India's economic woes hit demand for Dubai real estate

Would-be buyers taper off with Indian economic growth reaching three-year low last quarter

Nakheel’s stand at the Dubai Property Show in Mumbai in 2016 displaying a scale model of the Palm Jumeirah. Rebecca Bundhun / The National

Dubai real-estate developers have flocked to Mumbai in the past days to target potential homebuyers from one of the emirate’s largest buyer markets, even as the slowdown in the Indian economy has tapered demand.

The three-day Dubai Property Show in India's financial capital, organised by the Dubai Land Department, concluded on Sunday, with presentations from developers including Nakheel, Azizi Developments, MAG and Dubai Properties

“We remain very committed to the [Indian] market,” said Sanjay Manchanda, the chief executive of Nakheel, for whom Indians make up most of its foreign customers. “Everybody has indicated the fact that these emerging economies are going to be the economies that everybody will have to focus on in every business sector.”

But slowing economic growth in India has impacted buyers’ appetite for real estate in Dubai and elsewhere. The country’s economic growth fell to a three-year low of 5.7 per cent for the three months to the end of June, impacted by the government’s controversial demonetisation programme launched late last year.

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Indians are still the biggest foreign buyers of property in Dubai, purchasing Dh12 billion worth of real estate in the emirate last year, according to figures from the Dubai Land Department. That represents a 40 per cent year on year decline compared with 2015, the department said.  Dubai meanwhile is facing its own challenges, with apartment property prices declining by 4 per cent in the third quarter year-on-year amid a weak outlook for oil and the global economy, according to a report by Asteco.

“The market has slowed down because of [factors including] the dollar, oil prices, Brexit,” said Omar Al Mesmar, the general manager of Dubai Investments Park. But he said he had seen good levels of interest at the exhibition. “[However] the Indian market is [still] very important and we can't miss such an exhibition.” he said.

Some developers resorted to offering free hotel stays and attractive payment plan deals to lure Indian buyers at the show. Held at the Bandra Kurla Complex business district in the city, the event was inaugurated by Bollywood star R Madhavan.

But developers did acknowledge some issues that could hamper sales.

“Obviously there are a few factors which have made the investor think,” said Nakheel’s Mr Manchanda, who cited the closer monitoring of overseas investment by the authorities, which only permit Indians within India to remit $250,000 abroad a year each.

“People I think are a little bit more careful, making sure that they have not transgressed any regulations back home in India while they're investing.”

He said that demonetisation had also had an effect.

“It's not only Indian investments overseas, but Indian investment in India. That sentiment at home is probably spilling over into Dubai in some measures.”

One visitor at the show, Hitesh Rathod, who has a transport business, said he wanted to look at the opportunities to buy a property in Dubai after he visited the emirate last month for the first time for a one-week holiday.

“Prices are quite similar to Mumbai,” he said. “I'm going to think about it.”

Historic trade ties, the large Indian expat community, and the geographical proximity, mean that developers remain confident that Indians will remain critical customers in the years to come.

“The UAE and India's relationship has only been strengthened over the passage of time,” said Vijay Sajjanhar, the chief financial officer of Dubai Sports City.

Last year, the show in Mumbai received more than 4,000 visitors, generating sales enquiries worth Dh1.2 billion, according to the event’s organisers.