Looming Large

Mohammed Ali Al-Abaar owns a private golf course that stretches across the front yard of his enormous home. He is the chairman of the United Arab Emirates Golf Association. Al-Abaar made sure to have the walkway leading up to his home paved with stones imported from abroad, with a specific set of instructions regarding the merchandise. "They have to be better than the stones that are paved along the Champs-Elysees." He made a similar demand to the planner of the huge residential tower he launched in 2000 - what is today the symbol of Dubai's commercial success - Bourg Dubai. "The tower has to be taller than the buildings that have either been built or are in the planning stages," he said. He is estimated to be worth over $700 million, while the company which he founded in 1997, Aamar, is believed to be one of the biggest in the world. On the company Web site, Al-Abaar lays out his "vision for 2010," in which he declares his goal of turning the Middle East's largest real-estate firm into one of the world's leading companies. As one of 12 sons of a fisherman growing up in the United Arab Emirates, Al-Abaar can be satisfied despite the dip in his company's stock value this past year. The fall was a result of the U.A.E. central bank's decision to increase regulation of the lending industry in the commercial and mortgage sectors.

In a 2004 interview with the U.A.E.-based Al Dubai Web site, he was asked whether he thought he was adding to the mass of buildings in a country already awash with luxury towers. He was also quizzed on how he planned to turn Dubai Towers into the most expensive piece of real estate in the world. He replied with a series of questions: "Do you have the right land? Do you have the right location? Will you plan it the right way? Will you have the human capabilities you need? Will you provide special services for tenants? Will you examine all the details ranging from public transportation to water supply to the street? Will there be security guards in the parking lots? Will there be activities for children? What is the capacity it can hold? Why am I so sure? Because I see it in the eyes of my staff who are yearning to build the best square kilometer [of property] in the world."

Four years later, there is no doubt about it. But there were three "mistakes" along the way, as he puts it: The first was his business ties to Rami Mahlouf, the cousin of Syrian president Bashar Assad, with whom he plans to build houses in Syria estimated at $100 million. American sanctions against Mahlouf's bank accounts, however, threaten to scuttle the deal. The second hiccup was with Egyptian businessman Shafiq Jabbar, with whom he parted ways. The split cost Aamar a staggering $140 million. The third error was his stated intention to purchase from Israel one of the settlements it evacuated in the Gaza Strip at a cost of $56 million. The deal never came to fruition and Al-Abaar did not lose any money, though word of his meeting with Ariel Sharon nonetheless cost him dearly. His denials that such a meeting with Sharon ever took place were unconvincing.

Since 2000, when planning for the Dubai Tower was underway, property prices soared by 400 percent (in the last year, they have nosedived by 76 percent). Investment banking giant Morgan Stanley predicts that real estate prices in the country will stabilize in 2010, perhaps even fall somewhat, due to the estimated rise in supply against a drop in demand. Morgan Stanley's analysis is not shared across the board. None other than actors Brad Pitt and Pamela Anderson have invested in a new hotel being built in Dubai. Anderson, who plans to make her hotel "green" by powering it with solar energy, was recently quoted as saying that she came away impressed with the rulers of the country. Her hotel would fit in with the state's new regulation guidelines, which mandate more environmentally-friendly construction practices that abide by international standards. Contractors in the country are also bound by these new rules.

Morgan Stanley's analysis comes in the wake of forecasts, which predict that in the next six years, Dubai is expected to see a construction boom approach $272 billion, which is accompanied by an ever-growing demand. Renting an apartment downtown can cost upwards of $420 per square meter, and for those interested in buying an apartment - $7,000 per square meter. The brochures and advertisements, which the large companies publish in the mainstream Arab and international newspapers offer prospective buyers such amenities as a swimming pool, playgrounds for children, grass in the middle of the desert, air-conditioned parking lots with security, even complimentary interior design courtesy of the contractors. "We sell a lifestyle," Al-Abaar boasts on his Web site.

Infrastructure inadequacies, primarily with the water grids, and environmental services that are struggling to keep up with the pace of construction threaten to delay the opening of these apartments to buyers as scheduled. Dubai's housing boom and the astronomical rent and purchasing costs of property have already forced some customers to look to neighboring emirates, which in a short time are also expected to turn into real-estate havens like Dubai and Abu Dhabi. At a time of a surge in the construction of apartments for rent, which yield a 15 percent dividend to landlords in the U.A.E., companies in Saudi Arabia have already posted signs that read: "No apartments for rent." The dearth of affordable housing in Saudi Arabia, particularly in the capital Riyadh and in towns of the Hijaz, has squeezed out the lower and middle classes.

The other problem is that somebody has to build these luxury apartments. When 1.5 million foreign workers climb aboard the scaffolding of these new structures in the U.A.E., the trouble will begin. The cost of unskilled foreign labor hovers near $7 per worker per day, and the total cost of labor eats up nearly 8 percent of the total cost of the project. If the foreign workers were paid minimum wage that would be adjusted according to basic living costs in Dubai, their salaries would need to reach $30 per day.

These dry figures were what moved foreign workers in Dubai to launch demonstrations last year demanding a wage hike. Last month, Indian laborers staged violent protests. Over 3,000 workers were arrested, some of them deported back to their native countries. The Indian embassy immediately condemned the laborers, and the Indian ambassador said such violent displays harmed India's image. His statements implied that the Gulf states would now hesitate before importing "undisciplined" Indian laborers to their countries. Most of those arrested have been released for the time being, and have been sent back to the living quarters together with the other laborers.

The low standard of living and quality of life of foreign laborers in the Gulf states is a flammable issue that must be addressed by improving salaries, which would certainly require the price of construction to rise. If these workers were security guards or street cleaners, they would have already found themselves expelled from the country, since the law permits the deportation of "regular" workers who break the law. More than 1,000 Bangladeshi workers were deported this past month from Kuwait following similar demonstrations. Janitors in Kuwait earn an estimated $114 per month, and a security guard's wages reach $250 per month. While the Kuwaiti parliament did hold sessions devoted to raising foreign worker salaries during which it condemned job placement companies for exploiting these workers, the crux of the problem remained.

But in Dubai, since the entire construction process depends on foreign workers and the closing date of apartment sales is the guillotine hanging over the necks of all contractors, the law buckled under. Only eight foreign workers are expected either to stand trial or to be deported for their protests. Al-Abaar, who continues to build projects across the country at bargain-basement prices thanks to this role as adviser to the ruler of Dubai, can rest assured. The laborers will stay, the apartments will go up, and the customers from the West, Russia, and Iran will continue to buy his brand of urban "lifestyle."