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UAE real estate

The impact of financial crisis on and construction
UAE real estate and construction
sector: analysis and implications
115
Husam-Aldin N. Al-Malkawi
Department of Finance, Faculty of Economics and Administration,
King Abdulaziz University, Jeddah, Saudi Arabia, and
Rekha Pillai
Business Administration Department, ALHOSN University,
Abu Dhabi, United Arab Emirates

Abstract
Purpose – The purpose of this paper is to analyze the performance of real estate and construction
companies in the United Arab Emirates (UAE) during the pre (2006-2007) and post (2008-2009) global
financial crisis periods.
Design/methodology/approach – A ratio analysis was conducted on a sample of six companies in
the real estate and construction sector. A nonparametric test, namely the Wilcoxon matched-pairs
signed rank test, was employed to see whether the calculated ratios differ between the pre-crisis and
post-crisis periods.
Findings – The findings reveal a negative impact of the business cycle on the performance of real
estate companies in the UAE. There is a significant fall in the liquidity, profitability, leverage and
activity ratios after the financial crisis.
Research limitations/implications – The limitations of the study revolve around factors such as
limited sample size, non-availability of data for the aforesaid periods, low transparency in revealing
some financial details and non-availability of yearly industry averages.
Practical implications – The companies in this sector could be obligated to ensure better
transparency in revealing financial information to the public. Implementation of stringent regulatory
policies in the real estate sector will help the unprecedented downturn in these companies.
Originality/value – This is the first empirical study conducted to examine the impact of the global
financial crisis on the performance of the real estate and construction companies in the UAE.
Keywords United Arab Emirates, Construction industry, Real estate, Financial crisis, Ratio analysis,
Wilcoxon test, Profit, Liquidity
Paper type Research paper

1. Introduction
The regional boom in the United Arab Emirates (UAE) has been one of the most
prominent topics to hit news headlines for the past several years. This is mainly due to a
plethora of inherent strengths for which the UAE’s economy is legendary around the
world. An increase in oil price has been the most prominent factor acting as a catalyst
to the country’s fame. The prudent policies adopted by the government include
channeling oil revenue into developing non-oil economic sectors, attracting foreign Humanomics
Vol. 29 No. 2, 2013
pp. 115-135
q Emerald Group Publishing Limited
The authors would like to thank Ms Chantal Mercier of the English Language Centre at 0828-8666
ALHOSN University, for her assistance with proofreading the manuscript. DOI 10.1108/08288661311319184
HUM investment and financing various infrastructure, development and housing projects. In
29,2 addition, a highly supportive Government, favorable business climate, flexibility in
legislation that allows 100 percent foreign ownership in Free Trade Areas, dollar
pegging, cultural diversity, high standard of living and good quality of life are other
factors which make it easier for the country to climb the success ladder.
In spite of having these competitive advantages, the global financial crisis which
116 crippled the world economies in 2007 did not fail to leave its mark in a rapidly growing
country like the UAE. Al-Masah Capital Limited released a report in 2011 stating that
UAE contributed to about 60 percent of the property boom in the Gulf Cooperation
Council (GCC) countries, with Dubai alone contributing to 47 percent of the total among
the GCC nations. This effect justifies the argument by Baker (2008, p. 73) that “the central
element in the financial crisis is the housing bubble”. The real estate and construction
sector which emerged as the most attractive destinations for global investors during
2003-2007, was a sector severely affected by this financial blow.
A report released in 2011 on GCC real estate specified that prices and rents dropped by
20-50 percent from their peaks and an estimated $364 billion worth of construction projects
(28 percent of the $1.3 trillion in pipeline) have been put on hold or cancelled in the UAE.
The report also attributed several reasons for a lag in correction of this plummeting trend.
The dominant factors noticed were retreation of foreign investors, decline on expatriate
population due to retrenchments, funding difficulties due to stringent liquidity conditions,
declining consumer confidence in the UAE economy and major imbalances in demand and
supply of housing units. However, several reports argued that Abu Dhabi real estate has
more chances of speedy recovery due to its rich oil reserves and a shortage in supply of
housing units in comparison to the demand. The lack of transparency in real estate
and construction dealings was also another factor which escalated the decline in investor
confidence towards this sector. This is because the GCC market as a whole is basically
considered to be one of the least transparent in disclosure matters in the world compared
to countries like Australia, the USA, France and Germany. The annual Jones Lang La Salle
(JLL) Global Real Estate Transparency Index states that UAE and Bahrain fall under the
semi transparent zone while Kuwait, Oman, Qatar and Saudi Arabia fall under the low
transparency zone (Al-Masah Limited, 2011). The transparency issue has cornered vast
attention especially after the financial crisis, as investors are now in search of accurate and
reliable information before making investment decisions. Many real estate developers
have began to leave the business arena after forecasting bleak prospects in this sector.
At present there are 11 companies in the real estate and construction sector listed in
the Dubai Financial Market (DFM) and three companies in the Abu Dhabi Securities
Exchange (ADX). This paper will perform an analysis of the performance of six
companies in this sector during pre and post financial crisis. A ratio analysis has been
conducted and 14 ratios have been calculated to prove the effect of the financial turmoil
and to draw an inference about the sector. The overall performances of these companies
have been categorized under four groups of ratios, namely: liquidity ratios; profitability
ratios; financial leverage ratios and turnover ratios. A nonparametric test, namely the
Wilcoxon matched-pairs signed rank test was employed to see whether the calculated
ratios differ between the pre-crisis and post-crisis periods. An in-depth analysis of the
ratios reveals a declining trend in the liquidity, profitability, leverage and turnover
position of the companies. This supports the reports related to the overall decline in the
performance of this sector after the crisis.
 The remaining part of the paper is structured as follows: Section 2 highlights the UAE real estate
significance of the study while Section 3 sheds light on previous studies and reports and construction
generated in the similar field. Section 4 is dedicated to data collection and methodology
while Section 5 elaborates on the findings and their analysis. Section 6 summarizes the
study offering recommendations to improve the performance of companies in the real
estate sector while Section 7 points out the limitations of the study.
117
2. Significance of the study
The descent of the real estate and construction sector during the financial crisis is still
a topic of great concern and dilemma to the stakeholders in the UAE. Few years before,
investors and real estate developers were reaping benefits out of an unregulated
market which ultimately increased the real estate prices. Such practices, along with the
impact of the global financial crisis, positioned the UAE real estate to become
extremely over-inflated before the bubble finally burst by the end of 2007 and values
began to drop. Dubai further raised eyebrows when the emirate requested the creditors
of Dubai World for a major debt restructuring due to difficulty in debt repayments[1].
Though the real estate and construction sector has shown a recovery from the worst
phase, many of the promised projects will still take time to materialize.
There are a few reasons which act as motivations behind this research. First,
although market experts talk about the general decline in UAE real estate market[2],
there has been no empirical evidence or a comprehensive study conducted in UAE to
prove the same. Second, Wickens’, 1941 NBER Report of, has stressed the necessity of
more research in real estate financing, as this sector is fundamental to any nation’s
wealth (as cited in Nicholas and Scherbina, 2011). Third, this study, to the best of
our knowledge, makes original contribution to the body of knowledge as it examines
the performance of six major UAE real estate companies which have passed through
the financial crisis period. It is also an empirical examination of the impact of financial
crisis on one of the most important sectors in UAE. Fourth, due to the volatile nature
of these companies performance in the region lately, this study will provide a better
understanding of the performance fluctuations in real estate and construction
companies during different business cycles. Various studies addressing the issues
related to real estate and construction have evolved during the years and these will be
highlighted in the next section.

