Will the Weakening Rupee Affect Dubai?

The Indian rupee has reached a record low this past week at 68.825 rupees to the US dollar.

This is a difficult situation for India, particularly because of the increasing inflation that is sweeping the nation. The government have been taking measures to control the situation to the best of their abilities.

Not only is this affecting India, but it is affecting other nations such as the UAE and particularly Dubai.


Tourism, along with trade, are the primary means of income for Dubai. In 2012 the city generated 182 billion AED which is equivalent to 50 billion USD.

The city’s economy relies heavily on the influx of tourists from across the world.

Indian tourists are the second largest group to visit Dubai yearly, they are preceded only by Saudis.

Since the rupee began to gradually fall in May, hotels in Dubai have been reporting a 25% increase in booking cancellations. The main reason being that tours coming from India are being cancelled at an alarmingly fast rate.

However, hotels are not entirely dependent on Indian visitors so some of their lost bookings are eventually taken up by other tour groups.

Tour companies focused on the Indian region, are taking a hit. Rapid cancellations leave tour operators in difficult positions as once a tour is booked, the companies begin making down payments of up to 70% of the customer’s over-all expense.

Their solution is downgrading hotel rooms in tour packages and attempting include more exciting destinations within Dubai in order to increase their sales.


The property market in Dubai is also reliant on Indian buyers. Damac and Emaar, two large real estate firms, heavily market many of their projects in India.

It is a growing concern that due to the sinking rupee, many installed payments will not be made on time. This could potentially have damaging effects on the real estate market in the city.

In addition, the Indian government has set up a new limit for foreign investments.

In an attempt to keep the foreign exchange rate from plummeting further a new maximum has been set to 75 thousand USD versus the previous 200 thousand USD.

This limit is only relevant to domestic Indian citizens wishing to invest in foreign markets.

Thus far this new legislation has not affected Dubai but speculation suggests that it may end up having further repercussions on the real estate market in the city.

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