On April 16, Dubai experienced its heaviest rainfall in 75 years, disrupting lives across the city. While the city is typically associated with a dry climate and scorching heat, residents found themselves unexpectedly rushing for umbrellas to protect themselves against heavy rainfall. It hardly rains in Dubai, which is why the drainage system was not included in city planning. As a result, a significant portion of the water remained stagnant due to urbanisation and inadequate drainage infrastructure, exacerbating flooding in many areas. Blocked roads made it difficult for people to resume their daily activities, with grocery stores unable to restock and several employees having trouble reaching their workplaces.
The storm in Dubai not only caused inconvenience for its residents but has also jolted investors and businesses across the UAE. Dubai is heavily dependent on its tourism industry and all businesses flourish under this industry. Being UAE’s financial hub, Dubai has the busiest airports in the world. Due to the heavy storm, approximately 1,000 flights were cancelled, leading to days of subsequent delays. Motorways remained submerged until the rain stopped. Around 21 people sadly died across the UAE and Oman.
These circumstances do not present a favourable picture to the investors. They had not predicted that natural disasters such as rain would have such an impact and must now be factoring it into their future investment decisions. At present, their main concern will be whether it is a one-time thing or something set to continue.
Meanwhile, scientists and researchers are divided about this sudden rainfall. Some are blaming seeding, whereas many think it is due to global warming. According to Richard Washington, a professor at Oxford University, it is technically quite difficult to blame seeding alone for this storm. As per World Weather Attribution, “heavy precipitation hitting vulnerable communities in the UAE” is set to become “an increasing threat as the climate warms.” If this sort of event is now the norm, it will raise concern for Dubai’s investors. Additionally, it will pose challenges for Western investors, for whom one of the key attractions of residing and investing in Dubai is its weather.
Government response amid crisis
A positive sign for the investors is that the Government of Dubai has assured its residents that it will provide damages for the loss suffered and the UAE has allocated $544m for repairs caused by the storm. The UAE Central Bank, on the other hand, has confirmed that insurance claims will be provided for damaged homes and vehicles if the party holds a comprehensive insurance policy against loss and damage.
The bank has instructed all financial institutions to offer a six-month repayment deferment to customers with personal and car loans affected by flooding. It has assured that customers will not be bound to pay any additional amount, interest, or profit charges. Moreover, the principal amount of the loan will also not be increased.
Insurance companies in the UAE were not prepared to manage such claims, and have taken time to settle them, with claims made by customers against loss and damages backed by UAE Central Bank, which is a sigh of relief for many investors. However, it will be quite challenging for consumers to file a claim, especially regarding negligence, even if they have comprehensive coverage. For instance, if you have knowingly parked a car or a vehicle in a flooded area or if you were driving in a rain-affected area. Rejection of these kinds of claims could put a dent in investor confidence.
Dubai knows that it cannot afford to lose its reputation as both an attractive travel destination and ‘safe haven’ for investors to mere rain. Therefore, it has deployed thousands of workers to bring back normalcy. Other than banks and financial institutions, many developers in Dubai are also facilitating the repair of residential property damage. As per Khaleej Times, the CEO of Damac Properties, which is the largest property developer in Dubai, has also come forward to provide assurance to its residents that they will repair all their property damages at no cost. But the real question for investors is perhaps not about repairs, but about an upgrade to the city’s drainage system.
Dubai’s investors will certainly have this playing on their minds while looking for business opportunities. Investors will be looking to see how the Dubai government intends to support them in the case of flooding or other extreme weather events. They will carefully assess and scrutinise how insurance companies will facilitate them, what is covered and what is not. Considering current predictions, the likelihood of more severe rainfall events in the future remains high. Therefore, the government of Dubai must prioritise providing assurance to its potential investors by taking proactive measures to address the city’s inadequate drainage infrastructure and improving insurance policies. By tackling these challenges, Dubai can mitigate these risks and maintain its attractiveness as a destination for investors and residents alike.