3. Review of relevant studies

The real estate and construction sector has received much attention from research
scholars as it is a very key sector in any economy. Nicholas and Scherbina (2011)
constructed real estate price indexes for Manhattan (USA) between 1920 and 1939 in
order to compare the property values towards the arrival of the Great Depression in
1929. The study utilized 7,500 real estate transactions data in Manhatttan for this
purpose. Results revealed that during 1920s (pre-depression) the prices reached
abnormal levels and fell by 67 percent at the end of 1932, while following the same trend
for another few years. Similar findings about depression and real estate shocks were also
revealed by Hyott (1933) and Shiller (2006). This suggests that there is a direct
relationship between the general business cycles and real estate performance. Inspite of
these adverse situations, an uncontrolled and rapid development of the sector without
taking into concern the demand and supply factors could make the scenario worse.
HUM A report delivered by Credit Suisse in 2008 regarding the performance of three
29,2 prominent Dubai real estate and construction companies (Arab Tech Company,
Emaar Properties and Union Properties) attracted attention among prospective investors
during that period. The study analyzed the financial statements of the aforesaid
companies, constructed ratios and analyzed the reasons for their respective performance.
The main success factors highlighted were significant rise in oil prices, freehold
118 ownership rights, increase in population, establishment of free trade zones and the
general peak in the economy. Another report by the Kuwait Finance House (2008) on
real estate in the UAE revealed that the maximum growth in real estate transaction
volume was reported in UAE. This was followed by Oman, Qatar and Saudi Arabia,
respectively. The study projected acceleration in the real estate and construction sector
in the coming years and did not expect the bubble to burst.
Another interesting study was conducted by Wheaton and Baranski (2006) relating
to real estate performances of 253 properties in Manhattan for 100 years from 1899 to
1999. The results revealed that adjusting for inflation, commercial office property
values were 30 percent lower in 1999 than they were in 1899. They also argued that
long-term appreciation in property is only because of inflation and not any other factor.
Also within any decade values often rise and fall by 20-50 percent in real terms. This
suggests that macroeconomic variables like inflation play a major role in real estate
performance rather than business cycles.
Following the same lines, Wu and Chang (2002) conducted a study on whether the
Asian financial crisis which began in 1997 had an impact on the real estate sector in
Taiwan during post- and pre-crisis periods. Several statistical tests, like the Chows and
Quandts tests and Granger causality test were applied to the study and results proved
that there was an insignificant effect of financial crisis on the real estate sector.
However, the researchers emphasized that macroeconomic variables like GDP,
money supply and consumer price index were leading indicators of the real estate
market. A similar opinion was voiced by Kim (1999) in his study of the Korean real
estate market and Reinhart and Reinhart (2010) in their study of the impact of the
global fall.
Deviating from the above, Ooi and Liow (2004) conducted a study on the
performance of 212 real estate stocks listed in seven developing markets in East Asia
between 1992 and 2002. They employed panel regressions in order to deduce the
main factors affecting the risk adjusted returns of these real estate stocks. Results
revealed that size, book to market value, capital structure, interest rates and market
conditions played a significant role in influencing the returns of real estate stocks
(see also Ling and Naranjo, 1998; Devaney, 2001; Bond et al., 2003). This suggests that
performance is related to both firm specific and region specific factors. One can also
conclude that market conditions are inevitable in judging the performance of
companies.
A review of relevant studies thus suggests that business cycles have played a
prominent role in real estate performance globally. In spite of an abundance of studies
related to real estate performance, there are no empirical studies focusing on the impact
of global crisis on real estate companies in GCC countries. In order to fill this gap in the
existing literature, we venture towards analyzing the real estate companies in the UAE
market. Continuing the chain of research we now proceed to the next section related to
data collection and methods used for analyzing the data collected.
4. Data and methodology UAE real estate
The data for the study has been collected from the ADX and DFM web sites. At present, and construction
there are 11 real estate and construction companies listed in the DFM and three
companies listed in the ADX, respectively. Of these, five companies from the DFM and
one company from the ADX was chosen for our study[3]. The other companies were
excluded for the following reasons:
.
lack of financial data for the required period ranging between 2006 and 2009 as 119
some companies have been incorporated after 2006;
.
disclosure differences for Kuwaiti based companies; and
.
presence of outliers which will distort the reliability of results.

