Dubai’s appeal as a safe-haven investment destination for Pakistani investors has weakened amid the ongoing regional conflict, with investors and currency dealers reporting difficulties in recovering funds and a shift of capital back to Pakistan.
Thousands of Pakistanis have invested hundreds of millions of dollars in Dubai, particularly in the property sector. Pakistan has twice been identified as the second-largest foreign investor in Dubai’s real estate market, while concerns have long been raised that illicit funds generated in Pakistan were being channelled into the emirate’s property market.
All Pakistan Builders Association Chairman Hassan Bakhshi estimated that around $60 million in illicit funds was generated in Pakistan each month and invested in Dubai, but said such flows had now largely stopped.
Currency dealers said the situation had reversed, with some funds held in Dubai becoming difficult to recover because of the ongoing conflict. They attributed increased remittances from Dubai partly to Pakistanis repatriating liquid assets to Pakistan.
The shift has also affected Dubai’s attractiveness as an investment and tourism destination. At the same time, higher inflows from Dubai have contributed to greater liquidity in Pakistan, with some funds being redirected towards the domestic property market.
Bakhshi said property prices in Defence areas had increased by around 50 to 60 per cent since the conflict began. He attributed the trend partly to investor preference for properties considered secure from ownership disputes and fraudulent transactions.
The movement of capital to Dubai had not been limited to property. A number of Pakistani technology companies had also relocated to the emirate, attracted by its business environment and seeking to avoid challenges related to internet disruptions and increased tax-related scrutiny in Pakistan.
Dubai was also being used by Pakistani businesses as a third-country base for conducting legitimate trade with markets such as India and Bangladesh. However, the prevailing regional instability has left some investors seeking to recover their assets and reconsider their exposure to the emirate.
Currency dealers said hundreds of millions of dollars could potentially return to Pakistan from the Gulf once regional conditions stabilise, arguing that the conflict had weakened investor confidence in Dubai.
Bakhshi also backed reports that Pakistani investors were attempting to withdraw or recover investments from Dubai, where property prices have come under pressure amid the conflict.
Meanwhile, property dealers said real estate activity in Pakistan had picked up, with both buying and selling increasing amid improved liquidity.
Property dealer Karim Dad said prices in several parts of Karachi had risen by around 20 to 25 per cent. He attributed the increase partly to government measures aimed at supporting the construction sector and improving activity in the property market.
