DUBAI, April 30 (Reuters) - Moody’s on Thursday changed the outlook for Dubai’s largest listed developer Emaar Properties and its unit Emaar Malls Group to negative from stable, citing the impact of the coronavirus pandemic.
It kept their ratings unchanged at Baa3 and Baa2 respectively, but said they could be downgraded in the case of any further deterioration in Dubai’s economic environment and debt burden.
The Dubai real estate sector has for years struggled with oversupply and sluggish economic growth.
Last month, S&P Global Ratings placed Emaar Properties and Emaar Malls on creditwatch with negative implications.
“Travel restrictions will likely weaken international demand for new residential properties in Dubai,” Moody’s said.
“At the same time, international investors are likely to have suffered losses from a decline in global asset prices and business disruptions which could lead to delays in collecting payments for properties sold.”
International buyers made up about half of Emaar Properties’ investor base at the end of 2019, the ratings agency said.
Moody’s said the company has a 45.8 billion dirhams ($12.47 billion) backlog of sales. Cash collection across its property developments is at 55% on average and around 85% of units have been sold.
It concluded a large part of construction costs would therefore be covered by cash already collected.
Lower interest rates would to an extent help demand in the medium term, but would not be enough to offset weaker consumer sentiment in the near term.
Emaar Malls will be hurt by lower tourism and consumer spending, Moody’s said, and expected the company would have to provide concessions, including rent reductions to support retailers. ($1 = 3.6730 UAE dirham) (Reporting by Yousef Saba; editing by Barbara Lewis)