The recent Arab Spring shook the Middle East. However, the UAE remains stable and safe, with business activities at a normal level. There as been no such uprising in the region and the country has become a default refuge from unrest. These aspects have lead to a trend slightly different than the usual: more traffic from Arab countries to the UAE and more business. Europe's growing sovereign-debt crisis and the unstable US economy could well be the cause of this “regionalization” - Arabs investing their petrodollars in other Arab countries, the UAE being the centre of such activity.
Dubai has seen none of the violence that has destabilized the region. Its hotel, retail and residential real estate sectors are enjoying a boost from general stability of the country. According to Reuters, anecdotal evidence suggests that Arabs, middle class and above, are buying Dubai property to hedge their risks in other countries.
Similarly in India, a weaker currency is encouraging Indian expatriates in the Gulf to invest in domestic markets. According to the Economic Times, non-resident Indians, especially those living in the Gulf, have invested about Rs 75 crore in August and September of this year in the region, the largest pay-in in over 2 and a half years.
Recently, Russell Investments classified the UAE as an emerging market as opposed to the frontier market designation given by MSCI (Morgan Stanley Capital International) and Standard and Poor's. The UAE is the first Gulf Cooperation Council (GCC) country to graduate from frontier to emerging market status within the Russell Global Index series. The market in the UAE seems to be welcoming investments. In addition, articles say that those willing to invest in the UAE, have a longer term approach to investing and are not phased by short-term market fluctuations. This clearly demonstrates the relatively higher comparative value of investing in the UAE over other parts of the world.
According to the UAE Investor Attitudes Index as published in UAE daily - The National, about 60 per cent of the investors surveyed said it was a good time to put money in gold, and half said fixed-rate bank deposits were smart investments. The survey was based on interviews with over 750 people in the UAE, who are market investors, majority whom were expatriates. Dubai's roar and rumble has always been connected to the real estate market. There is still over-supply in the market and investors seem to not want to invest heavily in real estate. Though there are still a number of challenges to overcome, it seems stability is on its way up.
Supporting that, Kabir Mulchandani, UAE real estate veteran says that pessimism is just in people’s minds. “I transfer property every day. My optimism comes from real demand and real purchasers with real money. I see a steady growth in prices until 2014 but then I see a significant jump between 2014 and 2016. Then probably in 2017 and 2018, when suppliers are against us to come back, hopefully we will have some stabilization.”
Once pending infrastructure projects are near completion, more investors are likely to look into investing in the property market which is certainly taking an upturn. According to a recent survey of the industry by PricewaterhouseCoopers (PwC) and INSEAD Abu Dhabi, the private equity industry in the Middle East and North Africa (MENA) has emerged stronger from the global financial crisis and the recent political turmoil in the region. In addition, the survey showed the small-and medium-sized enterprises (SMEs) sector has emerged as new investment target for the regional private equity players.
All in all, there seem to be enough good reasons to invest in the UAE in the long-term. The rest, time will tell!
Kabir Mulchandani
Skai Holdings
Dubai, UAE