DUBAI, June 26 (Xinhua) -- As inflation in India soars and the value of the Rupee falls, non-resident Indians, who make up half of Dubai's 2 million inhabitants, increasingly struggle to make the needs for their families back home.
Despite counter-measures of India's central bank on Monday, the partially convertible Indian rupee showed little tendency to gain territory and fell back to a record low at around 57 per U.S. dollar. Since the start of 2012, the currency has lost 14 percent relative to the greenback. Since 2008, when the U.S. subprime crisis transformed into a Great Recession globally, the rupee depreciated 46 percent in value.
Dubai has been traditionally a magnet for qualified professionals and blue-collar workers from India who settle in the Gulf Arab sheikhdom as it is geographically close and offers much higher salaries than at home. Most of Indian expats working in Dubai can't afford to immigrate with the whole family, which forces them to send regular remittances to their country.
Because the UAE Dirham, the currency in Dubai, is pegged to the dollar, the fall of the rupee is at a first glance an advantage for Indians who work abroad, as they can buy more at home and their families receive a higher amount of rupees for the same amount of dirham. "Judging the exchange rate as favorable is money illusion," said Suresh Mandody, a shop owner in Dubai's Indian- dominated district of Satwa, "the premium my wife and brothers receive back home from my income is eaten up by the soaring inflation rate in the country."
Inflation rates soared to above 7 percent per annum in India, while counter measures by the Reserve Bank of India to raise interest rates by 5.25 percent in the last 18 months were more or less sterile. Wide-spread corruption, government miss-management and a massive brain-drain have taken its toll on subcontinent. Global rating agency Standard and Poor's warned Monday India could be the first BRIC country to lose its investment grade.
Sunny Ganjoo, Deputy Manager Sales at developer Emaar MGF, a joint venture between the Middle East's largest real estate giant Emaar Properties and India's MGF Development Limited, said that only an investment in property can preserve capital for non- resident Indians.
"The fall of the rupee has triggered a run on real estate in India. Property is generally cheaper than in Dubai, but the currency meltdown has made it a bargain," he said.
According to Ganjoo, property prices have rallied over 30 percent year-on-year in Indian hotspots like Mumbai, Chennai or Bangalore.
Investing in stocks back home, on the other hand, is no alternative. Since September, the volatile Bombay stock market gauge BSE India Sensex 30 Index has been trading in a narrow band between 1,500 and 1,750 points amid declining trading volumes.
This leads Dubai's Indians to spot property. A house worth 6 million rupee today costs 370,000 Dirham (100,800 dollars), 16 percent less than one month ago. A three-bedroom apartment in the outskirts of Mumbai costs 100,000 Dirham (27,270 dollars), in Dubai, this value would not even buy a one-bed room flat. By law, foreigners are not allowed to own property in any Indian federal state.
India is Dubai's top trading partner, as exports and re-exports reached 40 billion Dirham (10.9 billion dollars) in 2012. But there is another problem where expat Indians in Dubai feel the economic heat.
The constant high price of gold has forced many jewelry traders, most of them Indians, to foreclosures. Gold is an important god in the Hindu culture, and many Indians regard it as an insurance against inflation, making their country with its 1.2 billion people the world's largest consumer of the yellow metal.
Thanks to its gold souq in the old town of Deira, Dubai is nicknamed "City of Gold." But there and in the world's largest shopping center Dubai Mall, many jewelry shops are shut and look for new tenants.