, in the short term the Government could assist businesses in getting credit to complete the outstanding projects. The present credit crunch means that new projects are facing financing difficulties in getting their projects off the ground. Everyone in the construction industry knows that there is a considerable lag between the booking and the completion of projects. Secondly, by renewing the longer three year visa for workers, Dubai would signal that it is ready to take on expatriate workers again for the completion of old projects and starting new ones. As things are, Dubai accommodation sector is going downhill, with accommodation in Dubai becoming a buyer’s game. Except for Dubai marina apartment , Dubai condos and Dubai villas- which has seen some consistency or even appreciation in value, in general Dubai flat rent, Dubai Apartments, and Villas in Dubai have depreciated in value over the last few months. A further dip in the market is expected by March-April 2010, after which the market is expected to recover by 2011. But it’s anybody’s guess as to what will really happen, and that is why the Government needs to take steps to see that Dubai is back on track again- the sooner the better. There is too much at stake.