Of realty ties undone

Read in the pages of Wall Street Journal:

A Dubai deal called into question as boom ends:

Mr. Zadeh's experience, compiled though court and company documents, offers a rare window into the murky business world that helped transform this city from an empty coastline into a metropolis. It also may offer a cautionary tale for investors lured to the city, which bills itself as the modern face of a new Middle East.

…the judicial system in the U.A.E (has long been criticized) for a lack of independence and oversight. In the good times, investors didn't fret much about these shortcomings. Now, some of the same deals that helped build Dubai are coming undone -- in particular, a tradition of off-the-book business partnerships between Emirati citizens and elite expatriates…

Mr. Zadeh has not been charged with a crime. But for the past year, authorities have held onto his passport, making it impossible for him to travel or find work. "I used to believe in the miracle of Dubai. But now I see it all as a mirage," said Mr. Zadeh, 37.

And then in the Financial Times:

The executive at the centre of $100m fraud allegations rocking Dubai’s property sector has hit back with a counterclaim that his accusers have defaulted on more than $18m of debts owed to his company. Kabir Mulchandani, chairman of Dynasty Zarooni, claimed that a series of cheques written by investors had bounced as the real estate industry’s fortunes plunged late last year.

In an interview at Dubai’s Port Rashid police station, where he has been held since last month, Mr Mulchandani told the Financial Times he was pursuing cheques totalling Dh68m ($18.5m, €14.5m, £13m) that were written by Dynasty investors to pay for property. He claimed they bounced in late December as the international financial crisis hit the emirate’s business community.

“This is a wonderful country,” he said, “but ... it is still gearing up to deal with these complaints, because this is the first time they have had a property meltdown.” The case – involving one of Dubai’s largest private real estate companies – highlights concerns that the emirate’s legal system is poorly equipped to cope with the slew of disputes arising as the sector turns sour.