Impact of Dubai debt restructuring in Indian realty mkt
10 Dec 2009, 0041 hrs IST, Kamlesh Pandya , Source: Economic Times
Dubai's real estate was characterised by buildings that were the tallest, widest, biggest and so on. So, when two companies announced that they will need six more months to service their debt, reactions went into overdrive.
What is happening in Dubai, is a corporate default situation involving Nakheel and Emaar, explains Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj. "However, the sovereign has not defaulted. So, the condition is presently restricted only to real estate. This would not have a major direct impact on India's real estate market, which is largely driven by local demand," he says.
Sukhraj Nahar, chairman of the Nahar Group, has a marketing set-up in Dubai for his Mumbai-based real estate offerings and he expects the problems facing the Dubai companies to get sorted out, albeit eventually. "These things happen in all countries; debt gets restructured and it isn't the end of the world," he smiles. He draws a parallel with the scenario that Mumbai's realty market faced, in the second half of 2008 and points out that the situation is 'almost back to normal' now.
"The UAE, like other countries in the GCC, is a source of buyers for Indian real estate and the NRIs constitute a large chunk of buyers in recent times. If one looks at the impact that this debt restructuring could have on Indian real estate, it will probably result in fence-sitters among NRIs turning into aggressive buyers of Indian real estate. Those who do not have a 'home, back home' will want to lock in an Indian home at the earliest," he points out.
Anuj Puri is a bit circumspect. "There are four factors involved in the Indian real estate market - demand, supply, finance and sentiments," he explains. "Sentiments, due to the collapse of real estate in Dubai, are the most vulnerable and may get hit, while demand, supply and finance in India will remain untouched." It was evident that Dubai's real estate market was not sustainable from the long-term perspective, since it was not driven by end-user demand, adds Puri. "For a long time now, a multitude of apartments there have been standing unsold, held largely by speculator/investors who had bought them to sell them at higher prices that never happened. The big question now, is how many of these investors have the ability to service their mortgages," he points out.
In Thane, developer Manoj Khetwani speaks of Dubai-based buyers calling, wanting to know if they can return the under construction apartments they had booked some months back. "In the segment of NRI bookings, there might be some sort of cancellations, as they might face a choice of servicing debt in the UAE, vis-à-vis paying EMI on what is essentially an investment. Obviously, they might opt to concentrate on the UAE payments," he feels. "This is about NRI investors, not those who will be buying their first home, back home," he adds. The logical impact, he feels, is that a few flats may now be available for local buyers, in projects that were earlier sold out.
Nahar says he has been getting positive feelers, from NRIs in the UAE and other GCC countries. "The debt restructuring has been given undue importance. For Indian real estate, it will result in more NRIs booking their home, in India, rather than anything else," he concludes.
What is happening in Dubai, is a corporate default situation involving Nakheel and Emaar, explains Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj. "However, the sovereign has not defaulted. So, the condition is presently restricted only to real estate. This would not have a major direct impact on India's real estate market, which is largely driven by local demand," he says.
Sukhraj Nahar, chairman of the Nahar Group, has a marketing set-up in Dubai for his Mumbai-based real estate offerings and he expects the problems facing the Dubai companies to get sorted out, albeit eventually. "These things happen in all countries; debt gets restructured and it isn't the end of the world," he smiles. He draws a parallel with the scenario that Mumbai's realty market faced, in the second half of 2008 and points out that the situation is 'almost back to normal' now.
"The UAE, like other countries in the GCC, is a source of buyers for Indian real estate and the NRIs constitute a large chunk of buyers in recent times. If one looks at the impact that this debt restructuring could have on Indian real estate, it will probably result in fence-sitters among NRIs turning into aggressive buyers of Indian real estate. Those who do not have a 'home, back home' will want to lock in an Indian home at the earliest," he points out.
Anuj Puri is a bit circumspect. "There are four factors involved in the Indian real estate market - demand, supply, finance and sentiments," he explains. "Sentiments, due to the collapse of real estate in Dubai, are the most vulnerable and may get hit, while demand, supply and finance in India will remain untouched." It was evident that Dubai's real estate market was not sustainable from the long-term perspective, since it was not driven by end-user demand, adds Puri. "For a long time now, a multitude of apartments there have been standing unsold, held largely by speculator/investors who had bought them to sell them at higher prices that never happened. The big question now, is how many of these investors have the ability to service their mortgages," he points out.
In Thane, developer Manoj Khetwani speaks of Dubai-based buyers calling, wanting to know if they can return the under construction apartments they had booked some months back. "In the segment of NRI bookings, there might be some sort of cancellations, as they might face a choice of servicing debt in the UAE, vis-à-vis paying EMI on what is essentially an investment. Obviously, they might opt to concentrate on the UAE payments," he feels. "This is about NRI investors, not those who will be buying their first home, back home," he adds. The logical impact, he feels, is that a few flats may now be available for local buyers, in projects that were earlier sold out.
Nahar says he has been getting positive feelers, from NRIs in the UAE and other GCC countries. "The debt restructuring has been given undue importance. For Indian real estate, it will result in more NRIs booking their home, in India, rather than anything else," he concludes.
