Sources close to the project tell MEED that Limitless asked banks to respond to invitations to provide $1.5bn for the initial work, to remove more than 200 cubic metres of earth, in the summer. But, the response has been slow from banks outside the region.

“It is unlikely that international banks will be keen to finance any Dubai real estate projects in the current market,” says a source at one international bank that was invited to finance the scheme.

Most major international banks operating in the region, including HSBC, BNP Paribas, Standard Chartered Bank, Calyon, Societe Generale and Citi, are thought to be wary of financing the project.

Limitless is also keen to secure Islamic financing for the project and talks are understood to be continuing with several local banks, including Emirates NBD, Dubai Islamic Bank and Badr al-Islami, the Islamic banking arm of UAE-based Mashreq Bank. “Work on the Arabian Canal is on track, interest in the project is healthy and there is strong funding behind it,” says a spokeswoman for Limitless.

One source involved in the talks confirms that the three finance houses are considering ways of financing the project that rely primarily on the support of other regional banks.

A report by ratings agency Moody’s Investors Service says Dubai’s debt will grow faster than the economy as a whole for the next five years, an issue that is deterring international support for deals (MEED 13:10:08).

“It is becoming difficult to get credit approval for any Dubai debt, especially in the real estate sector, after the Moody’s report,” says a banker at one international firm in Dubai. “Internal credit committees are using that as another reason not to extend debt.”

The contract for the phase one work was awarded to Abu Dhabi-based Tristar Transport & Contracting at the end of September.

Phase one is expected to take three years to complete and work on a stretch of 9 kilometres is under way (MEED 29:9:08).