The study was conducted by dividing the period of study into two phases namely the
pre-crisis period (2006-2007) and the post-crisis period (2008-2009). Financial ratio
analysis was adopted as the method to assess the performance of the companies during
both periods. This approach, for example, has been employed by Kesimli and Gunay
(2011) to examine the impact of the global economic crisis on the working capital of real
estate sector in Turkey. Beyer (2010) suggested that the financial risk of companies is
mainly driven through quantitative measures like ratio analysis. Downs and Goodman
(2003) argue that ratios are extremely significant when it comes to making yearly
comparisons or for determining the trend of the industry. Financial ratios are assumed to
be the most popular tool for analyzing a company’s performance. They are helpful in
predicting stock prices, financial risk, and bond yields. The ratios have gained
popularity because of their perceived utility in making financial decisions (Ketz et al.,
1990; Needles et al., 2010). Annual financial statements like the balance sheets and
income statements have been analyzed for the purpose of the study and 14 ratios have
been constructed to deduce the liquidity, solvency, profitability and asset management
situation during the pre- and post-crisis periods.
In order to make inferences about the impact of the financial crisis on the entire real
estate and construction sector in UAE based on our sample, a formal statistical test was
employed. The Wilcoxon matched-pairs signed rank test has been conducted to see
whether the calculated ratios differ between the two periods (pre- and post-crisis).
This test will also enable us to check if the drop/increase in a particular ratio (post-crisis
as compared to pre-crisis period) is statistically significant or not. This test is a
nonparametric alternative to the two-sample t-test. The advantage of the Wilcoxon test
is that it does not require any assumption about the shape of the distribution. In the
present study the pre- and post-crisis samples (n ¼ 12) are quite small, so much less can
be inferred about the distributions. “If the populations are non-normal, particularly for
small samples, then the t-test may not be valid” (Davis and Pecar, 2010, p. 374).
Therefore, it is more appropriate to use a nonparametric test instead of a t-test.
To this end, the null (H0) and the alternative (H1) hypotheses to be tested for the
14 ratios under the study are stated as follows:
H0. The population medians (for a particular ratio) pre- and post-crisis are similar.
H1. The population medians (for a particular ratio) pre- and post-crisis differ.
The results revealed from the adoption of ratios and Wilcoxon test are enumerated in
the next section.
HUM 5. Findings and implications
The present study employs financial ratios that have been calculated for analyzing the
29,2 overall performance of the real estate sector before and after the financial crisis. These
ratios have been grouped under the four categories of liquidity, solvency, profitability
and activity ratios in order to understand which financial aspect of business needs
more attention on the part of management to take corrective measures if necessary.
120
5.1 Liquidity ratios
Liquidity ratios are calculated in order to have an understanding of the liquidity position
of the company or, in other words, to find the ability to repay short-term debts. Creditors
and bankers are interested in this group of ratios as it helps them to know how fast their
debts will be repaid with the help of liquid assets (Kieso and Weygandt, 2010).
Considering the availability of data, four liquidity measures have been calculated, in
order to assess the liquidity position of the companies during the pre- and post-crisis
period. Table I reveals some descriptive statistics (mean, median, standard deviation
and inter quartile range) of the liquidity measures along with the statistical test
(Wilcoxon test) for a median difference between pre- and post-crisis period.
5.1.1 Current ratio. Current ratio (CR) is calculated by dividing current assets over
current liabilities. It measures the company’s liquidity and short-term debt paying
ability. It measures the extent to which a company’s short-term creditors are covered
by assets which can be converted into cash within the same short-term period (Downes
and Goodman, 2003). The CR varies from industry to industry; however the acceptable
norm is 2:1 (Khan and Jain, 2006 and Bragg, 2010).
Findings. Table I shows that the mean (median) CR calculated before the crisis was
2.926 (1.405) while it dropped to 1.324 (1.264) after the crisis. The value of the test
statistic is Z ¼ 2.51 with a p-value of 0.012. Thus, the H0 is rejected at the 5 percent
level of significance, which suggests that the financial crisis has a significant negative
impact on companies’ liquidity as measured by the CR. This can be due to the decrease
in cash balance, low sales, low inventory turnover or fall in receivables.
Future implications. A regular decline in CR can imply the need to raise debt
for meeting current obligations and a greater reliance on operating cash flow
(Robinson et al., 2008). As debt entails a cost along with it, they can become an extra
burden for the companies especially if they are in the recovery phase of the business.

Pre-crisis Post-crisis Wilcoxon test

Mean Median Mean Median Z-statistic
Ratio (SD) (IQR) (SD) (IQR) ( p-value)

