No more than a hiccup for Indian market

Indian real estate companies together have an exposure of $2 billion to the United Arab Emirates (UAE), a big chunk of it in Dubai. Almost half the exposure is of real estate developers based in Mumbai.
The Mumbai companies’ total investments in the UAE are between $500 million and $1 billion; those from Bangalore and Delhi take this total to $2 billion. Most of the money was invested in Dubai, one of the emirates in the UAE.
“The major part of this money would have come from the banking system, with not just developers but retail investors too taking bank loans to buy property,” said Sunil Mantri, president of the Maharashtra Chamber of Housing Industry.
Not only developers but retail investors also borrowed money from banks and diverted it to buying property in Dubai. If property prices in the emirate keep dropping as they have, they would have a problem in repaying their loans.
Among banks, Bank of Baroda has the largest exposure to Dubai of about Rs 4,000 crore; only Rs 600 crore of it in real estate. “Our total book in the UAE is Rs 10,000 crore,” said M D Mallya, chairman & managing director of the bank. The bank’s overall real estate exposure, including that in India, is Rs 3,800 crore.
In the Palm Jumeria project where 500 bungalows are under construction, several have been bought by non-resident Indians and rich Indians, including film stars Amitabh Bachchan and Shah Rukh Khan. Each bungalow costs between Rs 30 crore and Rs 50 crore. As the property is under construction, it may be a long time before they can have a house-warming party there.
Companies that have invested in projects still to be completed will be in trouble as the property market has collapsed. Not only building activities have come to a halt, there are few buyers for ready properties.
Besides residential and commercial projects, Indian companies are also involved in road, bridge and power projects. “They too will be impacted,” said Prannay Vakil of Knight Frank, a property consultancy which marketed Nakheel properties in India. Overleveraged companies too will have problems as prices are dropping fast and fresh investors are hard to find.
At least one developer which invested in Dubai, Hiranamdani Properties, claims to be home and dry. The company has only one project there -- 26 Marina, the 380- metre tall apartment block. “About 97 per cent of the property is sold out and money has come into the company,” claimed Niranjan Hiranandani. His company has a piece of land in the emirate but has not decided how to develop it.