Real Estate Flow Chart
As the revolutionary change of globalization has surrounded the world with new technologies, developments, ways of conducting business, and shaped our life styles in a better way; therefore, the need for countries to make use of technologies and ideas has increased for the sake of developing a better and reliable infrastructure for ourselves and our future generations (Mc Shane & Travaglione, 2003). Infrastructure, that provides us with optimum ease, benefits, and be in line with the sustainable development for a greener tomorrow. Although companies devise quite optimistic plans for the development of infrastructure such as, office buildings, shopping malls, resorts, hotels, mansions, and plazas; nevertheless, they do not always go the way as expected. It is due to the problems that are faced by the real estate sector organizations that may create a bottleneck effect, in which certain tasks accumulate and not processed on time since there remains a huge dependency of those tasks on each other. If one of them is congested, the other one cannot start or proceed. So, the paper would shed some light over a problem related to the real estate sector by the help of a flow diagram, and later the solution would be provided to the manager in the form of a memo. Dubai is being taken a place where this problem has occurred.
The main theme of the problem related to the real estate sector is that there has been little or no growth in it for the past two years; the projects that were initiated a few years back are not reaching the finish line and are wedged in their incomplete situation.
Explanation of the Problem
Real estate industry is facing a stagnant growth here in Dubai that has caused many of the companies to either stop their business temporarily or has forced them to completely shut down their business. The projects that were initiated by some huge real estate and construction companies have not reached their milestone and are stuck in way between. Those projects included the construction of office buildings, shopping malls, resorts, and hotels; many of them were in the final stages but are not completely in action yet. This has caused the real estate companies to bear unprecedented loss, since the investment that was made in those projects seems to be going in vain.
Secondly, the earnings that were expected from the completion of these projects in terms of tourism or operating of multinational organizations here in Dubai do not seem to be rolling in for at least another couple of years. Moreover, the momentum in which the development in Dubai was taking place has diminished and would definitely take time to regain that momentum. Now let’s scrutinize the overall problem and find out some of the causes or factors that have led Dubai’s real estate sector to face such curtains.
Factors causing Problem
The factors behind this overall stagnant growth of the real estate sector sprouted from a one major incident, Global Financial Crisis that brought several unwanted circumstances and outcomes from the year 2008. The factors causing the problem work as chain reaction, on which the other factors are dependent upon and hence caused the decline in the growth of real estate sector.
When the global financial crisis in terms of credit crisis, hit the world badly a couple of years back, the economies of a number of countries suffered badly including United States, England, France, and of course Dubai. The main aspect working behind it was the inability of the consumers and borrowers – either banks or companies – to meet up the credit requirements and return the mortgages and interest to the lenders. Since, most of the consumers, entrepreneurs, and organizations were more reliant on loans and mortgages for operating their business and meeting their expenses; therefore, they couldn’t realize how lethal could it get for them later. As a result, companies went bankrupt, consumer spending faced a bearish trend, and the demand for real estate sector automatically declined.
After the global credit crisis hit, the companies had to reduce their unnecessary expenses and costs for keeping bankruptcy at bay; therefore, they lain off thousands of workers from all over the world. After that, the demand for labor declined for the real estate companies who also stopped taking services from architects, construction workers, material suppliers, etc. Labor supply was not only the issue, in fact the material supply from across the borders was one of the key issues due to which the construction could not resume, since there was not enough cash with the real estate companies to immediately carry on the business (Real Estate Dubai Blog, 2010).
Apart from that, the most alarming factor was that the foreign investors went on back foot and curbed their investment to be made in countries, for instance Dubai, that also locked the doorway of importing new technologies, new machineries, and methods of production from abroad. They did so due to the gloomy picture that depicted the loss of investment and no profits in the future at all, hence many investors drew back their investments. Consequently, local real estate companies did not have sufficient funds to carry on with their business.
Consumers and Companies taking huge amount of loans
Not able to pay mortgages and interests
Financial Crisis hit
Companies lain off workers
Demand for labor decreased
Foreign investors drew back their investments
Locking of technologies, machineries, and methods of production to come from abroad
Insufficient funds with the real estate developers to carry on their projects
Initiated projects stood still without been completed
To: Mr. Judith Samuels
From: Your Name
Date: July 30, 2010
Subject: Proposal for the Solutions to the problem
Dear Mr. Samuels,
The problem related to the real estate that our company is facing is pretty much the same. We have several projects already initiated but they do not seem to be completed in an year or so if we do not take effective measures. After analyzing the whole situation about the problem and its causes, I have devised a plan that proposes to implement certain measures as a solution to that problem.
Since investors have backed out, so in order to overcome this problem, we should issue shares to the market where the interested investors – precisely local investors – would buy those shares and become the owners of the company. Moreover, we should offer ESOPS to our management and top managers, which is Employee Stock Options where the management would buy a greater share and become the owner. This would further motivate them to work diligently and exercise those practices that can be lucrative to the company (Daft, 1997).
Secondly, workers that are already been lain off by the company should be hired on a part-time basis and not full-time; this would help us to at least resume the incomplete projects even at a slower rate.
Third, other financial securities should also be offered such as corporate bonds, mutual funds, etc. that offer attractive return rates to the investors, so that at least some of the foreign investors are enticed to invest here. And finally, there is no need to permanently buy the technologies or machineries at this stage, since it would be too costly for us to afford. Therefore, what we can do is to get those machineries and technologies on loan or lease from other real estate companies operating either in this country or the other. This would definitely avoid the huge fixed costs related to the purchase of those equipments.
Issue more shares in the market
Offer ESOPS to the management and top level managers
Laid off workers should be hired at a part-time basis
Other financial securities such as Corporate bonds must be offered at attractive return rates
Get the machineries or technology on loan or lease to avoid huge fixed costs
Although, the problem is overwhelming the real estate sector, but it does not mean that there is no way out. We can avoid the stagnant growth and complete our incomplete projects by avoiding unnecessary expenses and adapting to certain measures as mentioned above. This is the most feasible solution that has a great probability of success.
Daft. R. L. (1997). Management. Fourth Edition. U.S.A. The Dryden Press
McShane. S. and Travaglione. T. (2003). Organisational Behavior on the Pacific Rim. Australia. McGraw-Hill Australia Pty Limited.
Real estate Dubai. (2010).Commercial real estate problems in Dubai. Retrieved on July 30, 2010. From http://www.realestatedubaiblog.com/commercial-real-estate-problems-in-dubai/