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Wealthy Afghans Snapping Up Properties in Dubai
By REUTERS
Published: September 12, 2012
DUBAI — Not long ago, Mohammed Daoud was making good money hiring out halls for wedding parties thrown by a new class of Afghan war entrepreneurs. Now he is using some of the profits to buy a $160,000 apartment nestled amid the skyscrapers and shopping malls of Dubai.
Mr. Daoud sees his 27th floor apartment as both a good investment and an insurance policy against the darkest scenarios he can envision for his homeland when the bulk of foreign forces leave.
“Nobody knows what’s going to happen after 2014,” he said in an interview 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 commercial calculations and security fears brought on by the withdrawal of international troops.
Afghan buyers spent 220 million dirhams, or $60 million, on property in Dubai in the first six months of this year, a 27 percent increase compared with the same period in 2011, according to Dubai government data. Some Afghans are spending up to 20 million dirhams on shopping sprees for multiple villas while many are buying million-dollar homes with cash, brokers say.
The rate of the Afghan blitz outpaced a 21 percent increase in total purchases of Dubai property by both local and foreign investors in the same period. A steep decline in prices in the emirate’s once white-hot property market has increased their interest.
The trend presents a fresh challenge to Western allies struggling to convince an uneasy Afghan population that the transition will not be a prelude to international abandonment or an escalation of fighting with the Taliban.
Haji Obaidullah Sader Khail, chairman of the Afghan Business Council-Dubai, said the true scale of Afghan investment could be four times higher than the data suggest 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 with 76 in the same period in 2011.
Reports from real estate agents that Afghans routinely buy luxury homes with cash will do little to ease concerns that some of the billions of dollars the United States and its allies spend to bankroll the government and security forces is seeping abroad.
“Purchases by Afghans have gone up for sure. With the U.S. pulling out of Afghanistan a feeling of insecurity is setting in,” said Parvees A. Gafur, chief executive of Propsquare Real Estate in Dubai. “They want to invest before it’s too late.”
The flood of cash exports from Kabul has stoked fears that entrenched graft and persistent capital flight from Afghanistan will make it harder to put a booming but fragile war economy on a more sustainable path.
Afghanistan’s power elite has long cherished second, third or fourth homes in Dubai as footholds in a land of designer boutiques and safe districts only a three-hour flight from Kabul. Since the United States ousted the Taliban in 2001, lucrative and often badly supervised contracting opportunities offered by NATO forces or civilian agencies have nurtured a new breed of oligarchs who boast ever more ostentatious addresses.
With international forces scaling back, the rapid growth of the past decade is likely to slow. “Spending from the U.S. and international community is going to decrease,” said Ajmal Saifi, managing director of Prestige Real Estate in Dubai. Prestige is part of an Afghan family-run conglomerate that includes construction and retail interests in Afghanistan.
Uncertainty about who will replace President Hamid Karzai, who is expected to step down in 2014, has compounded investor anxieties in a patronage-driven economy where fortunes are won or lost as the political landscape shifts.
Under pressure from aid donors, Mr. Karzai has ordered ministries to take steps to fight corruption and told the Supreme Court to accelerate investigations into longstanding graft cases. Although few believe his call will have much impact, the announcements have caused jitters among Afghan plutocrats.
“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 deputy chairman of the Afghanistan Chamber of Commerce and Industries. “They all fear that if the government starts to crack down on corruption, they will lose all they have earned. So it’s a good time to take out as much as they can.”
The more uncertainty at home, the greater the incentive for Afghans to park their money abroad. Buyers jetting in from Kabul are mainly purchasing residential apartments worth between 3 million and 4 million dirhams, according to Mr. Gafur, the property dealer.
Some have found their dream home in the Palm Jumeirah, a frond-shaped development of luxury seafront villas whose vista of passing yachts is in stark contrast with the panorama of tawny hills that encircles Kabul.
Others have sought refuges in up-market developments with names like Emirates Living and Business Bay and in the needle-shaped Burj Khalifa, the world’s tallest building.
The central bank says it recorded $4.6 billion in declared dollar exports from Kabul airport last year, double the figure from the previous year. The authorities have taken steps to limit the amount of cash people take onto Dubai-bound aircraft, but it is difficult to measure their success.
While much of the money may represent the proceeds of currency trading or licit commerce in a cash-based economy, Afghan and Western officials believe a share is derived from government corruption, the theft of aid or heroin trafficking.
Security concerns have motivated many Afghan house-hunters to buy in Dubai, but some are primarily looking for bargains. Dubai real estate prices slumped by more than 60 percent from their peak in 2008 after the global economic crisis triggered a collapse in the emirate’s property market. Prices have started to recover. The total value of real estate transactions in Dubai topped 63 billion dirhams in the first half of 2012. That was a 21 percent increase over the same period in the previous year. Of that, foreign investors paid 22 billion dirhams for 12,875 properties.
Back in Afghanistan, a sharp slowdown in the property market driven in part by doubts over the near term has encouraged investment in Dubai.
Haji Shir Shah Ahmadzai, managing director of a real estate company in Kabul, said property prices in Afghanistan fell 35 percent to 50 percent in the past year. “The only people who are selling properties are people who need money fast,” he said.
The propensity of rich Afghans to acquire assets in Dubai fell under the spotlight after a run at Kabul Bank, the country’s biggest private lender, in 2010. Dubai villas account for about $160 million of $900 million in assets auditors are trying to recover from the collapsed bank, which extended unsecured loans to a roster of well-connected individuals, according to a former senior Afghan official, who spoke on condition of anonymity. In June, the Afghan government told the International Monetary Fund that it had managed to retrieve properties in Dubai worth an estimated $44 million.
