12-15-2009, 01:52 PM
Tuesday, December 15, 2009
By Saad Hasan
KARACHI: Pakistanis have invested billions of dollars in Dubai real estate which saw a steep fall in its value in a few days back after a large emirate corporation sought rescheduling of debt to evade a possible default, industry people told The News.
It is hard to establish exactly how much is stuck in the once-booming construction industry since most of the investments were funneled through the illegal network of Hundi brokers, they say. “There are no data available on such investments because money was not transferred from here in the first place,” says Akeel Karim Dhedi, a stock market broker. “Rather the foreign exchange that was supposed to make its way here just stopped there at Dubai.”
But he said considering the fact that just two years back local construction companies were advertising their projects in Dubai on a daily basis and spoke volume of Pakistan’s involvement.
Saleem Mandviwalla, Board of Investment Chairman, reportedly said on weekend Pakistanis have invested $6 billion in Dubai mostly in real estate property. Referring to his statement, Dhedi said the numbers could be much more than that. “The obvious shift in home remittances (during the last two years) reflects that investment opportunities abroad have diminished.”
Remittances sent home by expatriates have surged tremendously in recent years. They surged 22 per cent in 2008-09 to a record $7.8bn from $6.4bn a year before. Exchange company officials say the rise is in part due to the government action against exporters and importers who used to misreport their transactions. They say traders use under-and-over-invoice to avoid taxes and seek government rebates, respectively. It created room for hundi and hawala brokers to sell foreign currency to these traders at above market rates. Electronic transfers never used to take place across national borders and transactions were settled through off-the-book payments. The State Bank of Pakistan (SBP) has also disallowed exchange companies from undertaking trade-rated telegraphic transfers while FIA has tightened noose around tax evaders.
Malik Bostan, Chairman of Forex Association of Pakistan, cites the shift between open and inter-bank market rupee-dollar exchange rates as sign of changing trend. “Open market rates were always higher than inter-bank market. Now it is the reverse and remittances are showing up in inter-bank market.” International financial turmoil, crash of property price in US and then in Dubai all have worked to weaken the incentive to keep cross-border transactions concealed from authorities.
Munir Sultan, Chairman Urban Development Committee, FPCCI, also believes that Pakistanis hold investments of between $5-6bn in Dubai’s real-estate which has produced marvelous skyscrapers in recent years.
Dubai was full of construction activity in the past decade. Tens of thousands of laborers from South Asia including Pakistan went there to work on real estate projects funded by international investment firms.
But rapid growth in a number of apartment buildings did not help in attracting tenants. A slowing global economy, empty apartments and job losses were bound to take toll on Dubai’s financial outlook, analysts say.
By Saad Hasan
KARACHI: Pakistanis have invested billions of dollars in Dubai real estate which saw a steep fall in its value in a few days back after a large emirate corporation sought rescheduling of debt to evade a possible default, industry people told The News.
It is hard to establish exactly how much is stuck in the once-booming construction industry since most of the investments were funneled through the illegal network of Hundi brokers, they say. “There are no data available on such investments because money was not transferred from here in the first place,” says Akeel Karim Dhedi, a stock market broker. “Rather the foreign exchange that was supposed to make its way here just stopped there at Dubai.”
But he said considering the fact that just two years back local construction companies were advertising their projects in Dubai on a daily basis and spoke volume of Pakistan’s involvement.
Saleem Mandviwalla, Board of Investment Chairman, reportedly said on weekend Pakistanis have invested $6 billion in Dubai mostly in real estate property. Referring to his statement, Dhedi said the numbers could be much more than that. “The obvious shift in home remittances (during the last two years) reflects that investment opportunities abroad have diminished.”
Remittances sent home by expatriates have surged tremendously in recent years. They surged 22 per cent in 2008-09 to a record $7.8bn from $6.4bn a year before. Exchange company officials say the rise is in part due to the government action against exporters and importers who used to misreport their transactions. They say traders use under-and-over-invoice to avoid taxes and seek government rebates, respectively. It created room for hundi and hawala brokers to sell foreign currency to these traders at above market rates. Electronic transfers never used to take place across national borders and transactions were settled through off-the-book payments. The State Bank of Pakistan (SBP) has also disallowed exchange companies from undertaking trade-rated telegraphic transfers while FIA has tightened noose around tax evaders.
Malik Bostan, Chairman of Forex Association of Pakistan, cites the shift between open and inter-bank market rupee-dollar exchange rates as sign of changing trend. “Open market rates were always higher than inter-bank market. Now it is the reverse and remittances are showing up in inter-bank market.” International financial turmoil, crash of property price in US and then in Dubai all have worked to weaken the incentive to keep cross-border transactions concealed from authorities.
Munir Sultan, Chairman Urban Development Committee, FPCCI, also believes that Pakistanis hold investments of between $5-6bn in Dubai’s real-estate which has produced marvelous skyscrapers in recent years.
Dubai was full of construction activity in the past decade. Tens of thousands of laborers from South Asia including Pakistan went there to work on real estate projects funded by international investment firms.
But rapid growth in a number of apartment buildings did not help in attracting tenants. A slowing global economy, empty apartments and job losses were bound to take toll on Dubai’s financial outlook, analysts say.