The proposed merger between Dubai's largest real estate developers -- Emaar Properties and Dubai Holding Commercial Operations Group (DHCOG) -- would create a dominant entity that would essentially control Dubai's property market, Moody's Investors Service said Monday. "Moody's recognises that consolidating Emaar and DHCOG's real estate interests into one entity will create a new giant in Dubai's market, with unrivaled access to a sizable land bank," said Martin Kohlhase, an associate analyst in Moody's Corporate Finance Group based in Dubai. "Furthermore," Kohlhase added, "several drivers -- such as the opening of Dubai's Metro (public transportation system), the inauguration of Burj Dubai (the world's tallest skyscraper) and the end of the school year/beginning of the summer period -- will shape Dubai's residential property market in the near term and lead to greater differentiation within Dubai's residential areas, from which Emaar and DHCOG's real estate divisions may benefit." Moody's noted that the Dubai residential property market generally remains oversupplied, and the downward trend in the market is unlikely to stabilize before Q210. Large-scale lending has not resumed and property developers report a number of buyer delinquencies, Moody's said, although a liquidity crisis and delinquency levels may not be the only risks posed to the companies. "Larger government ownership in Emaar may not be sufficient to mitigate the detrimental impact that the merger would have on the company's fundamental creditworthiness," Kohlhase said. "Furthermore, ongoing market weakness and the prospects of weaker cash flow over the near to medium term will impact the combined group going forward." In response to the merger announcement, Moody's placed the long-term issuer ratings of both companies on review for possible downgrade. Emaar currently bears a "Baa1" long-term issuer rating while DHCOG is rated at "A3." Write to Diana Golobay.