CR 2.926 1.405 1.324 1.264 2.510

(3.775) (2.257) (0.824) (1.176) (0.012) * *
QR 2.904 1.387 1.300 1.209 2.589
(3.787) (2.332) (0.834) (1.186) (0.009) * * *
CSHR 1.809 0.527 0.465 0.362 1.883
(3.474) (1.675) (0.412) (0.657) (0.059) *
Current cash debt coverage ratio 0.031 0.051 0.099 0.037 20.471
(0.528) (0.917) (0.239) (0.351) (0.638)
Table I. Notes: Statistically significant at: *10, * *5 and * * *1 percent levels; SD is the standard deviation;
Liquidity ratios IQR is the inter quartile range
Brigham and Ehrhardt (2010) addressed the effect of a constant decrease in CR from the UAE real estate
point of view of shareholders and creditors. On one hand, shareholders will be pleased to and construction
know that the company is not holding their funds in unproductive (or less profitable)
assets, thus placing more demand on such stocks, but on the other hand, this decrease
will signal a slow chance of debt recovery for the creditors.
5.1.2 Quick ratio. Quick ratio (QR) also known as acid test ratio is calculated by
dividing total current assets (excluding inventory) over current liabilities. It is a genuine 121
test for the liquidity position as it excludes inventory from current assets. Inventory takes
time to be converted into cash and avoiding its presence in the calculation of QR will shed
light on the most liquid assets in the company’s possession (Brigham and Houston, 2009).
CR overestimates the liquidity position of the company due to the inclusion of inventory
(Bragg, 2010). This can be misleading during the event of meeting short-term obligations.
Findings. Table I shows that the mean (median) QR before the crisis was 2.904 (1.387)
while it dropped significantly to 1.300 (1.209) after the crisis. As can be seen from the table,
the value of the test statistic is Z ¼ 2.589 and its p-value is 0.009, which means there is
strong evidence to reject the H0 and support the H1. Accordingly, we can infer that the
global financial crisis has a significant negative impact on the liquidity’s position of the
real estate and construction companies, as measured by the QR. This drop is mainly due to
the decline in cash and receivables after the onset of the crisis. We can also assume that
this decrease in cash is either due to payment of dividends or due to further investment of
assets. The data collected clearly shows an increase in total assets and dividends paid after
the crisis. Therefore, this offers sufficient evidence for a decrease in cash.
Future implications. A continuous decline in the QR can signal an insufficiency of
quick assets in order to repay short-term liabilities. This will affect the credibility of the
company in the eyes of creditors in future and invite the burden of more costs due to
raising debt for meeting their immediate commitments. On the contrary, Stickney et al.
(2009) argued that a decrease in QR need not be a very severe cause of concern as the
companies must have invested the cash in fixed assets or in paying dividends.
5.1.3 Cash ratio. The cash ratio (CSHR) is a ratio which further refines the current and
QRs. It only takes into consideration the amount of cash, cash equivalents or short-term
funds (considered as the most liquid assets) sufficient to cover current liabilities. The
ratio highlights the extent to which liabilities could be converted into cash easily
(Downes and Goodman, 2003). The usefulness of this ratio is limited to a certain extent as
companies find it irrational to retain large amounts of cash after considering the high
opportunity cost of doing so.
Findings. The results from Table I show that the mean (median) CSHR before the
crisis was 1.809 (0.527) while it plummeted to 0.465 (0.362) after the crisis. This fall,
however, is marginally significant (at 10 percent level, p-value ¼ 0.059), which suggests,
to some extent, a decline in cash and cash equivalents after the crisis. This can be due to
the delay in payments by debtors, delay in sale of projects or heavy demand by creditors
for their payment. An increase in the payment of dividends (reported in Section 5.2.5) can
be another reason for this decrease. The financial crisis which caused a downward pull
in the share market led to an under valuation of marketable securities (a component of
CSHR) and this further caused cash balances to plunge.
Future implications. A decline in the CSHR in the long run can signal an unhealthy
liquidity position within the company in the eyes of stakeholders. Availability of
sufficient cash is the foundation for any business success; therefore a decline in one
HUM of the most important current assets can be an obstacle in making payments like salaries,
29,2 dividends and meeting day-to-day expenses. This downward trend can also provoke
stakeholders to consider actions such as heavy debt repayment, channeling cash into
secret venues or heavy purchase of assets. However, Robinson et al. (2008) suggested that
it is normal for the CSHR to decrease during financial crisis and therefore the ratio needs
to be relied on mainly during the aforesaid period.
122 5.1.4 Current cash to debt coverage ratio. The current cash to debt coverage ratio
(CCDCR) is calculated by dividing net cash from operations over average current
liabilities. It measures the amount of cash from operations available for meeting
short-term obligations (Epstein, 2008). This ratio removes the discrepancies involved in
CR as the CCDCR considers cash provided by operating activities over a period of time
while the CSHR only considers balances of current assets and current liabilities at a
certain point of time. The commonly accepted threshold is 0.40 according to accounting
experts, which means net cash from operations should be able to meet 40 percent of the
average current liabilities in a firm (Kimmel et al., 2010).
Findings. Table I reveals that the mean CCDCR was 0.031during the pre-crisis while
it was 0.099 after the crisis. This implies that prior to the crisis cash from operations
was able to cover only 3 percent of the average current liabilities while it was able to
cover 9 percent of the average liabilities after the crisis. Though the percentage slightly
increased, it is far below the generally accepted norm of 40 percent. This suggests that
cash from operations is not sufficient enough to meet the current liabilities of firms
before and after the crisis. In relation to the median, Table I shows a decline in CCCDR
from 0.051 pre-crisis to 0.037 post-crisis. Yet, this decline is not statistically significant
and the H0 cannot be rejected (Z-statistic ¼ 2 0.471, p-value ¼ 0.638).
Future implications. A constant increase in the CCDCR implies a very slow recovery
position from the current dangerous situation. However, short-term creditors will be
extremely dissatisfied if this ratio does not reach the aforesaid level of 40 percent. This will
also send signals of a decreasing cash flow or negative cash from an operation which again
arouses suspicion in the minds of investors regarding the reasons for huge cash outflows.
To summarize, an overall assessment of the liquidity ratios highlights a decline in
the liquidity position of the companies after the onset of the financial crisis. The
Wilcoxon test has revealed a statistically significant decline for three of the four ratios
calculated. As Boone and Kurtz (2010) noted, low liquidity ratios urge organizations to
choose between defaults or opt for high cost lending sources to meet their maturing
obligations. Low liquidity can also act as a pioneer for financial distress and bankruptcy
(Megginson and Smart, 2008). It is suggested that remedial measures be taken such
as: finding alternatives to repay obligations by raising debt at a minimum cost;
encouraging prompt collection of dues; devising methods for a speedy sale of inventory;
and receiving raw materials at a cheaper cost without compromising on quality. Apart
from analyzing the liquidity position of these companies it is also vital for researchers to
evaluate the profitability position of the companies. Therefore, performance or
profitability ratios will be considered as our next topic for discussion.

5.2 Profitability ratios

Profitability ratios are those ratios that measure the overall performance and efficiency
of the business over a given period of time. They demonstrate the company’s ability
to earn a reasonable return on total assets, invested capital, and sales. Table II reports
 UAE real estate
Pre-crisis Post-crisis Wilcoxon test
Ratio Mean (SD) Median (IQR) Mean (SD) Median (IQR) Z-statistic ( p-value) and construction
EPS 0.581 0.462 0.346 0.224 1.804
(0.336) (0.658) (0.392) (0.413) (0.071) *
ROE 0.238 0.230 0.102 0.083 2.903
(0.093) (0.117) (0.104) (0.119) (0.003) * * * 123
ROA 0.166 0.164 0.049 0.044 3.059
(0.072) (0.075) (0.048) (0.063) (0.002) * * *
NPM 1.224 0.498 0.331 0.201 3.059
(1.815) (1.326) (0.342) (0.545) (0.002) * * *
DPR 0.105 0.066 0.493 0.246 22.087
(0.123) (0.178) (0.873) (0.466) (0.037) * *
Notes: Statistically significant at: *10, * *5 and * * *1 percent levels; SD is the standard deviation; Table II.
IQR is the inter quartile range Profitability ratios

