With Mohammed’s visit India hopeful of attracting FDI

From Khaleej Times

Non-resident Indians (NRIs) in the UAE are a key source market for real estate projects in India. However, the property market in India is slowly emerging after a downturn and is reeling under oversupply and project delays.

The visit of His Highness Shaikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, to India from today is expected to witness the signing of a host of new agreements, possibly on affordable housing and smart cities, say industry experts. This is likely to encourage NRIs to invest further in Indian real estate.

“Both the Indian and UAE governments are keen to increase the overall trade between the two countries by up to $100 billion, and they want a major part of it to be non-oil trade. Also, the UAE’s maximum investments in India are currently in the construction and real estate sectors,” says Ashwinder Raj Singh, chief executive of residential services, JLL India.

Until now, NRI investors have been waiting on the sidelines for residential prices in India to bottom out and the regulatory environment to improve further.

Rizwan Sajan, founder and chairman of Danube, however, issues a caveat. “As far as investment from NRIs in Indian real estate is concerned, builders have continuously lost trust of buyers due to the poor quality of construction and tremendous delay in delivery. There is a serious issue of oversupply which will further depreciate the value of properties in India, not making it the opportune time to invest in Indian real estate. Real estate investment in India also comes with capital gain tax and tax on rental income, further reducing your returns.”

Poor returns

Although the cash-rich Gulf sovereign wealth funds could plough money into Indian property, with the drop in oil prices and a stronger dollar, these funds are more cautious now and looking at markets that offer better investment returns.

“SWFs have been investing in the more lucrative markets of Europe and the US for a while now. However, this can change with this high-profile visit, as the government of India is ready to offer various sops for investing in India’s infrastructure,” informs JLL India’s Singh.

At the other end of the spectrum, Indians need no cajoling to invest in UAE property. They have traditionally been the top non-Arab investors in Dubai property. This could be attributed to better prospects of rental income and capital appreciation in the UAE. Also, Indian investors find the UAE a more controlled and tightly governed market.

“This visit will give a further boost to more Indian investments, given the fact that some places in the UAE are more economical compared to Delhi-NCR and Mumbai,” informs Singh.

Echoing his sentiment, Danube’s Sajan said properties in Dubai are still at affordable rates in comparison to a place like Mumbai and offers far higher rental income in comparison. “We recently opened Danube Properties‘ first branch office in Mumbai and it has remained flooded with enquiries,” he said.

However, with India’s investment scene looking up and the government’s recently-announced schemes for smart cities, the ‘Housing for All’ programme and affordable housing gaining traction, investment options for NRIs will start looking good again.

Sajan sums it up succinctly: “The ties between India and the UAE have always been driven by the excellent relationship between leaders of the two nations. It has always been a two-way traffic. Shaikh Mohammed’s visit will suddenly not change the stream of financial investment unilaterally, instead it will open new doors of opportunity for cross-country trade.”

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