Qatar embraces the extravagant

Men in traditional white robes, women in black abayas and crowds of expatriates in shorts and miniskirts lined up to take pictures of the new arrival: the Silver Zwei, the longest all-aluminium yacht in the world, as it berthed in the Porto Arabia marina at The Pearl-Qatar. Taking a cue from Dubai, developers in Qatar have become fixated with building the biggest, the tallest, and longest edifices in the world. And in some ways the Pearl is Qatar’s answer to Dubai’s palm-shaped islands. finished in 2010, it will create 32km of extra coastline and house up to 41,000 residents on artificial islands designed to resemble a string of pearls. The cost of the development is estimated at $20bn and it is being built by the United Development Company, a Qatari conglomerate. Yet its construction is taking place as the Gulf still struggles under the impact of the global economic crisis that saw real estate sectors plummet across the region. In Qatar, property prices fell by as much as 30 per cent in the first half of this year, and many feared Pearl would face a crisis comparable with some of the extravagant schemes in Dubai. Pearl’s developers, however, are hoping to buck the trend. Qatar is also in a very different position to debt-laden Dubai, as Doha’s gas riches are helping to drive economic growth during the slowdown. The government has also intervened to boost financial services, offering to buy banks’ equity portfolios, as well as their domestic real estate assets and loans. “We are lucky to be in Qatar, where the economy was least affected. The steps taken by the government to support local industry protected us all,” says Khalil Sholy, UDC managing director. “We are even considering new investments in leisure and hospitality in Turkey and north Africa.” With the price of a one-bedroom flat starting in the region of QR1.5m ($412,000), the Pearl caters to a niche clientele. Mr Sholy says about 65 per cent of released properties have been sold, including all 450 villas. Some residents have already moved in, while 40 retail outlets have opened. But delivery of units in several areas has been delayed, and analysts have expressed scepticism about whether UDC will meet its 2010 completion deadline. Mr Sholy admits some “slippage” may have taken place, but says the company is still within its “contractual limits” and that any delays in delivering units will be limited to between eight and 15 months. UDC reported a net profit of QR79.8m in the third quarter of 2009, a 2 per cent fall from the same period in 2008, and has taken out QR600m in fresh loans. Analysts expect demand to stay relatively strong as the population of the Gulf state grows by 5 per cent a year, driven by an influx of expatriates. The Qatari economy, fuelled by the state’s gas riches, is expected to grow by 9 per cent this year, while other Gulf economies are forecast to contract. “They [UDC] were not hit badly because in Qatar, the economy is still growing,’’ says Venkateshwaran Ramadoss, a real estate analyst at Kuwait’s Markaz. However, UDC’s cash flow dropped from QR1.5bn to QR500m in the first nine months of the year, he says. Mr Sholy attributes the drop in cash flow to the fact that the company has already sold 65 per cent of the units. He expects improvements next year when a second phase of units is offered for sale. He also says that, because of the current environment, the company has cut costs throughout its operations, and has become more selective with expansion plans to avoid overreaching. Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.