Gulf tensions rattle Dubai real estate sector

Gulf tensions spark caution among Indian investors, impacting Dubai's real estate market after years of rapid growth and stability.

Fifteen to 20 years ago, when the going was tough, officials and agents of Dubai-based real-estate companies would visit Mumbai and other key cities in India. They showcased and aggressively marketed their projects, highlighting comparative advantages in pricing and rental income. The aim was to persuade Indians to invest in property or buy a second home.

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The impact was swift: within two weeks of the war, the Dubai Financial Market Real Estate Index (DFMREI) had fallen 21 per cent, while property transaction volumes reportedly declined 38 per cent year-on-year in the first 13 days .

The sales pitch focused largely on price. A Dubai apartment was typically priced at about one-third the cost of a south Mumbai apartment. It also promised rental yields of 6%–8%, compared with just 1%-2% in Mumbai.

But that situation changed dramatically with the introduction of the UAE Golden Visa programme in 2019, and Dubai emerged as a dependable global business destination and a haven in the post-COVID era.

Due to the local government’s ability to handle the pandemic, citizens from many countries across Asia and Europe flocked to the city and made it their primary home. This, in turn, fuelled unprecedented demand for luxury real-estate, as well as high-quality office and retail space.