You are here: Home » Latest Features » Feature Items » Dubai Real Estate - Indian Inv... » Lebanon
Send to friend
Discuss on CityscapeConnect.com
FDI Features
Dubai Real Estate - Indian Investors To The Rescue?
17 Mar 2010
Sanjay Dutt, CEO - Business, Jones Lang LaSalle Meghraj
Post the Dubai real estate market crash, there has suddenly been a resurgence of interest by foreign investors there. A not inconsiderable part of these are Indians. Surprising? Not really.
Dubai is a market that has always thrived on investment. Real estate there has now become attractive because of the reduced pricing that followed the recent real estate downturn. The revival of interest by Indian investors, who are fundamentally value-seekers, should be understood from the point of view of the latent opportunities available in Dubai at the current time.
Indian investors are traditionally quite familiar with the property markets in the UK, Canada, US, Dubai and Australia. These are markets that are always being monitored at some various levels from Indian shores. Many Indian investors are beginning to focus their investments within Dubai because they see an opportunity to pick up previously overpriced properties cost-effectively, with the expectation that demand will revive again in the long term. Moreover, many Indians also have commercial interests in Dubai, which has a close emotional fit with the Indian community because of the large diaspora existing there.
In evident response to this fact, many real estate developers from Dubai are zeroing in on Indian investors now. This makes business sense because Dubai is, both geographically and sentimentally, in the close neighbourhood of the Indian subcontinent. This creates a natural affinity for investments from this country. Another factor would be the relative ease of investment that exists for Indians in Dubai. The fact that a large number of Indians have business and personal interests there also makes them a natural customer catchment. However, India is not a solitary case in point here - Dubai-based developers are also targeting other countries for the same reason.
Are we witnessing a new investment trend here? Is Dubai the Investment Mecca for Indians in the current epoch? It would be too early to make such an assumption. We are talking primarily of opportunistic investment at this point in time.
Definitely, Dubai has a lot of supply available, so we are not going to see a peaking in property rates for a while. Currently, it is difficult to say in which direction Dubai's property market dynamics will go in the near and distant future. Much depends on how well the economy there revives. The current spurt of investments is speculation-driven, and the initial numbers may not prove sustainable for Indian investors in the long run.
In fact, the current dynamics visible in Dubai are not very different from what was witnessed in the US during the worst of the subprime crisis. Properties were suddenly available at vastly reduced rates, and investors with a long-term vision took advantage of the situation. Dubai has its own set of aspirational values, and the market has responded accordingly.
It should be noted that investing in a market that has recently seen a serious downturn is not without potential pitfalls. The most obvious risk for investors into Dubai property is that the real estate market there may not revive in sufficient quantum and quality, or over the hoped-for time span.
Most markets which are organized in terms of development also have a lot of steady supply. Investment value is unlocked when there is a dearth of supply as opposed to demand. In other words, investment into Dubai-based properties would only begin to yield a decent ROI when demand overtakes supply - and that is not a likelihood for quite a while yet. In fact, there is a risk that Dubai may see another surfeit of dead property investments if another crash develops. In such a case, the challenges for investors plugging funds into Dubai's property sector would be considerable.
Source: Jones Lang LaSalle Meghraj