Dubai: Indian expats in the UAE (and the Gulf) have always battled with one existential question — are they better off taking a dirham loan from local banks and then using it to fund a property purchase or meet mortgage commitments in India? Or should they opt to do so by tapping mortgage funds from an institution based in India?

Indiabulls Housing Finance Ltd. hopes that with its newly set up operations in Dubai, they will be able to respond better to these doubts. “Home purchase and borrowings are very long commitments — short-term arbitrage never helps in this,” said Gagan Banga, Vice-Chairman and Managing Director at India’s second-largest privately owned housing finance entity.

“Also, the borrowing amounts are also high [for a] property purchase, and unsecured loans in local markets will not able to fill that space.” However, Banga added that those arbitrage options could still have a “partial” impact on Indiabulls’ goals in this market.

Banga believes there is enough happening to suggest that buying activity in Indian property is on the mend after a relatively lacklustre year. “Market is showing positive signals as real estate is skewed towards affordable housing projects,” Banga said. “These projects are selling at attractive rates and [with] innovative finance options/subvention [grants from government] schemes.

“High-end properties are at a standstill and leading developers with only upper category offerings are in a worse situation as transaction levels have gone down to almost none. This year seems to [suggest] a stable growth period with property sales picking up in the second-half, and with price corrections in pockets.”

Recently, the Indian central bank revised the lending rate and raised the possibility of more to come at some point. “There is marginal correction from RBI [Reserve Bank of India],” said Banga. “As such, banking and HFC [housing finance companies] have lowered offerings from 10.75 per cent to 10.15 in the last one year.

“Our expectation is that market may see a rate of interest 1 per cent lower than the current in the medium to long term. Most borrowings are happening on floating rate and hence customers will benefited if there is any correction on the lower side in future. To mitigate rate fluctuations, all the leading institutions are offering fixed rate of interest loans, which [are] an attractive proposition.”

Currently, “Potential buyers, mainly investors, are waiting for a rate reduction, expect a property price correction or better offers from builders. End-use customers are finding value and closing the transactions, and hence we see in the affordable segments transaction levels are pretty high.”

It is a full service branch that Indiabulls has opened in Dubai, and through which it will offer loan tenors of 15 years and more based on customer requirements. Indiabulls had an exposure in Dubai since 2012 through a tie-in with Doha Bank. The client base through this period totals 500 plus. (This is also the second overseas representative office after London.)