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Indian investors drive Dubai real estate boom

The market’s affordability, capital appreciation potential, and tax-free environment are key drivers, attracting Indian investors seeking portfolio diversification and high returns

Indian investors drive Dubai real estate boom

A recently released report by Betterhomes revealed that Indians are now the biggest buyers of property in Dubai. This interest comes not only from Indian expats already living in Dubai but also from wealthy individuals worldwide looking to invest in Dubai’s flourishing real estate market.

“Dubai is emerging as a popular destination due to its affordability compared to other cities such as Hong Kong and Singapore. It is projected to experience steady growth in the real estate market, with a predicted market volume of $0.80tn by 2028. Indians are increasingly investing in real estate in Dubai as they are seeking a free and interconnected world without geographical boundaries. The proximity to India makes it a desirable location for affluent families looking to acquire properties outside of their home country, with Dubai and London being top choices for fulfilling personal and professional aspirations while spending time abroad,” says Ritesh Mehta, Senior Director and Head (North and West), Residential Services and Developer Initiative, JLL India.

The UAE real estate market also offers Indian investors unique advantages compared to India. “In India, apartments are more common than villas or townhouses, and luxurious amenities like spacious backyards or private beach access are rare. In contrast, properties in Dubai have a strong focus on amenities for residents, and what may seem a ‘luxury’ in other markets is considered a ‘norm’ in Dubai. Indian investors are drawn to Dubai’s upscale living and high return on investment, which sets it apart from other markets,” elaborates Paul Kelly, Operations Director, Allsopp & Allsopp.

Dubai real estate market: Benefits galore

The UAE real estate market offers several advantages compared to other investment options available to Indian investors, both domestically and internationally. Elaborating on the same, Mehta mentions:

  • Capital appreciation: The real estate market in the UAE, especially in cities like Dubai and Abu Dhabi, has seen substantial capital appreciation in recent years, offering the possibility of higher returns than certain investment opportunities in India.
  • Rental yields: The rental yields in the UAE real estate market, especially in cities like Dubai, are often higher compared to many Indian cities. This can result in steady rental income for investors.
  • Tax-free investments: The UAE offers tax-free investments, which can be advantageous for Indian investors looking to diversify their portfolios and potentially reduce tax obligations.
  • Global city status: Dubai, in particular, is known as a global city with world-class infrastructure, amenities, and connectivity. Investing in Dubai real estate provides access to a cosmopolitan lifestyle and opportunities in a diverse and growing economy.
  • Geographical diversification: Investing in the UAE real estate market allows Indian investors to diversify their portfolios geographically, which can help mitigate risk and potentially enhance overall returns.
  • Alternative residency/Citizenship: The UAE offers investment programs like the golden visa for Indian investors seeking alternative residency or citizenship. This can benefit families by providing access to better education, job prospects, and quality of life.
  • Currency appreciation: Investing in UAE real estate allows Indian investors to diversify their currency exposure by including Dirham in their investment portfolio. This can be advantageous as it offers potential for currency appreciation and reduces the risks associated with having investments in a single currency.

Regulatory uncertainty and challenges in the Indian real estate market are driving investors to seek diversification overseas. Rising inflation and currency fluctuations in India are also pushing investors to look for stable investments. The UAE offers high rental yields, a tax-free environment, and a diverse economy, attracting investors with its advantageous laws such as Golden Visas and 100% foreign ownership.

The country’s affluent lifestyle, top-notch infrastructure, and proximity to India also make it a popular choice for Indian investors. Additionally, the increasing wealth of high-net-worth individuals in India is fuelling the demand for foreign real estate, particularly in the UAE.

Developers also play their part in attracting Indian buyers

According to experts, developers have noticed the strong interest of Indian investors in the UAE real estate market and have adapted their marketing strategies accordingly. They actively participate in real estate exhibitions in major Indian cities to engage directly with potential investors and showcase their properties.

Developers also offer flexible payment plans such as instalments, post-handover payments, and partnerships with Indian banks to cater to the preferences of Indian buyers. They also collaborate with Indian financial institutions to provide special financing options, making the purchase process more convenient for Indian investors.

“Developers prioritise cultural sensitivity by taking into account the preferences and needs of Indian investors. This involves incorporating features such as separate prayer rooms, spacious kitchens, and layouts that adhere to Vaastu principles. By considering these aspects in architectural design, amenities, and floor plans, developers aim to cater to the specific requirements of Indian clients,” explains Mehta.

Dubai’s lifestyle is often a big selling point for Indian investors. “By partnering with Indian banks, brokers, and media outlets, developers ensure their properties meet the needs of this influential group. Their marketing messaging emphasises connection, tax-free returns, and stability, appealing to Indian investors seeking upscale properties with high rental yields and lifestyle appeal,” adds Kelly.

Where are Indians investing?

Indian investors in the UAE real estate market favour upscale apartments and villas in gated communities for rental returns and lifestyle appeal. Office spaces and retail stores are also attractive to many. The growing tourism industry in Dubai has led to an increase in demand for holiday homes.

“Investors in Dubai have shifted their focus over the years, starting from affordable residences in Deira and Bur Dubai in the early 2000s to luxurious developments like Downtown Dubai and Palm Jumeirah by the mid-2000s. Between 2010 and 2020, they began looking into commercial premises in Abu Dhabi and Sharjah. Indian investors are still interested in luxury apartments and affordable housing, but the pandemic has sparked a renewed interest in villas,” explains Morgan Owen, Managing Director, Middle East & North Africa, ANAROCK Group.

He continues, “Key locations such as Downtown Dubai, Palm Jumeirah, Dubai Marina, Business Bay, and Jumeirah Lake Towers remain popular among Indian buyers. Additionally, Sharjah’s reasonably priced apartments and Abu Dhabi’s Saadiyat Island, Yas Island, and Al Reem Island are also attracting investor interest.”

Is the current growth sustainable, or are there signs of a potential bubble?

Experts opine that the UAE government’s open-door policy for foreign investors has helped them overcome post-pandemic challenges, suggesting a major slowdown is unlikely. The luxury segment in Dubai especially is expected to see continued growth due to strong demand.

“Even after Dubai crossed its highest average square foot price since 2014 (currently AED 1,322), the city remains affordable in comparison to cities such as London, Paris, New York and Tokyo. Moreover, over 50% of buyers in the market are opting for mortgages over cash, indicating an increase in first-time buyers and long-term investors. As a response to meeting the growing demand in the market, developers seem to be working around the clock to bridge the supply gap,” mentions Kelly.

“The residential market has sustained an upward trajectory, marked by unprecedented transaction levels in 2023 along with an increase of 18% and 26% year-on-year for sales prices and rents respectively. Villa price growth has outpaced prices for apartments while rent growth has moved in tandem when compared to pre-pandemic levels. This trend is expected to continue during 2024, albeit the pace of growth may stabilise further as new supply is launched,” adds Mehta.

Overall, in Q1 2024, Dubai welcomed over 25K expats, including families and young individuals, indicating a growing and healthy market. This influx of newcomers establishing roots in the city suggests sustained growth and potential for further development in the future.