Dubai’s offshore real estate market: Pakistanis among people owning properties worth billons of dollars

ISLAMABAD: Rich Pakistanis are among those who own properties worth billions of dollars in Dubai’s offshore real estate market.

This has been claimed in a research paper, “Who Owns Offshore Real Estate? Evidence from Dubai” published by the EU Tax Observatory (a research institution).

According to the paper, the offshore real estate in Dubai is large: at least $146 billion in foreign wealth is invested in the Dubai property market. This is twice as much as real estate held in London by foreigners through shell companies. Second, geographical proximity and historic ties are key determinants of foreign investments in Dubai.

About 20 per cent of offshore Dubai real estate is owned by investors from India and 10% by investors from the United Kingdom; other large investing countries include Pakistan, Gulf countries, Iran, Canada, Russia, and the United States. These patterns hold when focusing on the most affluent neighbourhoods, with the main difference that Indian investments become relatively smaller and Russian investments larger.

The bulk of foreign-owned properties in Dubai belong to owners from the Middle East, South Asia, Europe, and Central Asia. The largest foreign owners (both by the aggregate value of properties owned and by the number of owners) are Indian nationals: about 35,000 Indians own Dubai properties, worth almost USD 30 billion (20 percent of total offshore Dubai real estate). The United Kingdom comes next (23,000 unique owners, with properties worth USD 15 billion, 10 percent of the total).

The remaining top countries by aggregate values include countries in the wider Middle Eastern and Central Asia region (e.g., Pakistan, Saudi Arabia, Iran, Jordan, and Russia) and large economies (e.g., Canada, United States, and China). About eight percent of offshore Dubai real estate belongs to owners from the European Union, it said.

The main owners of Dubai real estate in absolute terms are large neighbouring countries (such as India, Pakistan, Saudi Arabia, Iran, Russia), and a number of large, often English-speaking economies (United Kingdom, United States, Canada; and to a lesser extent China, Germany, France), it said.

Because offshore real estate typically goes unrecorded in official international investment statistics, the net foreign asset position of low-income economies with sizable holdings in Dubai is significantly larger than officially recorded. This finding has implications for the sustainability of the external debt of these countries and for macroeconomic modelling, as the net foreign asset position is a key state variable in standard open-economy macroeconomic models.

It is suggested that the lack of cross-border exchange of information on real estate ownership is an issue for tax enforcement, depriving governments of income tax revenues (on rental income and capital gains) and wealth tax revenues (for the countries that tax wealth). Expanding the forms of international cooperation that currently exist for financial assets to real assets could help address this issue, it added.

Copyright Business Recorder, 2022