Dubai Money Going To India?

This one in Bloomberg this morning is interesting:

Damac Properties, a closely held developer based in Dubai, plans to invest as much as $5 billion in India over the next three years as a booming economy spurs demand for real estate.

The developer will construct houses, offices and shops in the Indian cities of Mumbai, New Delhi, Hyderabad and Bangalore, Chairman Hussain Sajwani said in a telephone interview from Mumbai. The first project will be started in 12 months, he said.

Soaring office rents and a shortage of apartments is luring developers including Donald Trump Jr. and Emaar Properties PJSC to India. Damac has built waterfront luxury projects in the United Arab Emirates and is investing in Saudi Arabia and Egypt as it expands outside its home base of Dubai.

``There is a latent demand for high-end and luxury properties as the economy booms and income levels rise,'' said Malvika Chandra, head of India research at Knight Frank in Mumbai. ``The right products are getting lapped up.''

India's 1.1 billion population faces a shortage of 25 million housing units, according to government data. The government is seeking to encourage the purchase of homes by giving tax breaks and ensuring easy availability of bank loans.

``We plan to meet the funding requirement from our internal resources,'' Sajwani said.

Growing Wealth

Demand for property is soaring in the world's fastest-growing major economy after China. India is poised for 9 percent growth in the year to March 31, following an average 8.6 percent average rise in the past four years.

Economic growth and the rising value of stocks and real estate are increasing the number of affluent in India.

The number of Indians with the financial wealth of $1 million or more rose by a fifth, the second fastest in Asia after Singapore, to about 100,000 last year, according to Merrill Lynch & Co. and Cap Gemini SA.

Rising demand is pushing up property prices with houses in south Mumbai doubling in the past two years, according to estimates by Cushman & Wakefield.

``We are on the luxury segment of the market so rising prices in India is not a concern,'' Sajwani said.

Mumbai also has the second-priciest offices in the world after London, according to CB Richard Ellis Group Inc.'s semi- annual Global Market Rents survey.

The city is the headquarters to India's main stock exchanges, companies and the main trading center for gold, diamond and commodities.

Rising Supply

Developers including Emaar MGF Land Pvt., Lodha Developers and Oberoi Constructions Pvt. are seeking to benefit from rising demand from Mumbai, New Delhi, and Bangalore and Hyderabad, the main hub for the telecommunications, software and pharmaceutical industries.

Still, a rise in the supply of high-end houses could hurt their future growth, according to DTZ Research. The number of high-end houses in Gurgaon, adjacent to New Delhi, could triple to 10,500 by 2010, DTZ said.

Most of these are being constructed by DLF Ltd., India's biggest developer, Emaar MGF Land, Unitech Ltd. and Parsvnath Developers Ltd., it said.

``Most of the prudent demand comes from the mid-income segments, and that's where we also see most of the supply also coming,'' said Chandra of Knight Frank.

Venture capital firm Indiareit Fund Advisors yesterday said it plans to invest 1.5 billion rupees ($38 million) in Samira Habitats, a company that's developing luxury villas and apartments in Alibag, on the mainland across from Mumbai, made up of a series of islands.

Houses in the 400-acre Samira Habitats project will cost between 5 million rupees and 100 million rupees when they go on sale at the end of next year, Managing Director Ramesh Jogani said.

Emaar MGF Land, the Indian unit of Emaar Properties PJSC, plans to sell 117 million shares. The Middle East's biggest real- estate developer by market value may raise as much as 60 billion rupees in an initial share sale, the Business Standard reported in September.