Dubai ruins to hurt rich NRIs

Dubai ruins to hurt rich NRIs
The Economic Times, December 1, 2009, Page 1

Shailesh Menon MUMBAI

THE leveraged asset purchases of Dubai-based wealthy non-resident Indians (NRIs) in the last few years may begin to haunt them as the collapse of real estate prices in the emirate prompts calls for additional funds as margins, which may force them to sell some Indian assets too, according to experts.

“Indian HNIs (high net worth individuals) made good use of easy credit lines in the past two years,” said Dubai-based JRG International Brokerage CEO PK Sajitkumar.

“They even made investments using leveraged money, investing in India-focused funds, buying freehold property and buying into Indian shares through participatory notes,” he said.

“The situation is now so bad that many of these people will have to sell their leveraged assets, maybe at a loss, to meet margin calls or retire debt,” added Mr Sajitkumar.

The slide of real estate and other asset prices in the Middle East has begun to accelerate after Dubai World, the government-backed conglomerate, last week sought a moratorium on debts of about $59 billion.

This has led to lenders seeking additional collateral for assets funded till date. Those who are unable to deposit more funds with the banks are forced to sell assets, including Indian stocks, or even think of selling Indian real estate assets.

The fall in Dubai real estate prices has gained momentum over the past two weeks, with rates going back to pre-2006 rates.