The lure of Dubai’s property boom 1

By Sabihuddin Ghausi

Many investors with surplus money, whether in business, private or government service or professionals, have either already bought or are planning to buy property in Dubai.

Reasons for these investment outflows to Dubai are not difficult to guess. For long, Dubai has been witnessing a construction boom and attracting investors from all around the world. From 2005 onward, the expatriates were allowed there to own property but not land. Since then Pakistanis have been acquiring real estate and Pakistan’s construction companies have been involved in big and small projects.On the construction boom, a leader of the Association of Builders and Developers (ABAD) quoted a recent Gulf News report stating that about 30,000 or 24 per cent of world’s 125,000 mighty big cranes are operating in Dubai. In April 2007, the investment in construction projects was estimated at 300 billion dirhams.

Pakistanis and Indians are turning out to be big buyers-almost 25 per cent– in a series of upscale neighbourhoods being developed by Emaar Properties not only in Dubai but in entire UAE, he said.

“Investors give a 10 per cent down payment and the remaining amount is payable over a period of time’’, a textile tycoon said. The property value in Dubai is said to be rising in double digit. For big investment, banks offer loan up to 75-80 per cent of the property value at 7-8 per cent interest rate.

More than a dozen top Pakistani builders entered Dubai as small investors a decade ago but are now involved in multi-billion dirham projects and they are the people who are luring their compatriots from Karachi, Hyderabad, Sukkur, Lahore, Multan, Guljranwala, Gujrat, Sialkot, Islamabad and other places to acquire property in Dubai.

A well laid down ‘hawala’ net work of bankers and money exchangers and builders is there to transfer money instantly at reasonable service charges and exchange rate for investors.

Earlier this month, the fourth Build Asia International Exhibition was held at the Expo Centre in Karachi where 450 stalls were set up. An official press release said 157 foreign delegates from more than 22 countries attended. Many businessmen and corporate leaders who visited Expo, said that the marketing of construction projects by UAE companies such as, BL Properties, Giga Group, Progres-sive Group and DAMAC Group, dominated the exhibition.

There was no official word from Trade Development Authority of Pakistan or from E-Commerce who organised the exhibition as to the size of investment, but no one denies that orders were booked for Dubai projects in three-day event at the Expo.

Dubai has also emerged as one of the three world’s top re-exporter and a big hub of cross country trade. It is one of the big warehousing port city for a variety of goods from Far East-Japan, China, Taiwan, Korea, Thailand, Viet Nam, Malaysia and Singapore for shipment to almost entire Africa and Central and South Asia.

Mainly involved in this multi-billion dollar trade are Gujratis and Sindhis of Indian, Pakistani and African origin. “Commodity traders from other ethnic groups from Pakistan and India have joined this cross-country trade in last five years,’’ said a Jodia Bazar trader in spices.

“As many as 70 to 75 per cent members of the Association of Builders and Developers (ABAD) are working in Dubai,’’ Babar Chugtai, Chairman of ABAD informed this correspondent on Wednesday.

While the booming construction and cross-country trade was attracting investors and traders in Dubai for more than a decade, the deepening political crisis in Pakistan since November 2007 and the economic meltdown have accelerated the pace of migration of capital and flow of investment to this otherwise desert island.

“I reckon that about $35-40 billion have been transferred to Dubai from Pakistan in last six to eight months,’’ Munir Sultan, a former Chairman of ABAD and now Chairman of the Federation of Pakistan Chambers of Commerce and Industry’s standing committee on building and construction said.

“This is almost 25 per cent of Pakistan’s total economy now being put at $160 billion,” he added

“The de-capitalisation of stock exchange by over a Rs1 trillion in the last few months, a stagnant domestic real estate market, the abrupt suspension of many construction projects in Karachi, Lahore and other places, are all indicators of money scarcity in the local market’’, an analyst in a money exchange company explained while endorsing the flight of capital. He however, made it clear that it was extremely difficult to quantify the transfer of money from Pakistan to Dubai or elsewhere.

A large number of prospective investors are now finding it difficult to dispose of their real estate at home for investment in Dubai. “I am not getting the real price for a plot in Karachi and a building in Lahore to make some investment in Dubai,’’ a top business leader whose nephew is a well known real estate agent with offices in Dubai, Karachi and Lahore disclosed.

Businessmen in Karachi say as many as 3,000 Pakistan investors in construction, commodity trading. share and exchange business are making good money in Dubai.

“Mega construction projects depend entirely on low wage employees from South Asia and Africa who work in a shift of 10-12 hours and also round the week and round the year with no concept of social security,’’ a leader of the Federation of Pakistan Chambers of Commerce and Industry said.

A leading builder reminded that only a year ago, television channels were showing advertisements of housing schemes not only in Karachi, Lahore, Islamabad but also at places like Nawabshah, Sukkur, Sialkot, Gujranwala and a few other relatively small towns.

Phenomenal rise in prices of cement and steel during last few months–the two main inputs of construction industry– has rendered many developers jobless as they have been forced to abandon their projects. Constructors and developers, are now exploring new business avenues in Dubai and other Middle Eastern countries.

Repeated pleas made by ABAD and the FPCCI’s standing committee for some relief to construction business have failed to evoke any positive official response.

“The government can institute special fund to bail out stock exchange brokers who offer neither employment nor contribute to national production but turns a deaf year to real business which generate employment and stimulate at least three dozen other industries’’ a leader of ABAD lamented. But as the investment spree in Dubai was going on, came a report from Stanley Morgan only this week predicting a 10 per cent fall in Dubai property prices by the year 2010 as, ‘’supply outpaces demand’’. “For 2009, we expect prices to start coming under pressure as oversupply becomes evident in Dubai’’, the report said.

While no reports are available as to how Dubai government or investors have reacted to this observation of the international securities house, investors in Karachi are now looking at Malaysia as the next destination where a booming economy offers better business opportunities, as real estate is much cheaper there.

Malaysian economy boasts of having more than 48 per share of industry, with a sound agricultural base and a rich mineral endowment including that of oil and gas.

Businessmen in Karachi say that Malaysia is a moderate Muslim country, with mild and hospitable climate, a strong vibrant civil society and well established state institutions.

A former chairman, All Pakistan Textile Mills Association based in Lahore recently visited Kaula Lampur to explore business opportunities, has suggested to his friends in Pakistan to consider Malaysia as a viable option for their business.

As compared to Dubai, Kaula Lampur is much more amiable in terms of climate, accommodation cost, prices of goods and services and above all there is a settled society with law and order. “The number of tourists going to Malaysia is increasing every year’’, Yahya Polani, a leader of travel industry revealed.

Since last year, the number of Pakistani visitors who explore business and job opportunities in Malaysia is increasing. But Malaysia is no longer offering visa at its airport because of unusual increase in traffic and visitors have to get a visa from its missions in Pakistan.


Source: Daily Dawn, 11/8/2008

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One thought on “The lure of Dubai’s property boom

  • Muhammad Tahir

    We have a land for housing society. if any investor are interested to join us as joint venture , we welcome to them. it will be good and big project for us