A German property developer has announced plans to build luxury villas and hotels on six artificial islands off Dubai despite the huge financial woes faced by the emirate.

The Kleindienst Group said it will begin work on location at The World - a cluster of artificial islands taking the shape of the world map - which is at the heart of Dubai's multi-billion debt crisis.

'We have interests in industrial, commercial, hospitality and residential real estate, but The World is where we now see the strongest market potential,' company director Josef Kleindienst was quoted as saying in a report in The Economic Times.

'Tourist arrivals to Dubai have increased despite the economic slowdown in 2009 and worldwide the market for property ownership abroad has shown resilience, particularly for luxury holiday home destinations,' he added.

Kleindienst plans to launch the project in the first quarter of 2010 with the construction of 'Germany' one of the islands, with plans to build later Austria, Switzerland, The Netherlands, Sweden and St Petersburg.

The project dubbed - Heart of Europe - is expected to cost a total of $850 million and to be completed in 2015, Kleindienst said, adding that it will include villas, hotels and restaurants.

Asked about the risk he was taking - particularly should state-owned construction giant Nakheel go bankrupt - Kleindienst said: 'We remain confident in the investment potential of The World.

'Dubai is a first class travel destination. We do not see a risk at all.'

The company began purchasing the six islands among a cluster of 300 islands that comprise The World in 2006, before the global financial meltdown that pushed property prices in Dubai to drop by 50 per cent.

Nakheel is one of the key subsidiaries of Dubai World, which is facing a staggering debt of $59 billion.

Nakheel narrowly escaped being pushed to default on debt after a last-minute Dubai announcement last week that its maturing Islamic bonds of $4.1 billion would be paid on time.

The payment was covered thanks to a $10 billion lifeline extended by neighbouring deep-pocketed Abu Dhabi, the capital of the United Arab Emirates of which Dubai is one of seven federations.

Last month Dubai rocked global markets when it requested a six-month freeze on debt payments by the Dubai World group in order to restructure it.

The Kleindienst announcement that it will go ahead with its mammoth project despite Dubai's financial woes came as Dubai World began talks on Monday with its lenders to restructure the $22 billion debt it faces.

Nakheel has put on hold several larger-than-nature projects planned for Dubai, including the construction of a one-kilometre high tower and a city dubbed Waterfront, which was expected to be twice as large as Hong Kong.