some descriptive statistics for the profitability measures selected in this study and the
results of the nonparametric Wilcoxon test for the median difference pre and post
financial crisis.
5.2.1 Earnings per share. Earnings per share (EPS) is a profitability ratio which is
computed by dividing net income by the number of shares outstanding in the year. Sinha
(2009) suggested that since various user groups cannot access the company records, EPS
is used as a single index of business performance. It is also helpful in calculating the price
earnings ratio, a significant ratio which reveals the growth and demand for the
company’s stocks. Shareholders can thus find out the net income applicable to each
share of common stock they hold in the business. They can also analyze the EPS for a
given period of time in order to take investment decisions.
Findings. Table II shows that the mean (median) EPS before the crisis was 0.581
(0.462) and it fell to 0.346 (0.224) after the crisis. This drop, however, is marginally
significant at (at 10 percent level, p-value ¼ 0.071). This shows that the profit available
on each share held by shareholders decreased with the onset of the financial crisis and it
suggests a downward trend in the performance of the companies especially after the
crisis. This is mainly due to the decline in net profits after the crisis and there has been an
increase in the number of shares issued.
Future implications. A frequent decline in the EPS can push the stock price of
respective companies down and thus affect the credibility of the company. Singhvi and
Bodhanwala (2006) affirmed that EPS is a valid representation of the company’s
earnings and as the ratio is used as a screen for growing companies, a constant decline in
EPS can send signals to prospective investors to deviate their investments into other
industries. Current shareholders can opt for selling their current shares which will
further put a downward pressure on the stock price.
5.2.2 Return on equity. Return on equity (ROE) is another profitability ratio which is
calculated by dividing net income over shareholders’ equity. It shows how much profit
a company generates with the money shareholders have invested and at the same time
highlights the amount of earnings available to equity investors after debt service costs
have been factored into the equity invested in the asset (Damodaran, 2007). This is the
HUM most important ratio to investors as it helps them to see how effectively and efficiently
29,2 their investments are being utilized to generate profits.
Findings. Table II reveals that the mean (median) ROE was 0.238 (0.230) before the
crisis but dropped to 0.102 (0.083) after the crisis. The value of the test statistic
(Z ¼ 2.903) and its p-value (0.003) indicate that the H0 can be rejected at the 1 percent
level of significance. Thus, the financial crisis has a significant negative impact on the
124 companies’ profitability as measured by the ROE. This is mainly due to the steep decline
in net profits reported during the post-crisis. Dorsey (2003) noted that a company having
a ROE above 20 percent but below 40 percent offers a good option to invest in, while a
ratio below 10 percent signals danger.
Future implications. ROE is a tool used by prospective investors for finding
competitively advantageous companies. It also helps investors to decide companies that
are profit creators and those that are profit burners. A company with a falling ROE also
implies the end of the growth phase for the aforesaid company. The current decline in
ROE in the analyzed companies may signal the end of the growing phase in the real
estate and construction industry. This may prompt investors to gradually remove real
estate stocks from their portfolio. As Dorsey (2003) suggested, there are three methods of
improving the ROE, which are an increase in net profit margin (NPM), asset turnover
and leverage. It is therefore recommended to adopt all or some of these techniques in
order to improve the ROE for a profitable journey ahead.
5.2.3 Return on assets. Return on assets (ROA) is another profitability ratio which is
computed by dividing net income over total assets. It measures the overall profitability of
assets in terms of income earned on each dollar invested in assets. Droms and Wright
(2010) asserted that ROA can be considered as an overall performance measure because it
is a product of the firm’s profitability and operating efficiency. The ratio measures profit
against all of the assets a division uses to make those earnings. Hence, it is a way to
evaluate the division’s profitability and effectiveness (Kristy and Diamond, 1984). It is
assumed that the lower the profit per dollar of assets the more asset intensive the business
is. The sector studied here is capital intensive therefore we can expect a low ROA.
Findings. Table II reports that the mean (median) ROA was 0.166 (0.164) during the
pre-crisis, while it went down to 0.049 (0.044) after the crisis. For this ratio, the test
statistic is 3.095 and its p-value is 0.002. Therefore, the H0 is rejected at the 1 percent level
of significance, which clearly shows the adverse effects of the global financial crisis on
the ROA of real estate and construction companies in the UAE. A detailed analysis of the
total assets and net income in the pre- and post-crisis clearly reveals a substantial
increase in total assets during the post-crisis and a steep decrease in the net income. Since
ROA is a product of NPM and asset turnover, we can attribute the decline of ROA solely
due to the decline in NPM and asset turnover (see findings in Sections 5.2.4 and 5.4.1).
Future implications. A constant decline in the ROA is not a favorable situation for
any sector; however the decrease here is solely due to decline in profits due to the crisis.
On the contrary if the net income had improved and ROA further decreased, then we
could relate it to mismanagement of assets, which sends negative signals about the
managerial efficiency of the company. Stickney et al. (2009) suggest that firms having
substantial investment in fixed assets and operating in an optimum capacity can
increase ROA only by increasing profitability. Catering to this suggestion the companies
discussed in our paper can adopt strategies like creating brand loyalty, quality and
efficient maintenance services and flexible payment plans in order to increase ROA.
 5.2.4 Net profit margin. The NPM is calculated by dividing net income over net UAE real estate
sales. It reveals how much profit is made out of each dollar it generates in revenue or and construction
sales after payment of all expenses. It can indicate whether the business is generating
enough sales volume to cover minimum fixed costs and still leave an acceptable profit.
Findings. Table II shows that the mean (median) NPM reported prior to the crisis was
1.224 (0.498) while it slipped to 0.331 (0.201) after the crisis. This drop is statistically
significant, the value of the test statistic is Z ¼ 3.059 and its p-value is 0.002. Thus, the 125
decline in the NPM has tended to reinforce the negative impact of the global financial
crisis on the profitability position of the real estate and constructions sector in the UAE.
This decline can be attributed to the increase in operating costs such as administration
and office expenses, and to the increase in dividend payments reported in the next
Section (5.2.5).
Future implications. A continuous decrease in the NPM can indicate danger to the
company as it clearly portrays the decline in its profitability of the company, insufficient
sales volume or mismanagement of operating expenses. This will affect the goodwill of
the sector and make investors cautious about further investments. Tiffany and Peterson
(2011) stated that lower margins are only acceptable if they lead to greater sales, larger
market share and higher profits. The study conducted here does prove an increase in
sales but low profits and lower marker share. Therefore, the decrease in profit margin
should be given due consideration.
5.2.5 Dividend payout ratio. The dividend payout ratio (DPR) is measured by
dividing cash dividends declared on common stocks by net income. Companies that
experience a high growth rate usually have low payouts as they tend to plough back
their profits. The situation is vice versa for low growth companies. A reduction in
payment of dividends may not be welcomed by a certain group of investors and there
may be a tendency to switch to other dividend-paying stocks (Al-Malkawi et al., 2010).
As a result, stock prices for the respective companies may also start deteriorating.
A stable dividend policy indicates consistency in management decisions, while a
100 percent payout policy indicates lack of provision for growth strategies and an
unsustainable trend (Bragg, 2010).
Findings. Table II reveals that the mean (median) DPR was 0.105 (0.066) before the
crisis while it climbed to 0.493 (0.246) after the crisis. This means that an average of
10 percent of the net profits was distributed as dividends before the crisis, while this
climbed to 49 percent after the crisis. As can be seen from Table II, the test statistic is
22.087 with a p-value of 0.037. Accordingly, the H0 is rejected at the 5 percent level of
significance. This increase in dividend distribution is undoubtedly a survival strategy
adopted by the sector to overcome the dilemma of investors regarding the real estate and
construction industry. This result also provides an answer to the reasons for decrease in
CSHR reported in our findings in Section 5.1.3. Since dividends are paid in cash, an increase
in dividend payouts can have negative implications on the liquidity of the company.
Future implications. A constant increase in DPR is well received by stock holders but
this can also lead to insufficient funds remaining for expansion and future growth
opportunities. Dividends contain information about the cash flows of a company and
dividend announcements can be regarded as a determinant to increase share price
(Al-Malkawi et al., 2010). Therefore, it is apt for companies to maintain a stable dividend
policy in order to highlight the consistency in management decisions and policies.
Epstein (2008) has made an interesting remark on a constant increase in dividend
HUM payouts irrespective of a fall in profits. The researcher warns that if the trend continues
29,2 the investors must recognize the hidden message of a future failure of the company.
To sum up, an overall analysis of the profitability ratios reveals a steep decline in ROA,
ROE, NPM and EPS after the onset of financial crisis. However, the DPR has shown a
significant increase as part of survival strategy. The Wilcoxon test conducted has further
justified these differences as statistically significant. Experts caution that investors and
126 creditors become reluctant to associate themselves with companies exhibiting declining
profitability ratios. The decline in the profitability ratios clearly indicates the negative
impact of the financial crisis on the real estate and construction companies in the UAE. It
is therefore recommended to take advantage of the decrease in raw material prices after
the crisis; maintain the trust and confidence of employees so that it does not affect their
productivity; minimize operating expenses; and maintain a stable dividend policy. This
will retain stockholders because profitable companies are well received by investors,
obtain finance easily and are less prone to government intervention (Barthwal, 2007).
Apart from profitability ratios another important component of assessing a firm’s
performance are the leverage ratios which will be discussed in the next section.

