Saturday, October 10, 2009

SMEs can significantly boost realty demand in UAE

The Small and Medium Enterprises (SMEs) in UAE can help in boosting demand for both office space and affordable residential property in the UAE immensely, if provided access to bank loans to finance start ups, offered working capital and investment for growth and expansion, reveal industry experts.

According to the CEO of MAG Group Property Development, Mohammad Nimer, SMEs account for nearly 80 percent of the economic activity in the UAE, which implies that they employ a large number of staff on the whole, and these employees too need housing.

The Dubai Chamber of Commerce has said that such companies are facing trouble in securing credit from UAE banks, and if they are given credits, it is only for 3 to 6 months with interest rates of about 15 percent, as they fall under high-risk category.

Ruwad Establishment said that currently there are more than 260,000 trading and industrial companies in the UAE, out of which 200,000 fall under SME category.

SMEs in the UAE usually employ less than 100 employees with investments in the range Dh.200,000 to Dh.2million.

"Imagine the stimulus to the housing market alone, even if each SME averaged just one new employee per annum, apart from the benefits to wider economy airlines, restaurants, hotels, shopping and so on," Nimer pointed out.

However, a Dun & Bradstreet report recently estimated that the loan rejection rates in the UAE were in the range 50 to 70 percent, partly due to the difficulty by banks in gaining access to accurate financial statements and in rare cases due to the complex and time consuming process of recovering money or liquidating seized assets.

No comments: