Dubai has been the traditional second home Mecca for affluent Indian investors. Now, that trend is accelerating with Dubai offering some great bargains following the real estate slump in the region. The political unrest in the Middle East has dented buyer sentiment to some extent, but many foreign investors, including Indians, are striking great deals in the distressed realty market.
Compared to Mumbai and Delhi, Dubai real estate now is 30-50% cheaper. According to research by real estate consultancy Cushman & Wakefield, capital values in Cuffe Parade in Mumbai is around Rs 40,000-60,000 per sq ft, whereas capital values in Palm Jumeirah is just Rs 15,000 per sq ft.
Sanjay Dutt, CEO-business in real estate consultancy Jones Lang LaSalle India, says the interest in Dubai "is equally distributed among investors responding to rationalized property rates in Dubai and those hoping to cash in on an improved market later."
Niall McLoughlin, senior VP in DAMAC Properties, a residential and commercial developer in Dubai, says that at an average price of $264 per sq ft in Dubai, "property prices are now about 60% less expensive than in central Mumbai, where the price is $664 per sq ft". Other factors like the proposed Strata law are also favouring homeowners in Dubai. The law, proposed by Real Estate Regulatory Authority of Dubai, gives the home owners more control over their property.
Home owners had also been crying foul over steep property management fees paid to firms maintaining their buildings. The Strata law seeks to resolve the issues between home owners and property management firms by monitoring the cost and quality of services offered.
Pre-recession, real estate prices in Dubai were steep, making it unaffordable. "The markets were speculative then. They are more mature now," says Richard Stokes, sales manager at Smith & Ken Real Estate. His firm has sold 250-300 properties in the last year and Indians have bought 30% of those. Analysts say the supply glut in the market is shadowing realty recovery in the region. "Dubai is likely to see in excess of 45,000 residential units being added over the next 24 months," says Dutt. In contrast, Mumbai's real estate market has seen a sharp escalation after the lull in 2009. Property prices have risen by 40-50%. But this is now adding to the negative sentiment.
"Mumbai real estate market is overheated. The buying has slowed down," said Kaustuv Roy, executive director of Cushman & Wakefield India. But it would still take a long time for Dubai realty prices to come anywhere close to Mumbai's.