5.3 Financial leverage ratios

Financial leverage ratios are also called long-term solvency ratios, and measure the
capacity of companies to survive and meet their long-term obligations (Kimmel et al.,
2010). The extent of employing debt varies according to the industry. Companies with
stable earnings and cash flows employ more debt in their capital structure and thus are
more highly levered (Stickney et al., 2009). However, companies with a high leverage are
often remarked by investors as risky due to the company’s fixed liability of principle and
interest repayments relating to debt[4].Table III presents the summary statistics of the
financial leverage measures selected in this study and the Wilcoxon test.
5.3.1 Total debt to total assets ratio. The total debt to total assets ratio (TDAR) has
been computed by dividing total liabilities over total assets. This ratio reveals the
percentage worth of assets financed by creditors (Hitchner, 2011) or, in other words, it
shows the percentage of assets to be liquidated in order to pay off the debts. It indicates
the extent of financial leverage utilized by the firm. Companies with stable earnings
such as utilities have a higher TDAR than cyclical companies. A low TDAR is usually
preferred as it indicates low risk in the eyes of creditors.
Findings. Table III reveals that the mean (median) TDAR was 0.387 (0.370) before the
crisis and fell slightly to 0.326 (0.221) after the crisis. This drop is not statistically

Pre-crisis Post-crisis Wilcoxon test

Ratio Mean (SD) Median (IQR) Mean (SD) Median (IQR) Z-statistic ( p-value)

TDAR 0.387 0.370 0.326 0.221 1.177

(0.216) (0.356) (0.385) (0.174) (0.239)
DER 0.879 0.590 0.587 0.663 0.471
(0.803) (1.193) (0.167) (0.221) (0.637)
DTNWR 1.062 0.616 0.129 0.121 2.746
(1.159) (1.209) (0.072) (0.109) (0.006) * * *
Table III. Notes: Statistically significant at: *10, * *5 and * * *1 percent levels; SD is the standard deviation;
Financial leverage ratios IQR is the inter quartile range
significant ( p-value ¼ 0.239), indicating that the medians of TDAR pre- and post-crisis UAE real estate
are similar. This ratio suggests that, on average, prior to the crisis 38 percent of the total and construction
assets were financed by debt while it dropped to 32 percent after the crisis. This implies
that after the crisis, to some extent, companies have decreased their dependence on debt,
taking into consideration the increase in lending rates, and opted more for equity. This is
also a positive signal for the creditors as they feel there is a greater cushion available for
them in case of bankruptcy. 127
Future implications. A constant decline in the TDAR reveals a great degree of safety
for the creditors of the company in the long-term but it should also be known that
inclusion of debt can lever up the shareholders return on investment. Therefore, it is
recommended to adopt policies which will maintain an optimum leverage ratio that is at
par with the industry averages and contributes to shareholders’ wealth maximization.
5.3.2 Debt/equity ratio. Debt/equity ratio (DER) is calculated by dividing total debts
over total equity. It measures the proportion of debt to equity in the capital structure of
the company. A high ratio reveals a risky situation for the company due to the
commitment to repay interest and principal. Webster (2003) has remarked that a highly
leveraged company is highly susceptible to business failures. This ratio is also of much
interest to creditors and investors as it shows the extent to which the management is
opting to fund their activities with debt rather than equity (Bragg, 2010).
Findings. Table III highlights the fact that prior to the crisis the mean (median) DER
was 0.879 (0.590) while it became 0.587 (0.663) after the crisis. Note that, the mean DER
has dropped after the crisis while the median has increased. Statistically speaking,
however, the H0 cannot be rejected (Z-statistic ¼ 0.471, p-value ¼ 0.637), which
indicates that the medians of DER pre- and post-crisis are similar. The decrease in the
average DER suggests that before the crisis companies depended heavily on debt in
order to finance projects during the property boom; while they showed less dependency
on debt after the crisis, taking into consideration high interest rates and enduring a cost
which is higher than the ROE. Though the figure shows a decrease it is wise to bring it
down further for the long-term benefit of the sector. This can also mean a hesitance from
creditors to advance loans to the real estate sector keeping in mind huge defaults made in
paying back the loans.
Future implications. A regular slide in the DER can imply more inclination towards
equity than debt. However, a very low dependence on debt cannot yield a high ROE in
the long-run which again is an unhealthy situation. The decrease in debt can also show
that banks are now very cautious in extending credit facilities to the real estate and
construction sector due to a chain of default in payments reported lately.
5.3.3 Debt to tangible net worth ratio. Debt to tangible net worth ratio (DTNWR) is
calculated by dividing total liabilities over shareholders equity minus intangible assets.
It measures what is owned to what is owed (Spurga, 2004). This ratio helps the creditors
to know the extent to which they are protected from insolvency. The DTNWR
is assumed to be more accurate in assessing the solvency of companies as it does not take
into consideration intangible assets which do not provide resources to pay for creditors
(Gibson, 2010).
Findings. Table III shows that the mean (median) DTNWR was 1.062 (0.616) during
the pre-crisis, but dropped to 0.129 (0.121) after the crisis. As can be seen from Table III,
the test statistic is 2.746 with a p-value of 0.006.Thus, the H0 is rejected at the 1 percent
level of significance, which implies that the degree of financial leverage of the UAE’s
HUM real estate and construction companies has declined after the financial crisis. We must
understand that during the pre-crisis the ratio revealed a 100 percent authority by the
29,2 creditors over the firm, while the post-crisis figure shows a steep decrease in the
creditors’ rights over the firm. This is a positive sign as a lower ratio reveals a safer
haven for investors. This is mainly due to the increase in total assets which can be
inferred from the data collected.
128 Future implications. A constant decrease in DTNWR shows a greater cushion for
creditors against their payments and also offers greater flexibility for firms to borrow in
the future. Spurga (2004) warns that a figure approaching 100 shows a creditors reign
over the company while a fall in the ratio shows a relief to the situation.
To recap, an overall assessment of the leverage ratios show a decline in the extent of
debt utilized by companies. However, the Wilcoxon test justifies only the decrease in
DTNWR as statistically significant. This reveals that after the crisis the real estate and
construction sector shows less dependency on debt for their operations, due to
obligations related to interest payments and repayment of principal amounts. These
findings are further justified by the report revealing a massive deleveraging process in
the UAE[5]. We can also attribute this decrease to the hesitation of creditors to extend
credit, fearing defaults. However, our findings here are contradictory to the debt paradox
which is explained by O’Hara (1999) and Lavoie (1995), who argue that during a boom
debt ratio remain constant or decrease while during a recession leverage ratios may
actually increase despite firms trying to decrease their leverage. Concluding with this
argument the paper will now consider the final set of ratios, namely the turnover ratios,
to complete the cycle of performance measure.

