Rational Exuberance: Indians Invest Big In The Gulf

The Gulf countries have long been the preferred trading partners of Indians. In the old days, merchants sailed frequently between the Malabar Coast and Arabia for trade and the rupee was the currency in circulation in the Trucial States until 1966. A lot changed after the immense oil boom of the 70’s saw hordes of Indians leave for the Gulf countries in search of lucrative opportunities, although the vast majority were of the "ABC" variety - an acronym for the ayah, butler, cook blue-collared jobs that Indians mostly engaged in. The 80’s and 90’s saw a flurry of larger-scale Indian businessmen and traders in addition to accountants, engineers and a splattering of top-notch doctors and high-powered executives strengthen their foothold in the region. Soon, the Indian in the Middle East gained recognition as a loyal, capable and diligent worker visible in the offices of almost all enterprises. The merchants established their bases and cemented ties with their trading partners and hosts while plying their wares in the markets of Dubai.

The scenario today, however, is quite different. The Gulf countries are trying hard to shed their dependence on oil revenues and focus on encouraging more trade and commerce. Dubai led the way by throwing the economy open to foreign investment and previously rigid investment laws were either repealed or relaxed. Foreigners today can own property and trade in the stock market in a dramatic move that has seen an explosion in the real estate sector and the stock market. The Indians have upped the ante as well by emerging as one of the biggest investors in the region and a force to be reckoned with as entrepreneurs, whether based in the Gulf or in India. The loser though, seems to be India. Whereas NRI’s for all these years remitted their money back home to acquire property and maintain fixed deposits, they are now increasingly happier ploughing their hard-earned dirhams or dinars back into their host countries. Investing their money in their country of domicile seems a better bet since not only does it often yield better results but also strengthens their ties to their adopted lands, where the laws still stipulate that they can never naturalise.

The notion prevalent until a few years ago was that the Gulf kingdoms were highly risky bets, chiefly due to their perceived political instability and lack of well-documented and established set of rules and regulations. Several years back, an article in Time once described the United Arab Emirates as one of the most risky countries to make an investment. All that has changed with the powers-that-be in the Gulf altering the scenario to make the system more open and transparent and the investment climate more encouraging to investors in their bid to woo foreign investment. With billions pouring in and the established functioning of the secondary property market, investor attitudes are as bullish as ever.

The Gulf real estate boom, spurred by Dubai with their relaxed laws and developments such as ’The Palm Islands," and "The World," has caught everyone in a frenzy and is now spreading to the neighbouring countries with Bahrain coming up with their "Financial Harbour," project, Qatar developing the "Pearl Islands," and Oman building the "Blue City," buoyed by surging oil prices and investment pouring in from institutional investors across the world. Today, 16% of all construction cranes in the world are housed in Dubai. It would do well to remember that back in the day, Singapore once boasted such a statistic. When the then Crown Prince of Dubai (now Ruler) Sheikh Mohammed bin Rashid Al Maktoum allowed expatriates to own real estate and play the stock market, what resulted was a pouring of money into the economy by the largest demographic group in the region, the Indians.

With the Gulf investment bug successfully passed on from the NRI’s in the Gulf to the wealthy classes residing in India, the region has seen some heavy investments from Indian companies and entrepreneurs, themselves riding on the back of a booming Indian economy. Tourism from India is at a peak and the number of Indian homeowners in Dubai is at an all-time high. Indian entrepreneurs are increasingly keen on expanding into the Gulf to take advantage of the economic boom, with Dubai’s economy growing at around 15%. Mumbai-based Lokhandwala Builders are one such firm. Already having successfully launched their "Lady Ratan Manor," project in Dubai’s International City, they have now announced a $57 million residential project called, "Eden Gardens."

Ras Al Khaimah, a smaller Emirate of the UAE compared to glamourous Dubai, alone expects to attract $1 billion of Indian investments this year according to Puneet Kinra of PriceWaterhouseCoopers, advisors to RAK Properties, the Emirate’s real estate arm. India’s Man Industries, a leading pipe maker for the oil and gas industry, recently became the first Asian issuer to tap the Gulf market by listing a Global Depository Receipt (GDR) on the Dubai International Financial Exchange (DIFX)

Never has the Gulf looked so alluring to Indian investors and never have the Gulf countries been wooing Indians as avidly as they are today. With the world’s top companies and who’s who establishing themselves with a presence in the Gulf, cities like Dubai with its ultra-Vegas style pizzaz, have become one of the hottest places to invest, own property and be seen today. It goes without saying that Indians have now well and truly established themselves in the Gulf among the big players - and we’ve come a long way from the "ABC," days of the 70’s.