Home > Economic Development > Qatar plans massive construction investment despite debt, weak property market

Qatar plans massive construction investment despite debt, weak property market

Despite suffering some of the worst news of the financial fallout and increasing debt, Qatar has planned billions of dollars of construction projects over the next decade.

But the gulf nation is expanding construction after years of stalled projects. It plans to invest $160 billion by 2022, when it hosts the World Cup of Soccer.

The announcement comes just days after the Qatar Central Bank said Islamic assets will be split from conventional assets.

Islamic assets are generally property-based, while conventional assets are monetary — think loans and bonds. This is significant because 23.4 percent of QCB’s assets are classified as Islamic and will have to be sold off to Islamic banks, where their values will fluctuate based on the bidder and demand.

The Financial Times reports that 16 percent of Qatar National Bank’s net profits came from Islamic banking.

Beginning the projects Qatar has in the works will require borrowing and strong banking institutions. If the national banks lose 23.4 percent of their assets, I have a hard time believing this is the right time for massive projects. Of course, those banks don’t just simply give up the Islamic assets for nothing — they will be compensated — but they still lose all that Islamic business going forward.

Adding this banking issue to the struggling Qatari property market and a severe debt crisis — despite faith in the government’s checks on the financial system — makes borrowing and building seem unwise.

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