Dubai, whose 2009 property collapse led to a debt crisis, launched a $1 billion real estate investment fund along with Canada's Brookfield Asset Management in a bid to revive the battered sector and restore investor confidence.

The emirate's main investment vehicle, Investment Corporation of Dubai (ICD), and Brookfield will each deploy $100 million in the joint fund, UAE state news agency WAM said on Wednesday.

Dubai's once-booming property market hit a wall in 2008 and the decline worsened after the global financial crisis, ending  a massive building spree. Prices are down 60 percent from their 2008 peak.

State-owned developer Nakheel , builder of islands in the shape of palms, was at the centre of the collapse.

Nakheel, and its parent Dubai World , have restructured some $41 billion in debt in the past year.

The market can expect more pain with oversupply likely to delay a price recovery in the Gulf emirate until 2016, ratings agency Moody's said.

'It's clearly a step in the right direction to bring back some confidence in the real estate market. $1 billion is not a small size and they (Dubai) can build on the success of that,' V.Shankar, Standard Chartered's global chief executive for non-US operations said at a conference in Dubai.

The fund, with a maximum cap size of $1 billion, will focus on a wide class of assets in both freehold and non-freehold areas.

It will also seek additional funds from a select group of local, regional and international investors, the WAM statement said.

The size of the fund will be capped at $1 billion and it will have a life of eight to 10 years, the statement said.

'We see this agreement as another big step in our next phase of growth. It once more affirms Dubai's attractiveness as a premier investment destination in this region,' Sheikh Ahmed bin Saeed Al Maktoum, tthe chairman of Dubai's Supreme Fiscal Committee and uncle of Dubai's ruler, said.

Market impact of the latest move, however, remained muted with the property-heavy Dubai stock index trading flat.

Top Dubai developer Emaar Properties rose 0.4 per cent amid low volumes.

'People will be slow to react and assess the impact. They will also be suspicious of what it means until they read the details,' said Mohammed Yasin, chief investment officer of CAPM Investments in Abu Dhabi.

In June, UAE extended visas for real estate investors to three years from six months in a move to boost foreign investment.

Brookfield, a property, power and infrastructure investor, has about $150 billion in assets under management.

ICD holds about $70 billion in assets and its portfolio includes airline Emirates and stakes in Dubai's largest bank, Emirates NBD, developer Emaar Properties and Borse Dubai.-Reuters