Financial experts and consultants have suggested setting up a realty special purpose vehicle (SPV) as part of UAE Government initiatives to prevent a total stoppage of construction activity in the UAE and tide over the tight liquidity situation caused by banks' reluctance to refinance $20 billion (Dh73.4bn) short-term loans.
The stoppage of construction business would cause cascading effects on other sectors like retail, gold sales and other businesses that drive the UAE economy and cause a contraction of UAE's gross domestic product
A special purpose vehicle, started with the initial funding of the government, and participation of high networth GCC nationals and institutional investors like the Abu Dhabi Investment Authority, banks and foreign investors, can solve the liquidity problem.
An SPV is a company formed for specific purposes, in this case, to buy completed or under-development property. Using pass-through securities (PTS), the SPV can buy illiquid assets from developers and their customers, who will continue to pay their monthly installments to the SPV. Investors get a principal and interest every month and pay a small fee to the SPV.
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