By REUTERS
Published: September 12, 2012
DUBAI — Not long ago, Mohammed Daoud was making good money hiring out halls for wedding parties thrown by a new class of Afghan war entrepreneurs. Now he is using some of the profits to buy a $160,000 apartment nestled amid the skyscrapers and shopping malls of Dubai.
Mr. Daoud sees his 27th floor apartment as both a good investment and an insurance policy against the darkest scenarios he can envision for his homeland when the bulk of foreign forces leave.
“Nobody knows what’s going to happen after 2014,” he said in an interview 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 commercial calculations and security fears brought on by the withdrawal of international troops.
Afghan buyers spent 220 million dirhams, or $60 million, on property in Dubai in the first six months of this year, a 27 percent increase compared with the same period in 2011, according to Dubai government data. Some Afghans are spending up to 20 million dirhams on shopping sprees for multiple villas while many are buying million-dollar homes with cash, brokers say.
The rate of the Afghan blitz outpaced a 21 percent increase in total purchases of Dubai property by both local and foreign investors in the same period. A steep decline in prices in the emirate’s once white-hot property market has increased their interest.
The trend presents a fresh challenge to Western allies struggling to convince an uneasy Afghan population that the transition will not be a prelude to international abandonment or an escalation of fighting with the Taliban.
Haji Obaidullah Sader Khail, chairman of the Afghan Business Council-Dubai, said the true scale of Afghan investment could be four times higher than the data suggest 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 with 76 in the same period in 2011.
Reports from real estate agents that Afghans routinely buy luxury homes with cash will do little to ease concerns that some of the billions of dollars the United States and its allies spend to bankroll the government and security forces is seeping abroad.
“Purchases by Afghans have gone up for sure. With the U.S. pulling out of Afghanistan a feeling of insecurity is setting in,” said Parvees A. Gafur, chief executive of Propsquare Real Estate in Dubai. “They want to invest before it’s too late.”
The flood of cash exports from Kabul has stoked fears that entrenched graft and persistent capital flight from Afghanistan will make it harder to put a booming but fragile war economy on a more sustainable path.
Afghanistan’s power elite has long cherished second, third or fourth homes in Dubai as footholds in a land of designer boutiques and safe districts only a three-hour flight from Kabul. Since the United States ousted the Taliban in 2001, lucrative and often badly supervised contracting opportunities offered by NATO forces or civilian agencies have nurtured a new breed of oligarchs who boast ever more ostentatious addresses.
With international forces scaling back, the rapid growth of the past decade is likely to slow. “Spending from the U.S. and international community is going to decrease,” said Ajmal Saifi, managing director of Prestige Real Estate in Dubai. Prestige is part of an Afghan family-run conglomerate that includes construction and retail interests in Afghanistan.
Uncertainty about who will replace President Hamid Karzai, who is expected to step down in 2014, has compounded investor anxieties in a patronage-driven economy where fortunes are won or lost as the political landscape shifts.
Under pressure from aid donors, Mr. Karzai has ordered ministries to take steps to fight corruption and told the Supreme Court to accelerate investigations into longstanding graft cases. Although few believe his call will have much impact, the announcements have caused jitters among Afghan plutocrats.
“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 deputy chairman of the Afghanistan Chamber of Commerce and Industries. “They all fear that if the government starts to crack down on corruption, they will lose all they have earned. So it’s a good time to take out as much as they can.”
The more uncertainty at home, the greater the incentive for Afghans to park their money abroad. Buyers jetting in from Kabul are mainly purchasing residential apartments worth between 3 million and 4 million dirhams, according to Mr. Gafur, the property dealer.
Some have found their dream home in the Palm Jumeirah, a frond-shaped development of luxury seafront villas whose vista of passing yachts is in stark contrast with the panorama of tawny hills that encircles Kabul.
Others have sought refuges in up-market developments with names like Emirates Living and Business Bay and in the needle-shaped Burj Khalifa, the world’s tallest building.
The central bank says it recorded $4.6 billion in declared dollar exports from Kabul airport last year, double the figure from the previous year. The authorities have taken steps to limit the amount of cash people take onto Dubai-bound aircraft, but it is difficult to measure their success.
While much of the money may represent the proceeds of currency trading or licit commerce in a cash-based economy, Afghan and Western officials believe a share is derived from government corruption, the theft of aid or heroin trafficking.
Security concerns have motivated many Afghan house-hunters to buy in Dubai, but some are primarily looking for bargains. Dubai real estate prices slumped by more than 60 percent from their peak in 2008 after the global economic crisis triggered a collapse in the emirate’s property market. Prices have started to recover. The total value of real estate transactions in Dubai topped 63 billion dirhams in the first half of 2012. That was a 21 percent increase over the same period in the previous year. Of that, foreign investors paid 22 billion dirhams for 12,875 properties.
Back in Afghanistan, a sharp slowdown in the property market driven in part by doubts over the near term has encouraged investment in Dubai.
Haji Shir Shah Ahmadzai, managing director of a real estate company in Kabul, said property prices in Afghanistan fell 35 percent to 50 percent in the past year. “The only people who are selling properties are people who need money fast,” he said.
The propensity of rich Afghans to acquire assets in Dubai fell under the spotlight after a run at Kabul Bank, the country’s biggest private lender, in 2010. Dubai villas account for about $160 million of $900 million in assets auditors are trying to recover from the collapsed bank, which extended unsecured loans to a roster of well-connected individuals, according to a former senior Afghan official, who spoke on condition of anonymity. In June, the Afghan government told the International Monetary Fund that it had managed to retrieve properties in Dubai worth an estimated $44 million.
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