The City of Gold Still Retains its Allure

In the post-pandemic era, Dubai is still an attractive destination for Indian real estate investors.

Starting from the late 1970s and early ’80s, Dubai has had a grip on the imagination of millions of Indians choosing to migrate and work abroad. It began with an exodus of semi-skilled and skilled workers and, by the late ’80s and ’90s, had moved to trained professionals leaving India for better prospects in Dubai. The wages were good, the lifestyle markedly better than that available in India, and there were zero taxes. All this meant that you could work hard for a couple of decades, save and return to India with a nice nest egg. For many Indians, it was the proverbial City of Gold.

?From the turn of the millennium, a new class of Indians started flocking to Dubai. These people had benefitted from the economic reforms started in 1991 and the resultant wealth creation. They now flocked to Dubai to invest in its booming real estate market.

?Several factors helped. First, the UAE government rolled out new visa laws, allowing investors in real estate almost automatic residency. Second, UAE was among the region’s most dynamic economies, offering many opportunities for professionals and business people. In terms of law and order, Dubai ranked among the top four-five countries – far higher than Germany, France, the US and the UK.

?Dubai’s property prices were relatively low compared to other global cities like London and New York. At the same time, the rental yields, as well as capital appreciation, were much higher than in similar global cities. What’s more, Dubai’s real estate investments attract zero property tax.

?The interest in real estate investments in Dubai was spread evenly among resident Indians as well as Non-Residents. For both, Dubai was perfect as a destination as it offered unparalleled connectivity to all regions in the world – in addition to all the factors mentioned above.

?Undoubtedly, there was a slight blip on two occasions – both caused by global factors. The global financial crisis and the consequent recession hit the Dubai property market hard. Prices dropped, and as developers were stressed for capital, projects got delayed.

?However, once the world economy recovered, Dubai real estate was once again top of the charts as an investment destination. By 2020, Dubai was the most active real estate market for global investors. According to a report that year by the Dubai Land Department, Dubai’s real estate sector attracted over 19,700 international investors who concluded investments worth AED 35.6 billion – about a fifth of all transactions in Dubai that year. Interestingly, Indians topped the list of global investors, followed by Chinese and British nationals.

?The Covid-19 pandemic was another blip that resulted in a slowdown in the market, in tune with what was happening globally. But as the pandemic recedes and the global economy recovers, Dubai is once again among the first cities to bounce back.

?The UAE’s GDP is forecast to grow at 7% in 2022. This is partially powered by the global rise in oil prices, and the nation’s hydrocarbon sector is expected to grow by 14%. But even the non-hydrocarbon sector is showing robust growth, which is forecast to touch 4.4%. Sub-indices like the Purchasing Managers’ Index (PMI) also support these rosy predictions. The PMI for the UAE is 55.4, while that for Dubai is 56.4, the highest in the last three years.

?This healthy growth is also reflected in the real estate sector. According to CBRE, a global property consultant, residential property prices in Dubai rose 10.1% in the year to June 2022. Average villa prices, in fact, showed a 19.3% appreciation during this period.

?Average rental rates have also shown a very healthy increase of 21.7% in the year to June 2022. This is the highest rate of growth since 2014. From December 2020 to June 2022, average prices in Dubai have increasedby14.4%, whereas average rents have increased by 25.4%, the CBRE report said.

It is clear that the City of Gold hasn’t lost its allure.