How are you reading the situation? Are you firstly surprised or you pretty much expected this coming by because we had heard of some problems brewing in Dubai time and again, sporadically there was some news that kept coming out?
Well, that is true because most of the demand that exist in Dubai is what I would like to call the imported demand, which comes from outside of Dubai. There is very little real demand coming from within, so if the west was affected by the recession, the demand in Dubai went down drastically. To give you an example, if a villa on Palm was available for say 12 million Dirhams just about 18 months back or may be two years back, it is now available for just 4 million Dirhams, and you can see the drop from 12 to just 4. Now that has happened mainly because the demand has completely evaporated and the supply has overtaken the shrunken demand.
Sure, so how do you see this situation now playing out because we are talking about a couple of the US banks having exposure and perhaps having worked on the syndicated loan that Dubai world has on its books right now, so in wake of those defaults that may come by in the future. They have just pointed out that right now, they cannot make their payments. It could have like a ripple effect on the provisioning and the accounting of couple of the US banks who are in transaction with Dubai world?
Well, that is true but that is not going to improve the demand situation. I mean see after all the property market works on demand and supply like any other market and if the demand is not going to pick up in the near term, what we are doing is just a first-aid to the banks just to kind of complete some obligations for having created the supply. I think only the time seems to be the remedy where over the next three to five years, demand and supply should equate.
What kind of a hit could certain Indian real estate company stake on their exposure in the Dubai real estate market listed or otherwise?
Well as you know there are couple of firms from the Middle East that are involved into real estate in India, I mean, Emaar being one of them. Now see basically they had come here with the money bags to kind of invest into the real estate in India but I think those money bags are no longer available from the Middle East. I mean what they are trying to do now is to create the resources from within India itself and invest it into the projects with they have ongoing. But, of course having said that the India real estate is far stronger at this point in time compared to the Middle Eastern real estate.
Sure but what about Indian companies which are of course within Indian jurisdiction who have exposure to the Dubai real estate market and there are handful of those, could these get significantly impacted I mean you would have assess the realty situation in Dubai as you rightly pointed out as well, could that have a significant impact of some of the balance sheets of Indian real estate firms as well?
I think there are some very well known companies that have presence I mean one of them is the tallest residential tower as you know in Dubai but the demand has slowed down for all of that even from India. On the contrary there are a number of people wanting to disinvest in Dubai and kind of pull their money out and put it into some of the market like may be London or UK which today is a very good market to invest.
What would this do to the liquidity situation for real estate firms in India, one could it have an impact in terms of the fact that its real estate per se which will get impacted in Dubai and two in terms of how would the funding situation change for some of the real estate companies. A significant amount of people from the Middle East buy apartments into India that is one and two the kind of funds that will coming via the Middle Eastern route, do you think that will get impacted?
Well, as you know there are 16 IPOs waiting in the wings and they will be hitting the market very soon. We are expecting them to bop up about in excess of 10,000 crores. I think all of that is going to have a huge impact mainly in India but some overflow of that or a ripple effect like you said also in the Middle Eas
