Destination Dubai

Sun, sand, world-class shopping and a cosmopolitan lifestyle that is the envy of the world; those are just some of traits that has made Dubai in the United Arab Emirates (UAE) one of the most sought after destinations in the world. Strategically located on the doorsteps of India and Europe, Dubai is unique in that it is a city of expats, playing host to nearly 200 nationalities who live, work and play side by side. The native Emirati population is miniscule, with the city depending on a nearly 2-million strong expat workforce to run its various businesses and services. While other cities in the Gulf region would consider such an ethnically diverse population to be trouble, the government here considers this level of foreign participation and investment as one of the pillars of its growth. That is why the government actively encourages foreign ownership of property, while promoting the host of benefits that the UAE offers compared to other regions. “What the UAE offers is a little bit more, a little bit better than everywhere else and that has been the success recipe for this country. There are no taxes, there is business friendliness, and there are liberal laws, a welcoming nature, multi-culturalism, all of that is fantastic”, says Barry Ebrahimy, head – commercial of Al Hamra Real Estate Development.

What’s Hot about Dubai?

These traits have led to Dubai being considered one of the top property markets in the world, alongside global cities such as London and New York. Considering that Dubai is barely a couple of hours away from India by air, it is not surprising that Indians are one of the largest investor groups here. Another major attraction are the UAE’s residency laws which do not allow for citizenship, but automatically makes a property buyer eligible for a renewable visa which can be used to find a job or start a business. That’s a big plus for many Indians who desire to live and work abroad. And the money has definitely come pouring in, with data from the Dubai Land Department showing that Indians had invested a whopping AED 7.8 Billion in just the first half of 2015, making them the largest non-Arab investors in Dubai’s property market. ”Indian investors are the highest investors that we have, not just in Dubai but also in this project and they can be divided into sub-developers, investors and end users. We have structured our payment plans and payment facilities in such a way that it is very comfortable them to invest in our projects and facilities”, says Alharith Bin Salem Al Moosa, vice-chairman & deputy general manager of the Falconcity of Wonders, a mega project consisting of residential, mixed use, commercial and leisure developments. Another indication of how seriously Indian investors are being courted, is the fact that the Dubai Property Show will be held in India this November with nearly 35 Dubai-based developers expected to showcase their properties.

What’s in it for Indian Investors?

So who are these Indian investors? Why aren’t they investing in domestic markets back in India where sales have been falling? Most are HNIs and businessmen who don’t see much value in over-priced domestic markets such as Mumbai, but are willing to explore global property markets. There is also a rising tide of young professionals who have been attracted by the RBI relaxing limits on how much an individual can spend abroad every year. Currently an Indian citizen can spend up to $ 250,000 per year abroad, which means theoretically a family of four could invest a cool million dollars to buy property in Dubai. For these investors, Dubai is more affordable than cities such London and New York where prices can be 8-10 times higher. Dubai also offers larger units, better facilities and more value for money. For a million dollars, an Indian investor might only be able to buy a 1,500 to 1,800 sq. foot, 3-bedroom apartment in Mumbai, but the same amount could get them a villa or beachfront property in Dubai. “Today, the average Indian is travelling out of India much more than they used to. They have a better idea of what is available globally compared to what is available in India. They have certain expectation which they want met. For this group, having a second home outside India makes better sense. Also, buying property here helps you diversify your portfolio of investments; it gives you an opportunity to have a rental yield home or just capital appreciation, so all the more reasons for you to invest here” says Sanjay Manchanda, CEO of Nakheel PJSC, one of the largest developers in the world and the company behind the Palm Jumeirah. Dubai’s potential as a property hotspot is already a hit with the Bollywood crowd and stars like Sharukh Khan, Aishwariya Rai and Mohanlal have invested in holiday homes here.

Opportunities in Dubai

But that doesn’t mean that all is well with Dubai’s real estate. The market is currently in a negative cycle, with transaction volumes coming down and prices under pressure. However, experts say capital appreciation will remain steady at 6% per annum. The biggest opportunity though, comes from rental yields which are between 8 to 12% depending on the location, among the highest in the world. “Rental yields are only about 2 ½ % in London and less than 2% in Singapore, so Dubai is definitely better. My feeling is that a positive cycle will emerge by the second quarter of 2016 or definitely in the third quarter. It is cyclical and it will go up again and then down and then up. That is just how businesses work. You will get at least 3% on depreciation of currency and then I will say that the general return on investment is 4 to 6% annually, so it will give you about 8 to 9%. Then there is the fact that there is no income tax in this part of the world, plus the infrastructure and quality of life and it is just fantastic”, says P.N.C. Menon, group chairman of the Sobha Group which is developing Meydan-Sobha District 1, a mixed-use development that boasts the world’s largest man-made lagoon and many luxury residential units.

All Eyes on Expo 2020

All eyes are now on the Expo 2020, a mega event that is expected to boost major infrastructural and social projects in the region in anticipation of the nearly 20 million tourists expected to visit the city by 2019-2020. As a result, hopes are high that immigration will soar and that Dubai’s property market will boom over the next 4 years. Mega-projects like Meydan-Sobha District 1, the Falconcity of wonders and Nakheel’s Palm Jumeriah are already launching new phases to cater to the expected demand. However, the rapid pace of development and the enormous amount of supply that is expected to hit the market is a cause for concern, with experts worried that the Dubai property market might get over-heated like it did in 2007-08. What’s good here is that the government seems to have learnt its lessons from that crisis, instituting several measures such as mortgage caps and higher transfer fees to discourage speculative buying. If this continues to be managed well, then domestic and global investment in Dubai’s property market will rise exponentially.

Nikhil Narayan Sivadas, Assistant Editor, NDTV