The return on capital in the UAE's real estate sector was 47 per cent during 2002-2007, while the return on shares of the sectors stood at 16 per cent, and the net profit margins and total expenditure stood at 40 per cent and 20 per cent respectively, a study has revealed.

The study was announced in Abu Dhabi yesterday by Ridha Muslim, Director-General of Truth Economic Consultants, in a press conference. It dealt with the most important economic and investment indicators of the country's real estate sector.

Muslim said the most important investment indicators that should be taken as a guide in the real estate sector confirm that the rate of internal return was 27 per cent.

He said the study has recommended the need for a very careful monitoring of the capital of public joint stock companies and that economic feasibility studies should be accompanied by a realistic work plan for the companies' first five years.

Muslim said the effect of the global financial crisis on the real estate sector will be limited as a result of several factors, primarily the big demand for residential units that far exceeds supply; the gap between supply and demand this year amounted to some 103,000 units. And the gap will widen to some 127,000 units next year.

The director-general said the rate of profitability in the real estate sector will continue to rise despite the global crisis, and it is expected to reach 33 per cent of capital, beating other economic and trade activities.

Asked by Emirates Business about the talk of a shortage of liquidity in the market, particularly in banks, and its effect on real estate projects, Muslim said: "There is no crisis of liquidity at present but there is a fear in the banking sector, which is strict in extending credit despite several government reassurances."

He said even a drop in the price of oil to $20 a barrel, at worst estimates, will not harm the UAE economy, given the vast surpluses of past years that were very well invested. Added to this is the low cost of oil extraction. Muslim called on the government to reconsider the cost of loaning to banks, which stood at four per cent. He said it should be reduced to between one and two per cent.