What makes Dubai property sound investment for Indians

Indians resort to the Dubai property market

The prospects of a property bubble back home increases the demand in the emirate

While a few years ago to purchase a Dubai property was a sign of wealth and prosperity for Indians in their own country, now it is seen as a wise and prudent investment decision.

According to property consultants, Indians continue to buy properties in the emirate not only because of the close proximity to India, price rationalisation and higher yields in Dubai, but also because of a “possible” bursting of the Indian housing bubble.

Data from Dubai Land Department shows that Indians have spent over Dh3.7 billion to purchase properties in the first half of 2012 alone. Indians are also the main buyers in Burj Khalifa, the world’s tallest tower.

Worldwide trends in real estate industry are cyclical in a way and the states of Indian and Dubai industries are currently at different stages of their respective cycles. While the property market in Dubai has been narrowing since the property bubble burst in late 2008, India, on the other hand, has experienced an ever growing property bubble with high inflation and interest rates.

Many experts are foreseeing India’s property bubble to burst soon because developers begin to offer significant discounts. This may indicate that sales are falling from evaporating demand which will lead to a oversupply situation. Buying property in India at this stage of the cycle may be considered a significant risk because some experts predict a fall in property values of between 20 and 30 per cent in the latter stages of 2012 or early 2013.

Meanwhile, Dubai has already spent much of its pre-recession premium and is witnessing a return to capital growth and rising rental yields in its more prime areas. This represents less risk and a greater probability of achieving capital growth in the short to medium term. Moreover, investors are likely to benefit anywhere up to seven per cent tax free net rental returns along the way.

Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India, said that usually the US and the UK are the favorite options of Indians who want to buy property abroad. Nevertheless, when these are out of limits, Dubai remains one of the most preferred among realistic property investment destinations for Indians.

Investors responding to the rationalized rates for Dubai property and business people who actually have operations here share the same interest.

National Housing Bank, a state owned bank and regulation authority in India, reported that residential property prices rose by up to 10 per cent in many major cities in India in the second quarter of 2012. The NHB RESIDEX index, which tracks the movement in prices of residential properties on a quarterly basis since 2007 indicates that 16 out of 20 have seen values hike.

NHB chairman R V Verma said that housing prices are expected to remain stable.