Saturday, December 19, 2009

Dubai Crisis- Is it the end or the tip of the Iceberg?

Dubai Crisis- Is it the end or the tip of the Iceberg



We all know that the financial crisis in Dubai World is due to heavy exposure in Real Estate Investments and the fall of property prices, and a very little demand for the already completed projects.


Money is locked in declining assets. The same scenario was seen in 2008 in US with large Investment Banks collapsing under their weight by holding huge exposure in real estate market. The ripples of that effect was heard in Asian and European Countries also.


But at that time, the asian countries some what remained insulated from that effect. In India also, those effects can be seen by the fall of property prices and lack of demand.


Now the million dollar question is whether the worst is over or the worst is yet to come. Normally, when a financial bubble is burst, its effect can be seen for 5 to 10 years. For example, the dot com burst had it effect for another 10 years. The same is going to happen now also.


In India, large number of IPO are coming in Infra, Power and Reality sector. This indicates people are still confident of this sector. It does apply that the worst is yet to come. We are likely to see Dubai Crisis scenario in coming months in some Asian and European Countries.


What I feel is that the Dubai crisis is just a tip of the Iceberg. When the whole Iceberg is known to the world, I don’t know how it is going to affect our career and living.


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