x Abu Dhabi, UAETuesday 25 July 2017

Gulf losing out on '$1tn worth' of India deals

Indian billionaire Gopichand Hinduja says the GCC countries are more focused on investing in stock markets than infrastructure.

Gulf countries are missing out on US$1 trillion (Dh3.67tn) worth of infrastructure projects in India, according to the head of the Hinduja Group, an Indian conglomerate.

"Unfortunately the Gulf countries have not yet come [into India] in a big way - there is a huge potential for investment in India," said Gopichand Hinduja, the co-chairman of the group. He said GCC countries were more focused on investing in stock markets than infrastructure. "It is inevitable for India to play a part and a long-term role in this region," Mr Hinduja said.

The Hinduja Group was one of the first Indian businesses to venture into the region when it transferred its business base to Iran in 1919. It has since grown to become one of the largest diversified groups in the world, spanning the finance, energy, infrastructure, telecommunications, and manufacturing services across the US, Europe and the Far East. With the advent of the 1979 Islamic Revolution in Iran, it moved its headquarters to London, where it remains.

India has become one of the fastest-growing economies in the world. Coupled with a young demographic that demands high-quality residential and commercial property and the knock-on effect of rising house prices, more companies are looking at the region as an investment hub.

India is expected to overtake China as the world's fastest-growing economy by 2015, an advancement that is expected to generate demand for infrastructure and employment. The country's economy is expanding by 8.9 per cent this year and may accelerate to 9.5 per cent annual growth in the next five years, according to data from Morgan Stanley.

Last week India reinforced relations with the UAE when it launched its first vehicle assembly plant in Ras al Khaimah in partnership with the Ras Al Khaimah Investment Authority. But the relative absence of UAE investment in India should be addressed, said Mr Hinduja.

"[Investment] is a win-win situation. India … needs the co-operation from oil producing countries, but the Gulf can have huge investments in India."

The 2008 global downturn sent shockwaves through the UAE and put many infrastructure and property projects on hold.

"There has been a retrenchment [of costs] so most governments are spending domestically in order to boost economies," said Majed Azzam, a property analyst at Alembic HC Securities.

Mr Azzam said any excess investment was often poured into overseas government bonds or equity markets because it was much easier for a foreign investor to withdraw cash compared with trying to take out money tied up in land assets.

"When you directly invest in infrastructure you have to deal with politics, and having the right partner is key, whereas equity markets are much easier," he said.

Abu Dhabi Investment Authority and Kuwait Investment Authority, two of the largest sovereign wealth funds in the Gulf, have increased their portfolio allocations to Indian-listed companies.

Qatar Holding, the investment arm of the emirate's sovereign wealth fund, also has an office in India. In 2007, Emaar Properties set up a property joint venture with MGF to target the Indian property sector.

Sachin Kerur, a managing partner at the law firm Pinsent Masons, said Mr Hinduja's comments "make absolute sense".

He said international companies, including building companies and contractors in the Gulf, had expressed interest in investing in Indian infrastructure projects.

"India has a huge infrastructure real estate market, but it does not have enough capacity to meet its deficit and is reliant to a great extent on international assistance," said Mr Kerur.

He added that the UAE's subdued property market should not necessarily impact investment in Indian projects.

"Inevitably anyone faced with challenges in the region here might be scarred but you've got to look at India in a completely different way, because the fundamentals are strong and there is inherent demand for infrastructure and real estate," he said.

fhalime@thenational.ae