5.4 Turnover or asset management ratios

The activity ratios show the overall operational efficiency of firms. They show how
efficiently a firm uses its overall assets and specifically the inventory and fixed assets
in generating income. These ratios are helpful in estimating the length of various
operating cycles (Nikolai et al., 2009). The two main activity ratios considered in this
paper are total asset turnover ratio (TATR) and fixed asset turnover ratio (FATR)[6].
Table IV reports the summary statistics for the turnover ratios considered in this study
and Wilcoxon test was conducted to judge the statistical significance of the same.
5.4.1 Total asset turnover ratio. TATR is calculated as net sales over average total
assets. It shows how efficiently the company is utilizing its assets in generating sales.
A low TATR can imply excessive stock of inventory, delay in collecting payments or an
excess production capacity. On the contrary, companies with a high TATR exhibit
faster movement in inventory, prompt collection of dues and optimum utilization

Pre-crisis Post-crisis Wilcoxon test

Ratio Mean (SD) Median (IQR) Mean (SD) Median (IQR) Z-statistic ( p-value)

TATR 0.393 0.337 0.326 0.221 1.647

(0.430) (0.296) (0.385) (0.174) (0.095) *
FATR 37.148 7.328 25.827 12.514 0.784
(47.426) (78.305) (33.323) (30.407) (0.433)
Table IV. Notes: Statistically significant at: *10, * *5 and * * *1 percent levels; SD is the standard deviation;
Activity ratios IQR is the inter quartile range
of production capacity. It can also mean that assets have been fully depreciated and UAE real estate
have no value in the balance sheet (Booker, 2006 and Cleverley, 1989). It is also assumed and construction
that companies with a low profit margin tend to have high TATR as they have to try to
increase their unit sales in order to offset low per unit profits (Kimmel et al., 2010).
Findings. Table IV shows that the mean (median) TATR was 0.393 (0.337) during the
pre-crisis period and declined to 0.326 (0.221) after the crisis. Statistically, the reduction
in the mean TATR is not (or marginally) significant, as the value of the test statistic is 129
1.647 and its p-value is 0.095.Thus, there is no (or little) evidence to conclude that the
financial crisis has negatively affected asset utilization of the real estate companies in
the UAE as measured by TATR. Although, this decrease in TATR is not supported
statistically, the ratio has to be given consideration as it is caused due to a marginal
increase in sales reported, in comparison with the increase in average total assets. It is
also worthwhile to remember that assets are purchased in anticipation to a boom in the
economy, or the rapid clearing of stocks are made in anticipation of a potential recession.
Therefore, the repercussions in the economy can show significant changes in the
turnover ratios. This can be the reason attributed to a large increase in average total
assets. On the contrary, the sales may not have caught up at a fast pace due to the general
gloom in the economy regarding the sector.
Future implications. A constant decrease in TATR can reveal slow movement of
assets and inefficient asset management policies adopted by the companies. They show
that the assets are being piled up due to a slack in aggregate demand. Booker (2006)
argued that underutilization of plant capacity lowers the TATR. It is suggested that
further investments in assets should be made only after making sure that demand is
increasing in the economy. This ratio can be improved by improving sales or disposing
of some assets, or performing a combination of both.
5.4.2 Fixed asset turnover ratio. FATR is calculated by dividing net sales over fixed
assets. FATR is of great importance in judging the relative efficiency of plant
investments (Cleverley, 1989). The higher the FATR the better the business is utilizing
its fixed assets in generating sales. Firms that are more capital intensive usually exhibit
a low FATR while labor intensive industries render higher ratios (Warren et al., 2011).
Findings. Table IV shows that there was a large decrease in the average mean
FATR after the crisis, from 37.147 (pre-crisis) to 25.826 (post-crisis). On the other
hand, the median increased from 7.328 to 12.514.However, this difference in medians
pre and post crisis is not statistically significant (Z-statistic ¼ 0.784, p-value ¼ 0.433).
Note that the average FATR in both periods is very high. The reason for such
inflated FATR values can be due to the overvaluation of fixed assets, specifically
land and property during the boom period (Bhattacharya, 2004). Reilly and Brown
(2002) commented that, an excessively high fixed asset turnover can also indicate the
use of obsolete equipments. A careful analysis of the data collected in this study
shows an increase in fixed asset investment but a steep decline in total revenue after
the crisis.
Future implications. A constant drop in the average FATR does not send positive
signals about the companies’ performance. Firms usually start investing in fixed assets
several years before these assets start generating sales. Considering such a situation, a
decreasing FATR can indicate an expanding firm preparing for future growth. This is
true, however because as long as there is an increase in population, there is a growth
market for the real estate sector.
HUM To summarize, the results largely show a decline in the average total and FATRs in
29,2 the UAE’s real estate and construction sector after the crisis. However, these changes are
not statistically significant as revealed by the Wilcoxon test. Carlberg (2009) stated that,
turnover ratios in general highlight details such as frequency of asset turnover, length of
invoices remaining unpaid and efficiency of companies in navigating the business cycle.
An overall decrease in turnover ratios suggests low frequency of assets being converted
130 into cash, increase in length of collecting dues and inefficiency in managerial decisions
relating to counteracting business cycles. In addition, Khan and Jain (2006) suggested
that low turnover ratios can imply underutilization of assets and presence of idle
capacity. It is therefore recommended to be extremely vigilant while making further
investment in assets and at the same time increasing sales position.

