Dubai property boom revives Hundi trade 8

By Shahid Iqbal

KARACHI, April 15: The UAE dirham is in higher demand than the US dollar in the local market, which has boosted the “Hundi” business in the country once again.

The reason for flourishing Hundi business and high demand of dirham is the slump in the real estate in Pakistan and the boom in property business in Dubai.

“The dollar is not paying more these days as the greenback has become unpredictable in Pakistan,” said Kamal Saeed, a currency dealer.

“We see all major currencies gaining against the dollar but the situation is reverse in our country,” he added.

He said the dirham business was paying much more than the dollar. However, most of the dirham is being paid through Hundi business. Investors used to pay in rupee in Pakistani and receive dirham in Dubai.

“The State Bank has strict laws for investing abroad, especially it is very difficult for an individual to stratify the demand of the State Bank,” said M. Munazir, a real estate dealer in Karachi.

He said the real estate business had been facing slump for more than six months and the situation had yet not improved despite a vital change came through the general elections.

“The real estate prices have declined but more significant factor is that very few transactions are taking place. This discourages the local investors, while Dubai attracts them to add to its wealth,” said Mr Munazir.

No currency dealer accepts that the money is being transferred through Hundi system but the investors know the addresses of currency dealers, who indulge in such money transaction.

After the incident of 9/11 in 2001, strict laws and harsh monitoring by US as well as Pakistan made it almost impossible to carry on the Hundi business.

The impact clearly helped Pakistan when the remittances of overseas Pakistani workers started flowing into the country through banking channels, which multiplied the volume of inflows reaching a record $5.5 billion in 2006-07.

With the passage of time the monitoring by the US relaxed and the non-involvement of any Pakistani bank in money laundering also made the harsh check on Pakistan relatively soft.

Currency dealers said Hundi business never stopped rather it slowed down and changed its direction. It is now mostly limited to this region and especially to the Middle East, Pakistan, India and Bangladesh.

Real estate dealers said Pakistanis had been investing in Dubai with the help of Hundi system as transaction through banking channel is almost impossible. They said for companies transfer of money was possible as a company is in a position to provide all documents to be demanded by the authorities.

“The demand for dirham is so high these days in the local market that I wonder what is going on in Dubai,” said a currency dealer attached with a large Pakistani bank.

Dubai, being commercial hub of the region, is attracting investment from all over the world but Pakistanis are eager to invest in real estate, software production, trade and small hotels and restaurants.

Courtesy: daily Dawn, 16/4/2008

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8 thoughts on “Dubai property boom revives Hundi trade

  • Dubai Property

    Well saying by Ann Julie & Clara James, You both are correct. It is true that the way of luxury living, a tax free environment, attracts investor’s capital for Dubai Real Estate.

  • Clara James

    Well Ann Julie you are absolutely right … the most important reason for hundi is to save the tax because the amount they charge is much lesser then the tax one have to pay.

    Well obviously when there is in flow of money there is increase in the activities like hundi …

  • Ann Julie

    Dubai is a huge attraction for many investors as it is a tax haven and its real estate demand is on the rise as the financial crisis is slowing down.

  • Mark Burns

    I would prefer to remain optimistic, but I do feel that we are looking at a decline in excess of 15% across all properties.

    Speaking with a large number of agents in Dubai at present, they are all posting low single figure sales volumes per month. Whilst a large number of investors are still interested in Dubai, I think many feel that the market over there is yet to bottom out.

  • Pakistani

    The Dirham is directly linked to the US Dollar so it will suffer or not as a result of the impact of the credit crisis. Most analysts are expecting a decline in property prices in Dubai – at least 15% in 2009

  • Richard Buckton

    I think the Dirham will stay strong as it seems the Dubai property boom may not be so badly affected as the rest of the world in the current crisis. The Dubai rulers will not want to jeopardise any of the huge projects like The World, The Universe etc because a) they’ve had so much publicity that it would be extremely emabarrassing and b) they have the funds to be able to bail it out. We’ll see though…