By Lin Noueihed and Jason Benham
DUBAI, Nov 30 (Reuters) - Dubai government-owned company Nakheel, developer of the man-made Palm Islands, said on Sunday it had cut 500 jobs, the starkest sign yet that the end of the Gulf hub's property boom could hit the whole economy.
The announcement by Nakheel, the developer behind a series of mega-projects that propelled Dubai into the global spotlight, comes as Dubai's real estate regulator urged developers to slow down, saying worsening financial conditions were driving up defaults on high-end property.
Nakheel's decision to cut back 15 percent of its workforce comes a week after a Dubai government official said the emirate would pull back on its building spree and rationalise spending as global turmoil forces the emirate to revise its growth plans.
"We have the responsibility to adjust our short term business plans to accommodate the current global environment," Nakheel said in a statement quoting an unnamed spokesperson.
"The redundancies are indeed regrettable, but a necessity dictated by operational requirements which are in turn dependent on demand."
Senior Nakheel officials were not immediately available for comment but the company said earlier this month it was witnessing a slowdown in real estate sales.
Last month, the developer said it had scaled back dredging work on its Palm Deira project, the largest of three palm-shaped islands, which was planned to house one million people.
Major job losses in Dubai, where expatriates comprise more than 80 percent of the workforce, could have serious knock-on effects for the emirate's economy as a whole, particularly as the real estate boom was behind much of its recent economic growth.
"Because such a high proportion of the workforce are expatriates, the second round effects of job losses will be particularly serious," Simon Williams, a senior economist at HSBC in Dubai, said.
"Unless they can find new jobs and new sponsorship, expatriates will have no choice but to leave. And when they go they take their spending, savings and expertise with them."
SLEW OF DELAYS
Nakheel's announcement comes in the wake of a slew of major project delays and redundancies by developers in Dubai, which kicked off a regional property boom when it allowed foreign investment in real estate in 2002.
Kuwait's Al Mazaya Holding
The developer did not specify which expansion plans were being shelved, but said it was "adopting new strategies concerning its expansion plans to the Gulf and Arab countries, after considering the current situation of the various economic sectors and the distorted movement of the market."
Al Mazaya said last month it planned to go ahead with an initial public offering in Qatar in November, despite the turmoil, and would launch $9.5 billion worth of Dubai projects.
It has also said it plans to set up a company in Bahrain.
Limitless, which is controlled by government-owned Dubai World, said last week it was reviewing the pace of development on its $61 billion Arabian Canal project, the largest of three it has in the emirate, as well as staffing levels.
In a major policy shift, federal government stepped in last week to bail out the former boomtown's financial sector in the face of the financial crisis.
It will inject capital into the Emirates Development Bank, a rescue vehicle created to absorb merging Islamic property lenders Amlak and Tamweel.
Marwan bin Ghalita, head of Dubai's Real Estate Regulatory Authority, said developers should review projects that had not been launched for sale, or where only a few units had been sold.
"Slowing down is very important and this is what we at RERA asked developers to do about a year back," he told Reuters. (Writing by Lin Noueihed, Editing by Thomas Atkins and Andrew Macdonald)