Rich Russians fleeing sanctions are pumping up Dubai’s property sector

DUBAI, United Arab Emirates – The workforce at Dubai property agency Mira Property have cause to rejoice. 

The posh actual property firm simply clocked a 100% year-on-year improve in gross sales to patrons from Russia and different former Soviet states within the first half of 2022.

Property gross sales to those nationals for the agency, which focuses on Russian-speaking shoppers, doubled yr on yr to 2 billion dirhams, or $500 million, in response to an organization press launch issued this week. 

In a swanky Dubai nightclub in Might, Russian actual property brokers from one other brokerage popped bottles of champagne to rejoice making report commissions on gross sales to fellow residents shopping for their first houses within the desert oasis. One saleswoman raked in 4 million dirhams in fee in simply three months, in response to her colleague, who spoke to CNBC anonymously in gentle {of professional} restrictions. 

And billionaire oligarch Roman Abramovich, former proprietor of Chelsea soccer membership and longtime affiliate of Russian President Vladimir Putin, is reportedly house-hunting on Dubai’s Palm Jumeirah, the long-lasting man-made archipelago of synthetic islands designed to seem like a palm tree. The tycoon’s non-public jet, price $350 million, has been grounded within the emirate for some 4 months after the U.S. Justice Division licensed its seizure.

The inflow of patrons from Russia — in addition to from the Commonwealth of Impartial States (CIS), a bunch of 9 former Soviet international locations spanning Japanese Europe, the Caucasus and Central Asia — has pumped up the United Arab Emirates’ property sector within the wake of Russia’s invasion of Ukraine and subsequent Western sanctions. 

Whereas quite a few international locations imposed sanctions and asset seizures on rich Russians and figures linked to Putin, inflicting many to lose their multimillion greenback properties in cities like London and Paris, the UAE has remained open for enterprise.

“The warfare in Ukraine and the influence of sanctions on Russian-speaking people and their institutions have led rich CIS buyers to flee their international locations and discover a haven in Dubai,” Mira Property CEO Tamara Getigezheva stated in her firm’s launch.

“CIS billionaires and entrepreneurs have been flocking to the UAE in report numbers, resulting in a surge in demand for actual property. Most homebuyers are on the lookout for prepared models and waterfront properties.”

Certainly, Dubai is seeing its hottest actual property market in years, with gross sales within the sector up 45% yr on yr in April and 51% in Might, in response to the Dubai Land Division.

Following a steep dive firstly of the pandemic, the UAE’s glitzy business hub noticed a gradual restoration after it adopted a extra relaxed strategy to the Covid-19 pandemic as different markets had been nonetheless imposing heavy restrictions. The UAE opened up new visa alternatives for long-term residents and distant employees, signed a historic normalization cope with Israel, liberalized a few of its social guidelines, and switched from its Islamic Friday-Saturday weekend to the Saturday-Sunday one.  

However the choice to remain impartial as a lot of the rich world shut its doorways to Russians following Putin’s brutal invasion of its neighbor in late February has paid off significantly properly for the UAE, whose 90% expat inhabitants, tax haven standing and repute for monetary secrecy make it extremely engaging to most of the world’s high-net-worth people.

Dubai brokerage Betterhomes, in a rating launched in April, discovered that Russians moved up two locations to grow to be the fifth-top patrons of Dubai properties within the first quarter. And London-based citizenship-by-investment agency Henley & Companions in June launched a report projecting that the UAE would be the world’s high vacation spot for the ultra-wealthy this yr, forecasting that it’ll obtain 4,000 new millionaires. 

Russia, in the meantime, is about to lose 15,000 millionaires, in response to the agency’s analysis. 

“Roots within the UAE are actually turning into a must have asset in each high-net-worth investor’s portfolio,” Philippe Amarante, a managing accomplice at Henley & Companions, wrote within the report. 

Misha Glenny, journalist and creator of the e-book “McMafia,” wrote in a publish for Henley & Companions: “The UAE has skilled hovering charges of high-net-worth migration, primarily into Abu Dhabi and Dubai.” 

“Prosperous Russians in search of to flee the influence of the devastating Western sanctions on their nation have began to maneuver to the UAE and to Israel,” Glenny added, the latter of which is fourth on the agency’s locations record. 

There’s additionally a transparent development as to what sort of properties Russian patrons go for, those that work within the enterprise say.

“Largely luxurious properties, particularly something across the sea,” Tahir Majithia, managing accomplice at Dubai-based Prime Capital actual property, informed CNBC. He named sought-after areas just like the Palm Jumeirah, in addition to the upscale Emaar Beachfront and La Mer properties alongside town’s coast. 

“Something close to the water with a very good view, that’s all the time their first desire.“

Patrons search a mixture of properties to carry and hire as investments in addition to for private use, although most are for funding, Majithia stated. “Block offers,” by which a purchaser will buy an entire ground or a number of, are quite common. One ground of a luxurious house constructing will price between roughly $7 million and $10 million on common, he stated, although this in fact varies with location and measurement.

Russians had been all the time among the many high 10 nationalities investing in Dubai property, Majithia stated. However there’s been a spike since February, he famous, including that “one thing we additionally seen was a few of these patrons had been additionally liquidating their belongings in different international locations and shifting these funds over right here.”

Many Russian patrons additionally make their purchases in cryptocurrency, he stated, as a number of of Dubai’s main property companies have began accepting digital forex funds.

Anti-corruption activists and lawmakers accuse Dubai of being a hub for soiled cash. Kremlin critic Invoice Browder has known as for the emirate to be placed on a monetary blacklist, and a bunch of members of the European Parliament in Might accused the UAE of facilitating “cash laundering at a grand scale,” calling on it to sanction Russian oligarchs who’ve moved there.

UAE officers on the nation’s Overseas Ministry and the anti-money laundering job pressure didn’t reply to a CNBC request for remark.

The Monetary Motion Activity Drive, an intergovernmental anti-money laundering watchdog, in March positioned the UAE on its “grey record” over considerations that the Gulf nation had “strategic deficiencies” in stemming unlawful monetary actions.

In response, the Emirati physique tasked with countering unlawful monetary actions stated that the UAE “takes its position in defending the integrity of the worldwide monetary system extraordinarily significantly and can work carefully with the FATF to shortly treatment the areas of enchancment recognized.”

UAE authorities have pledged to deal with illicit cash flows, because the nation steps up its reforms in an effort to satisfy worldwide requirements.

Within the meantime, its financial system is booming.

“I am positive a variety of Russians are attempting to repair their issues and their points, however Dubai will profit in the end from any disaster,” Emirati property magnate Hussain Sajwani informed CNBC in an interview in mid-March.

“I will be sincere with you, these sanctions … they made lots of people nervous,” Sajwani stated on the time. “If anybody brings cash by way of the banking system right here legally and professionally, we’ll do enterprise with them.”