Afghan investors bet on Dubai

DUBAI/KABUL — Not long ago, Mohammed Daoud was making good money hiring out halls for wedding parties thrown by a new class of Afghan war entrepreneurs.

By (Reuters)

Published: Sat 15 Sep 2012, 11:21 PM

Last updated: Tue 7 Apr 2015, 12:29 PM

Today, he is using some of the profits to buy a $160,000 apartment nestled amid the skyscrapers and shopping malls of Dubai.

Daoud sees his 27^th-floor bolt-hole as both a canny investment and the ultimate insurance policy against the darkest scenarios he can envisage for his homeland when the bulk of foreign forces leave.

“Nobody knows what’s going to happen after 2014,” he told Reuters in Kabul. “If something happens with the security situation here, I can take my family. We feel safe in Dubai.”

Wealthy Afghans have sharply increased the pace of investment in property in the Gulf emirate, motivated by a mix of hard-headed commercial calculations and more nebulous security fears sparked by the drawdown.

Afghan buyers spent Dh220 million ($60.7 million) on property in Dubai in the first six months of this year, a 27 per cent increase compared with the same period in 2011, according to Dubai government data obtained by Reuters. Some are spending up to Dh20 million on shopping sprees for multiple villas, while many buy million-dollar homes in cash, dealers say.

The growth outpaced a 21 per cent rise in total property transactions in Dubai by both local and foreign investors in the same period. The interest was driven in part by a decline in prices in the emirate’s once white-hot property market.

Haji Obaidullah Sader Khail, chairman of the Afghan-Dubai Business Council, said the true scale of Afghan investment could be four times higher than the data suggests because many transactions may not have been registered.

“I know people who have bought 15 to 20 villas,” he said.

According to the official figures, the number of properties Afghans bought in Dubai jumped to 114 in the first half compared to 76 in the same period in 2011.

Afghanistan’s central bank says that Afghans carried $4.5 billion in cash from Kabul airport last year in declared currency exports, double the amount in 2010. The bank estimates that the total amount of cash leaving Afghanistan each year could be as much as $8 billion — almost twice the size of last year’s budget.

The exodus of money is even larger than the $6.37 billion in net official development assistance Afghanistan received in 2010 — 45 per cent of gross domestic product — making it one of the world’s most aid-dependent countries.

“With the US pulling out of Afghanistan a feeling of insecurity is setting in,” said Parvees Gafur, chief executive of Dubai-based Propsquare Real Estate. “They want to invest before it’s too late.”

Afghanistan’s power elite has long cherished second, third or fourth homes in Dubai as footholds in a land of designer boutiques and safe neighbourhoods less than a three-hour flight from the more unpredictable streets of Kabul. “Spending from the US and international community is going to decrease,” said Ajmal Saifi, chief executive of Prestige Real Estate in Dubai, part of an Afghan family-run conglomerate that includes construction and retail interests in Afghanistan. But Afghan investors are wary of risking their savings to build factories or farm projects that could help reduce Afghanistan’s chronic dependence on foreign aid while the country is in flux.

“The traders are like birds, always looking for greener and more suitable places. But now they are flying from Afghanistan,” said Khan Jan Alokozai, one of Afghanistan’s most prominent traders and vice-chairman of the country’s chamber of commerce.

“They all fear that if the government starts to crack down... they will lose all they have earned. So it’s a good time to take out as much as they can,” he said.

Buyers jetting in from Kabul are mainly purchasing property worth between Dh3 million ($816,800) and Dh4 million ($1.09 million), according to Gafur, the dealer.

Some have found their dream home in the Palm Jumeirah, a frond-shaped development of luxury seafront villas whose vista of passing yachts cuts a stark contrast with the panorama of tawny hills encircling Kabul.

Others have sought an abode in up-market developments with names like Emirates Living and Business Bay and in the needle-shaped Burj Khalifa, the world’s tallest building.

Security concerns have motivated many Afghan house-hunters to buy in Dubai, but some are primarily looking for bargains.

Property prices have started to recover. The total value of real estate transactions in Dubai topped Dh63 billion ($17.2 billion) in the first half of 2012, a 21 per cent increase over the same period in the previous year, according to the data.

Foreign investors bought Dh22 billion of the total, buying 12,875 properties.