DFM Duabi Finacial market is seeing worst Crisis in History,
Emmar Share has Fallen below 3.5 which was 16 exactly 11 Months back and stated more than 10 many years. This is burst of Dubai property bubble, But other Companies which has no connection with realesate Like Tele Com , Air arabia etc are also low.
My question is to experts if Emmar share falls to this level what effects it causes on Company's Plans. One thing I understand that it cant collect money for Coming Projects by Public offerings [new shares] what else happens to Company if it crashes in Stock market,
Can Experts shed light on it, quoting examples.
Ahmed replied on Wednesday, November 12, 2008 01:35 PM
Inability to raise money u have already mentioned. Worst problem is that if the investors are unable to sell properties, A subtanital number of people will stop paying installments to the developer. When the company will not get moeny it will not be possible for them to payback the interest and principal payments to the banks from where they have borrowed money. Another factor is that banks will stop financing the contractors that if investor is not paying to developer how the devloper will pay to the contractors. If contractor is not paid by developer how will the contractor pay back to the bank. This loop will lead to the delay of the project completion and some projects which have not started as yet may be cancelled. Another thing is that when developer develops a barren desert, the increase in price of the land is shown as the profit. Whenthe prices are going down it has to be reflected as loss. Loss again means short of cash which again means no payment to contractors leading to delays in project completion and cancellation of projects. I have tried my best to keep it simple. |
