Will Dubai's debt crisis derail Indian property recovery?

The tremors from Dubai have not jolted the Indian real estate stocks much. But will it derail the property recovery cycle? Priyanka Ghosh delves deeper.

It did not have a significant impact on the real estate index yesterday. The market did not do too badly; it was down just about 0.5 per cent. Of course industry leaders like DLF and Unitech and certain other big-ticket midcap companies like HDIL and Sobha have all said that they have no direct exposure in the Dubai market.

However, there are a few companies that do have direct exposure. Among them is Omaxe Ltd, the company has put on hold its Rs 2,850 crore Dubai plan. It has said that it had paid Nakheel Rs 50 crore towards land payment. But it has not gotten that land and now it is looking to backtrack and sort of put on hold all its projects in Dubai.

Hiranandani has said that it will complete its Marina project in Dubai, 90 per cent of the project is already complete and the remaining 10 per cent will be complete by 2010. The company has said that there is no major debt obligation in Dubai and it has also said that it will currently not go ahead with its plan of a second project in Dubai.

But the company that one is talking about really today is Emaar MGF because of obvious reasons that joint venture between Emaar Properties and MGF Development. What we understand from the company is that it has officially said it does not see a significant impact on the company as well.

But Emaar has a debt of Rs 5,800 crore and Emaar is also coming up with an IPO of Rs 3,850 crore in the pipeline. Analysts are sceptical about the IPO pipeline. In general they have said that if the markets correct, or if the FII flows get impacted then this Rs 10,000 crore plus IPO pipeline may get significantly impacted.

There is this whole HNI demand in the market which actually chooses between investing in India and Dubai. And now because the Dubai market has crashed, they might actually look at some distressed asset purchase in Dubai versus India.

Compare that to the situation in India, prices have scaled up in the past couple of months with no major offtake. So will that have a significant impact on this sector? Possibly.