When they are finished, the Palm islands will solve the shortage of real estate and mark a change in the Dubai government’s attitude to residency rights for foreigners.

When complete, it will resemble a giant palm tree with a protective outer halo and, at five kilometres in diameter, it will be visible from space. From shore at present, it looks more like a giant harbour under construction, with a flotilla of dredgers and boat-mounted cranes at work day and night. It is called The Palm Jumeirah and will be the biggest man-made island-cum-residential development ever built. A second ‘Palm’ is being developed 22km down the coast from the first.

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The idea for the Palm ‘islands’ – which are connected to the mainland by a narrow causeway – sprang from a problem that no amount of careful planning by the government could avoid: a lack of space. Dubai’s population has tripled since 1980 to its current level of around 1.05 million residents. Property development has exceeded even that frenetic pace with the number of hotels that have been built to accommodate the growing number of tourists visiting the emirate.

Prime locations

Dubai had earned a reputation as the home of prestige waterfront resorts but “we were running out of beach”, says Sultan Ahmed Bin Sulayem, chairman of the Nakheel Corporation, which is responsible for the islands’ development.

The two Palm islands, which are being marketed as the “eighth wonder of the world”, have been designed to provide enough real estate for the 4000 villas, 5000 apartments and 60 luxury hotels that Nakheel has planned. The incorporation of palm fronds into the design means the islands will add 120km of mainly beach shoreline to Dubai. Construction on Palm Jumeirah began in 2001 and the resort is expected to open in late 2005 or 2006. Work on Palm Jebel Ali, which will be slightly larger (around 7km in length and width), is expected to last two years longer.

Project finance

Nakheel, which is bankrolling the Palm projects, is fully-owned by the government of Dubai. As such, it is difficult to get a detailed sense of how the projects are financed and whether Nakheel is exposing itself to the risk of overestimating potential demand.

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Sultan Bin Sulayem is quick to defend Nakheel’s strategy: “Palm Jumeirah sold out in four days. Palm Jebel Ali is around 40% sold.” He insists that, although the costs of dredging and land reclamation (about 1.5bn Dirham ($405m) for Jumeirah and 1.75bn Dirham for Jebel Ali) have been shouldered by Nakheel upfront, advance sale of the properties will recoup some of these costs and will bankroll construction of the islands’ infrastructure and properties. In addition to hotel and residential space, spas, shopping and entertainment venues are planned as additional money-spinners.

Homebuyer enthusiasm for the Palm developments to date prompted the announcement in early May of plans for another Nakheel development of similarly dramatic dimensions. It is called The World and, when complete in 2008, will be a man-made archipelago 5km wide, made up of islands representing the world’s seven continents.

The Palm projects also mark a political maturing of sorts for Dubai. The villas that are set to be built on Palm Jumeirah and Jebel Ali will be available to buy as freehold by foreigners and will be among the first developments in Dubai to offer that right. Citizenship is only available to those born in United Arab Emirates (UAE) or those naturalised from the Gulf Co-operation Council member states. A common complaint among long-term Western expatriates is that they have little in the way of permanent status. The Palm developments will confer permanent residency rights on the homeowner as long as they maintain ownership.

Sensitive issues

Residency and citizenship are sensitive issues in Dubai. Because UAE nationals are outnumbered by a ratio of 10:1 in Dubai, the government is not about to shift its rules on citizenship. The Palm movement, however, is widely interpreted as a sign that the government is listening to the priorities of its small but growing expatriate community. It knows that extending property rights is important for encouraging long-term foreign investors.

One veteran expatriate observer of Dubai says: “It helps to see the business of Dubai through the prism of real estate.”

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