Dubai, one of the biggest and busiest business centers in the Middle East might be sliding into a negative spiral. Dubai world the big real-estate venture which is most famously known for developing the artificial Islands project in Dubai has entered into solvency problems due to excess leverage and was forced into restructuring. This fact was long known and has been already digested by investors. However the announcement by the Dubai authorities which are reasonable for the restructuring, stressing that they expect the company’s creditors to accept a halt in the debt payments spurred worries over the economic health of the region and specifically the real-estate sector. Why did it affect market so severely? Investors got used that whenever large ventures in Dubai falter the authorities step in to maintain stability but the fact the authorities want lenders to participate in the cost of restructuring signaled things might be changing for investors in the region. The largest banks in Europe and the US have a high exposure to the real-estate market in the region and less government support could mean loan losses for the big players. Another important fact is that Dubai sovereign and private funds are very active in the global investment scene especially in the banking and Auto sector, troubles in home could cause them to repatriate funds.
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