The real estate sector in India is reeling under the impact of problems such as inflated prices, delays in delivery, slow approval process and corruption. While the blame game between developers and the government persists and home buyers are deferring their decision, large real estate investors are looking at international options. If the UK was a big investment destination a couple of years ago, Dubai is increasingly emerging as a new option.
“In the past 4 years, Indians have invested more than $14.4 billion in Dubai properties. In H1 2015, Indians were the most prolific foreign investors, with 3,017 transactions worth more than $2 billion,” Sultan Butti Bin Mejren, general director, Dubai Land Department (DLD), the apex department of real estate development in Dubai, said.
This trend of Indian high net-worth individuals (HNIs) investing in Dubai is based on both its location — it’s not very far from
India — and also the comparative pricing to that of a big Indian metropolis such as Mumbai or Delhi.
While it is conveniently located, the government also offers residential visa for property owners. Price range is being touted as another big benefit. The average ticket size for free hold prime locations in Dubai such as Dubai marina, Business Bay, Dubai Down Town is reported to be around 2 to 4 million UAE Dirhams or about Rs 3.45-6.9 crore. A similar space in Mumbai or NCR would not cost less than Rs 6-10 crore.
According to Sultan Al Suwaidi, the former governor at Central Bank of UAE: “Dubai property has been registering steady appreciation in the past 4 years. The rental yield is in the range of 4-7 per cent of the capital value annually.” For investors, this is higher than the rent they earn in any Indian metro which hovers around 2-3 per cent annually. Demand for rental is very high as thousands of Indians and other foreigners come to Dubai either for work, business or recreation.
There is also ease of exit. “There is no lock-in period and with no capital gains tax and no property tax, the profit margin is much higher compared to investments in other countries” says Alharith Bin Salem Al Moosa, vice chairman and DGM of Falcon City of wonders.
Dubai is hosting the World Business Expo in 2020. “Considering that the Dubai government is expecting 20 million people to come to Dubai during the expo, the demand for all types of properties is expected to be high,” said Dharmendra Patel, MD, Creation Gulf, a Dubai-based lighting designing company.
Real estate experts say that lifting of sanction on Iran may also result in rise in demand. “Dubai real estate market is set for stable growth in the coming years. Since Iranian sanctions are lifted, Dubai is going to witness a real estate boom thanks to investments flowing in from Iran.” says Ashwinder Raj Singh, CEO, residential services, JLL India.
Another major element of the Dubai real estate is its urban development strategy, structure and system, which is in sharp contrast to what it is in India.
Dubai has only one real estate authority to look after the entire development — Dubai Land Department (DLD) — unlike India where the developer has to run through 20 to 30 authorities to seek several clearances. DLD has a ‘one-window’ clearance system for approvals unlike India, where one needs about 50 to 55 permissions from different departments.
Free-hold land is marked and sold only to reputed and registered developers with proven track record and verifiable financial soundness unlike India where anyone with initial fund can block a plot or a project and then get stuck leaving the buyers high and dry for eternity.
“Each land parcel is mandatorily registered in detail. Even the brokers have to register with DLD. There is a strong real estate regulatory agency with tremendous powers overseeing the entire process strictly,” says Naaz Tabassum, marketing manager, Tebyan Development Enterprises.
Developers in India also say that getting approvals in India is a hassle. “The approvals can come in maximum 3 months. In India it takes 2 to 3 years.” says PNC Menon, group chairman of Sobha developers. “Besides, the permission is not stage-wise like India but for the entire project from start to finish so there is no ambiguity. All concerned are aware of the time frame available and final product from the beginning,” adds Menon. Besides, there are regular inspections that are carried out for quality control and timely completion. There have been cases in Dubai where the defaulted developer has been
penalised or his project withdrawn and given to others.
Even after getting the land, developers can’t decide how much to build in Dubai. Dubai’s Road Transport Authority (RTA) determines how much should be allowed to be built in that particular plot considering the current and anticipated density of infrastructure and traffic in that area.
In Dubai, developers cannot have any hidden charges such as floor rise, extra for parking or garage, additional fee for club membership etc. “Each developer has to remit all the sale proceeds in a mandatory escrow account. There is a strict guideline on when and how much can be withdrawn from that account depending on the stage of that project,” says Quasim Mansoor, development director, Emaar.
Also, in case a buyer wishes to sell his unit, the developer cannot interfere or charge anything. The new buyer has to just pay 4 per cent of the agreement value to the DLD and register the deal. In India, many developers impose locking period and also charge 10-25 per cent as the transfer fee and again make profits from the same flat.
(The reporter was in Dubai at the invitation of Sumansa Exhibitions)