DUBAI -- Government officials moved to shore up sentiment in Dubai's flagging real-estate market, saying state-controlled property developers have reined in the city-state's supply of new homes. One of the officials also unveiled details of a federally orchestrated merger of two big home lenders -- what in essence is the United Arab Emirates' first federal bailout amid the current global financial crisis.
Mohamed Alabbar, chairman of a Dubai government committee set up to deal with any fallout from the global economic crisis, also sought to assure investors and analysts concerned about Dubai's large overseas debt that it will meet all of its commitments. "The government can and will meet all its debt obligations going forward," Mr. Alabbar told an investment conference.
The moves come amid a sudden slowdown in Dubai's once-red-hot property sector. Real-estate agents report that buyers have dried up, while asking prices are falling amid tight credit, falling stock prices and the departure of spooked international investors.
In a rare public statement, the Dubai government said it had already moved to "actively manage" the current and future supply of new property coming onto the market. Property analysts had long suspected that government-controlled developers, who dominate the market, could reduce supply to support prices.
Offering details of the home lenders' merger, Mr. Alabbar said federal funds could be pumped into a new entity into which two big Dubai mortgage lenders said at the weekend they would merge under the control of the U.A.E.'s ministry of finance.
Under the merger deal, Amlak Finance PJSC and Tamweel PJSC, both partly owned by Dubai, will be merged into two existing federal government agencies. The new company will be called Emirates Development Bank and could "benefit from the government's funding if needed," Mr. Alabbar told reporters.
A bailout in the U.A.E. isn't a straightforward affair. The country is a federation of semiautonomous emirates, each ruled by a hereditary ruler. Most of the country's federal budget, however, comes from oil revenues from Abu Dhabi, the U.A.E.'s largest emirate and its capital.
It is unclear what, if any, conditions Abu Dhabi might require of Dubai if the government needs to inject capital. The federal government already has pumped liquidity into its banking system to counter tight credit markets and has guaranteed domestic bank deposits.
Mr. Alabbar said Dubai's sovereign and corporate debt stood at some $80 billion, compared with assets of more than $350 billion. He said Dubai's government and corporate entities also enjoy positive cash flow.
