Indians fear property bubble burst back home, find Dubai safe

A few years ago buying a property in Dubai was a sign of affluence for Indians back home, but that’s not the case anymore.

Now it is being seen as a wise and prudent investment decision.

Besides the close proximity to India, price rationalisation and higher yields in Dubai, Indians continue to buy properties in the emirate because of a "possible" bursting of the Indian housing bubble, according to a property consultant. 

Dubai Land Department data reveals Indians have spent over Dh3.7 billion to buy properties in the first half of 2012 alone, while Indians are also the topmost buyers in Burj Khalifa, the world’s tallest tower.

Mohanad Alwadiya, Managing Director, Harbor Real Estate, says: “Any real estate industry is somewhat cyclical and the Indian and Dubai industries are currently at different stages in their respective cycles.

“While the property market in Dubai has been contracting since the property bubble burst in late 2008, with values declining by up to 60 per cent in some areas, India, conversely, has experienced an ever growing property bubble, accompanied by rampant inflation and high interest rates.”

He adds many experts are expecting India’s property bubble to burst “very soon” with developers beginning to offer substantial discounts and sales slowing from evaporating demand resulting in a massive oversupply situation.

“The risks associated with buying property in India at this stage of the cycle are significant with some pundits predicting a fall in property values of between 20 and 30 per cent in the latter stages of 2012 or early 2013.”

Dubai, Alwadiya mentions, has already shed much of its pre-recession premium and is witnessing a return to capital growth and increasing 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 while enjoying anywhere up to seven per cent tax free net rental returns along the way.”

Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India, says: “The US and the UK are traditionally closest to the hearts of most Indians hoping to buy property abroad. However, when these are out of reach, Dubai is definitely among the most preferred among realistic property investment destinations for Indians.”

He believes there is some uptick in interest by Indian interest in Dubai's property market of late.

“The existing interest is equally distributed among investors responding to the rationalised property rates in Dubai and hoping to cash in on an improved market later, and business people who actually have operations there.”

Contrary to the bubble burst prediction, National Housing Bank, a state-owned bank and regulation authority in India, reported residential property prices increased 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 shows that 16 out of 20 have seen values rise.

Housing prices are likely to largely remain stable, NHB chairman R V Verma said.

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