Destination Dubai

Written by Timsy Jaipuria | Updated: Oct 19 2014, 06:00am hrs
TRAVEL TO Dubai and one is constantly reminded of the large number of Indians who have made the city their home. These are not just expatriate workers or businessmen residing in the city for a fixed time period, but include property owners as well. Indians are becoming the biggest buyers of luxury properties in Dubai, a trend that has registered a steady rise in recent years, as per reports on the real estate market in the United Arab Emirates (UAE). Citing data from the Dubai Land Department, property consultant Knight Frank says in the first half of the year, a number of key nationalities, including Indians, dominated the real estate investment activity in the UAE.

In fact, Indians invested nearly AED 10.5 billion during the first half of this year in the property market in Dubai. Between January and June 2014, Indian, British, Pakistani and Gulf Cooperation Council (a regional inter-governmental political and economic union consisting of all Arab states of the Persian Gulf, except Iraq) investors accounted for around four-fifth of all real estate transactions in Dubai.

The lure of Dubai, with its grand infrastructure, luxurious lifestyle and prestigious properties with high-end amenities, is clearly proving irresistible for a growing number of Indians. You could be living in Golf Links in Delhi or Malabar Hill in Mumbai, but having a property in Dubai is the new status symbol.

Its also a sound investment. Post the global downturn of 2008, property prices in the UAE saw sharp downturns of 40-60%. With the exodus of investors, the city had an oversupply of real estate properties already in the pipeline and this made them pretty affordable.

The capital value of apartments in the famous Burj Khalifa, for instance, is currently close to a third of what it was in 2008. Therefore, it offers good potential for capital appreciation in the near to mid-term for investors, especially when the real estate market has started to show signs of recovery.

The interest being shown in the Dubai real estate market by Indians is not a new phenomenon. In fact, Indian investors have been among the keenest observers of this market for several years now. The reasons are not hard to figure out. For the longest time, Dubai has had a massive representation of Indian manpower and business interests. In terms of investment sentiment, interest by Indians in the Dubai market has been evident throughout the various market cycles in the city, varying more or less in tandem with the fluctuations. Then there is the proximitya two-hour flight connects India to Dubaimaking it convenient for a weekend break.

Neil McLoughlin, senior vice-president of Dubai-based Damac Properties, says, Indians have been the biggest foreign investors in Dubais property market in the first half of this year, as per the latest figures from the Dubai Land Department. Indian buyers spent more than AED 10.5 billion in the Dubai property market of a total of AED 37.5 billion spent by people of other nationalities. During the same period last year, Indians invested

AED 8 billion in properties in Dubai. We can see that the

desire for luxury homes is

getting stronger.

Agreeing with McLoughlin, Sachin Sandhir, MD, RICS South Asia, says, The real estate market in the UAE, especially Dubai, has shown healthy growth in the past few quarters. Indian investors are looking to invest abroad to diversify their real estate exposure and Dubai provides a perfect platform with its well-developed real estate market. In fact, India is one of the top countries that invest heavily in the Dubai real estate sector.

Developers in Dubai are also launching new projects encouraged by the positive response shown by Indians to their previous properties. Damac, one of the most talked about property players in Dubai, says it experienced a high percentage of Indians buying in their master development project, Akoya by Damac. Due to the huge success of Akoya by Damac, we have launched Akoya Oxygen, a 55-million-sq-ft, lush-green community with beautiful finished homes set among over 4,000 trees, McLoughlin adds.

However, there are commercial reasons why Dubai attracts so many Indians. Investment bankers and real estate analysts say investing in a decent neighbourhood with a reputed builder can earn around 8-10% returns in rentals. It looks like the real estate sector in Dubai is reviving and Indians are increasingly showing interest in acquiring real estate in Dubai as compared to other markets, says Hemal Mehta, senior director, Deloitte India.

As per Dubai-based international real estate firm Emaar, there has been strong interest shown by Indians in their projects over the past few years. This builds on Dubais evolution as a regional hub for business and tourism, with several Indian professionals today regarding the city as their second home. With direct airline connectivity further gaining strength, there has been a steady increase in the number of business and leisure visitors from India to Dubai. The large choice of residential developments, particularly the serviced residence portfolio of Emaar, has generated strong interest from Indian investors, says an Emaar spokesperson.

Why Dubai

The real selling points have not changed much over the years. Investment potential obviously ranks high. However, one selling point of specific interest to Indians is the prospect of owning a home or property in a country where one is either professionally active or has family employed, says Anuj Puri, chairman and country head, JLL India.

McLoughlin of Damac Properties says, With Dubai just a two-hour flight away from India, it is seen as a luxury destination close to home with many facilities and infrastructure to welcome Indians. Dubai is often viewed in the same league as London for real estate investments by Indian property buyers.

The bulk of purchases is made by wealthy Indians to escape taxes. The industry estimates that close to $100 million move from India to Dubai every day. Dubai charges no tax on rental income or any capital gain tax for purchased property. Cash-rich Indians know their investments here are safe, says an industry observer. Other advantages include getting to invest with developers who have international standards for valuation, planning and construction. The Dubai government has, in fact, become the first government to announce its support for the International Property Measurement Standard (IPMS). The IPMS is being developed by a coalition of professional and not-for-profit organisations from around the world and will address global inconsistencies in the way property is measured, leading to greater transparency and increased investor confidence, Sandhir adds.

Who is buying

As per various media reports, Indians own 100 of the 900 apartments in Burj Khalifa. Of these, the most prominent ones include businessman Raj Kundra, who gifted his actor wife Shilpa Shetty an apartment there. BR Shetty, managing director and CEO of the New Medical Centre Group of Companies in Abu Dhabi, owns the entire 100th floor of the tower, while Rizwan Sajan, chairman of Danube Group, has also purchased an apartment there.

Its not that Dubai is attracting only the rich. Given the excellent state of physical and social infrastructure comparable to most developed nations, and the quality of construction and design, the property market in UAE is an attractive investment destination for many upper-middle-class Indians too. However, the target audiences are high networth individuals (HNIs) visiting Dubai for work or pleasure. There is a large investor base in India looking at owning a second home. Dubai has a safe environment plus a price point that makes investors happy, says Mehta of Deloitte.

Click here for graph

Indian investors opt for a wide range of residential and commercial investment choices in Dubai, from ultra-luxury properties to villas and serviced apartments in sought-after areas such as Downtown Dubai, Dubai Marina, Arabian Ranches and Emirates Living, the Emaar spokesperson adds.

Other marketing outreaches for properties in Dubai are generally targeted at upper-mid-income HNI buyers and investors, says Puri of JLL.

The target audiences are high networth individuals (HNIs) visiting Dubai for work or pleasure. There is a large

investor base in India looking at owning a second home.

Dubai has a safe environment plus a price point that makes investors happy: Hemal Mehta, senior director, Deloitte India

Indians have been the biggest foreign investors in Dubais property market in the first half of this year, as per latest figures from the Dubai Land Department. Indian buyers spent more than AED 10.5 billion in the Dubai property market of a total of

AED 37.5 billion spent by people of other nationalities. We can see that the desire for luxury homes is getting stronger: Neil McLoughlin, senior VP, Damac Properties

The real estate market in the UAE, especially Dubai, has shown healthy growth in the past few quarters. Indian investors are looking to invest abroad to diversify their real estate exposure and Dubai provides a perfect platform with its well-developed real estate market. In fact, India is one of the top countries that invest heavily in the Dubai real estate sector: Sachin Sandhir, MD, RICS South Asia