6. Summary, conclusions and recommendations

The tumbling stocks of real estate and construction sector in the UAE has been a topic of
common interest ever since the financial crisis made its presence evident by the end of
2007. The paper relates to a comparison of the overall performance of the real estate and
construction sector in the UAE during the pre-crisis (2006-2007) and post-crisis
(2008-2009) period. The study was mainly conducted in order to justify the reports on the
decline in the performance of the real estate and construction sector in the UAE which led
to the sharp decline of the shares of the respective sector tumbling from an all time high
level. The paper adds to existing research by providing empirical evidence to the reports
signaling a fall in the real estate sector in the UAE after the global financial crisis.
The financial ratios computed will back the theoretical allegations against the sector.
Six companies have been analyzed in detail in order to arrive at a conclusion regarding
the liquidity, profitability, leverage and activity position of these companies during the
pre- and post-crisis period. Ratio analysis has been conducted and 14 ratios have been
calculated in order to judge the variations in performance of these companies and make
inferences about the sector. In addition, the Wilcoxon matched-pairs signed rank test
was employed to test if the changes in the ratios calculated during pre and post crisis
were statistically significant or not.
The results reveal that there has been a decline in the overall liquidity, profitability
leverage and activity positions of the companies after the financial crisis. The decline in
liquidity and profitability position has also been judged as statistically significant.
A decrease in the leverage ratios signals a shift in financing company operations with
retained earnings or equity rather than employing debt. This can be attributed to the
shying away of creditors from advancing loans to this sector. The major reasons for the
decline in the other ratios can be attributed to abrupt suspensions in agreed projects,
huge fluctuations in rental income, increase in operating expenses and a negative cash
flow. Another major contributor to the fall in the sector was due to the oversupply
of property caused due to the rampant construction during the pre-crisis boom.
Recommendations which can be considered for the betterment of the performance
related to this sector are:
.
The sector must come up with more affordable housing schemes which will
improve both sales and turnover figures for companies.
.
Companies must take advantage of the decrease in cost of raw materials
especially steel prices.
 .
Requoting tenders after talks with developers will automatically reschedule UAE real estate
payment dates and recalculate operations costs. and construction
.
Real estate agents should be put under strict scrutiny by regulatory authorities
to prevent the artificial escalation of property prices.
.
The government can reconsider the current regulation of the 5 percent yearly
increase in rents.
131
.
The companies falling under this sector can be obligated to ensure better
transparency in revealing financial information to the public. This will highlight
their commitment towards better corporate governance.
.
The formation of risk management committees to forecast any potential risk can
act as a cushion against impending difficulties.
.
Potential investors should conduct a detailed research about the UAE real estate
market by using certain benchmarking tools to monitor the overall performance
of the sector.

It is worthwhile to note that the UAE Government has already adopted measures to
counter issues in the real estate market. The Federal Government’s decision to increase
visa validity from six months to three years for prospective property investors will have
a long-term effect on the market. Nabil Ahmed, real estate research analyst for Deutsche
Bank, commented that the regional unrest in neighbouring countries also pose the UAE
as a safe haven for investors (Clancy, 2011). Gulf Finance has proposed an option for
clients facing difficulties in repayment of debt. They are now provided with flexible
repayment schedules without facing criminal prosecution under Dubai’s strict debt
laws, which have in the past encouraged defaulters to flee the Emirate.
The empirical results obtained in the research clearly indicate the influence of
business cycles as the main determinant of the decline in performance of these
companies. It is hoped that the implementation of more stringent regulatory policies,
changes in business cycles, unexploited markets like Ras Al-Khaimah, Fujairah and
Umm Al Quwain and a friendly business environment will uplift the UAE real estate and
construction companies from the present turmoil and ease them into a stage of stability
and prosperity.

7. Limitations of the study

Certain limitations also arise from this research such as lack of availability of data for
the aforesaid periods, low transparency in revealing financial details and non
availability of yearly industry averages. Limited sample size also raises questions
pertaining to the reliability of the results. The results obtained can also be subjected to
the shortcomings inherited in the ratio analysis.

Notes
1. Dubai World is a global holding company which focuses on the strategic growth areas of
Transport & Logistics; Drydocks & Maritime; Urban Development; and Investment
& Financial Services. Its portfolio contains some of the world’s leading companies in their
industries, including Drydocks World, Economic Zones World, Istithmar World, Nakheel
and majority ownership of DP World.
HUM 2. Report available at: http://gulfnews.com/business/markets/real-estate-stocks-pull-down-
uae-market-1.72774 and http://gulfnews.com/business/markets/uae-markets-fall-led-by-real-
29,2 estate-construction-1.58028
3. The six companies included in this study are ALDAR Properties P.J.S.C., Emaar Properties
P.J.S.C, Union Properties P.J.S.C, Deyaar Development P.J.S.C, RAK Properties and
SOROUH.
132 4. Chan et al. (1990) stated that highly levered real estate companies are more prone to macro
economic shocks, which urges the need to control for debt while analyzing the relationship
between real estate returns and macro economic factors.
5. Report available at: http://m.ibtimes.com/political-turmoil-in-gulf-and-middle-east-could-
benefit-uae-property-markets-137237.html (accessed 15 November).
6. Inventory turnover ratio has not been considered here due to inadequate information
regarding the same.

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Further reading
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Building Materials and Construction, Dubai.
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15 November).
Saleem, N. (2009), “Real estate stocks pull down UAE market”, available at: http://gulfnews.
com/business/markets/real-estate-stocks-pull-down-uae-market-1.72774 (accessed
15 November).
About the authors UAE real estate
Husam-Aldin N. Al-Malkawi is an Associate Professor of Finance at the Faculty of Economics
and Administration, King Abdulaziz University, Saudi Arabia. He received his PhD from the and construction
University of Western Sydney, Australia and has taught in various countries including
Australia, Jordan, UAE and Saudi Arabia. He serves as a referee and a member of the editorial
board for several international journals. His research interests include corporate financial policy,
financial economics, e-commerce and applied econometrics. Husam-Aldin N. Al-Malkawi is the
corresponding author and can be contacted at: h.almalkawi@gmail.com 135
Rekha Pillai is an Assistant Instructor at the Business Administration Department of
ALHOSN University. She has a Master of Commerce and M.Phil degrees and currently is a PhD
candidate at Asia e university, India. She has several publications in international journals.

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