India accounts for the highest proportion of international real estate sales in the emirate. So what makes the city a key investment hotspot for Indians?
Dubai – a 21st century city synonymous with international property investment.
In the last 10 years investors from across the globe have witnessed some of the biggest returns the world’s property market has even seen. Today a sector that has matured to move in-line with those in cities such as New York and Paris, the demand to acquire assets in the emirate remains as feverous as ever.
Over AED 53 billion was invested in Dubai real estate in the first half of 2015 alone, with figures from the Dubai Land Department (DLD) outlining that 19,848 investors from 142 nations have purchased property in the city.
And top of the list of international investor locations is India. AED 7.3 billion (131.5 billion INR) in those six months was spent by Indians, accounting for 3,017 transactions. The DLD also estimates that 60% of all property purchases in the city are made by investors from across the other side of the Arabian Sea.
India has been the number one international investor region for Dubai for a number of years, and interest has been particularly profound this year following February’s announcement by the Reserve Bank of India to permit Indian’s to send up to 16.5 million INR (AED 918,000) overseas to acquire real estate.
So why are investors from India so enamoured with property in Dubai?
Yields almost 5% higher than India
For those investors looking for high levels of regular income, the UAE’s biggest city offers substantially higher yields currently on offer anywhere in India.
Average monthly returns in India range between 2-3%, while in Dubai average yields grew have hit 7.8%, rising from 7.2% in January 2014.
A fast growing expat population and increased visitor numbers are driving the demand for rental accommodation in the city, growing returns for investors.
Lower cost and huge growth potential
Searching for prime real estate in India is ordinarily reserved only for the super-rich. But in Dubai, the skyline is littered with some of the world’s most luxurious apartment developments and generally available at a significantly lower cost.
According to Knight Frank, 66.7 million INR (AED 3.7 million) can acquire as much as 96 sq m of land in Mumbai, India’s financial capital. Yet in Dubai, that same amount can acquire 145 sq m.
Crucially, however, it’s also the prospect of strong capital growth that continues to bring an influx of investors to the emirate. Whilst the outlook for the Indian property market shows moderate levels of growth in the coming years, real estate experts in Dubai are confident that the city’s most popular districts will see immediate growth of between 35-50% as a direct impact of Expo 2020.
Dubai’s tax status has been one of the key drivers for expat growth in the last 20 years. It’s also been a huge consideration for the global investor community.
In India, income generated from rental property is subject to property tax, calculated on the basis an annual value. This is equal to the maximum of the municipal valuation, rent received and fair rent as determined by the Income Tax department.
However in Dubai, any income from property is completely tax-free, helping protect overall returns on investment.
A location with close ties
Indian expats in the UAE account for almost 26% of the country’s total population, thanks to a thriving oil and construction job market. As the country’s largest city and emirate, Dubai is home to a high proportion of these workers, meaning that the city is not an unknown quantity in the eyes investors.
Furthermore, Dubai is just over a two-hour flight away from Mumbai and three hours from New Delhi, with the Middle East and Asia’s largest airline carriers providing regular daily flights between the three cities. For investors, it means that their asset is just a short journey away, offering them a greater sense of security.