Dubai property developers planning a sales offensive in India have suffered a setback as investors from the country reassess plans in the wake of demonetisation.
It follows a move by the government to remove large denomination notes in a bid to tackle the black economy.
That cast a cloud over the Dubai Property Show in Mumbai this weekend, as developers expressed their concerns about the impact on Indian investor sentiment.
"I think the demonetisation exercise definitely has put other priorities for people to address, so their investment decision-making may have slowed down because they have this matter to deal with," said Sanjay Manchanda, the chief executive of Nakheel, exhibiting at the three day show, which began on Friday.
Nakheel was focusing on promoting its twin-tower Palm 360 luxury hotel and residential project on the Palm Jumeirah, where homes are expected to be priced at up to US$5 million when they go on sale next year.
Indian investors account for about 11 per cent of Nakheel customers. They have bought property from the Palm islands developer estimated to be worth $2 billion.
Mr Manchanda said it would be "naive" to think demonetisation would not have an impact on business that would be generated at the exhibition.
India’s prime minister Narendra Modi last month announced a ban on 500 and 1,000 rupee notes, which took the Indian population by surprise. With restrictions put in place on cash withdrawals and exchange, Indians have been struggling to secure cash and the move has pushed the Indian rupee lower and led to forecasts for India’s economic growth to be cut.
Indians are by far the largest overseas investors in Dubai property, spending Dh7 billion in the first half of this year, according to the Dubai Land Department. Dubai home prices have been hit by oversupply. Analysts are expecting sales to British investors – Dubai property’s second largest overseas market – to be negatively impacted by the post-Brexit slump in the pound. India seemed to be a strong market for Dubai developers to turn to after that.
Bollywood actor Arbaaz Khan and the UAE ambassador to India, Ahmed al Banna opened the property exhibition, which is in its second year. But even Bollywood failed to draw the crowds on Friday, with footfall appearing to be subdued that afternoon, although there were expectations that visitor numbers would pick up over the course of the weekend.
"The timing was a little bit wrong," said Saif Aslam Khan, the sales director of Azizi Developments, which was offering fully furnished apartments in Dubai starting from Dh550,000. "If this exhibition was a little bit before the demonetisation, we probably would have done much better than this."
The developer had nevertheless managed to book two reservations for studio apartments a couple of hours into the show and was generating interest because of its relatively affordable price point, he added.
"There’s no doubt that it will have an impact on the overall mood in the market today," said Nasser Amer, the vice president of Deyaar. "We cannot ignore something like this."
But he said he remained "optimistic", with the Indian market "having very high potential" and given that investments from India into the Dubai property sector had been rising in recent years.
Sandeep Salvi, an architect from Dubai was among the potential buyers at the show.
"Dubai is cheaper than the prime locations in Mumbai," he said, adding that he was planning to spend about 20 million rupees on a two bedroom apartment in Dubai.
Sean McCauley, the director of agency services for Asteco, was representing Dubai developer Seven Tides, promoting projects including luxury hotel apartments on the Palm. He believed that demonetisation could in fact work in favour of Dubai.
"Some Indians might be looking to invest outside of India and diversify their investments abroad because there’s uncertainty about what might be coming," he said.
Mr Manchanda said that he hoped that the impact of demonetisation would settle down and a "normal state will be restored fairly quickly".
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