Bangalore / New Delhi: Four years ago, when developer Niranjan Hiranandani and his son Darshan announced the 23 Marina skyscraper project in Dubai, the emirate was the place to be in.

The city had turned into a construction site, its skyline was dotted with yellow cranes, and Indian developers and investors were lining up for a share of the pie.

Looming uncertainty: An undated handout photo of Marina residences at ‘The Palm Jumeirah’ development, also known as Palm Island, built by property developers Nakheel PJSC in Dubai, United Arab Emirates. Bloomberg

Dubai was shaping itself into a modern trading hub with mega real estate projects such as the Palm Islands—three man-made islands extending into the sea. But it took a big hit during the downturn as demand waned and credit became scarce. It’s now dotted with incomplete skyscrapers.

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On Wednesday, the emirate said it would ask creditors of Nakheel PJSC, the builder of the Palm Islands, and Dubai World, the state-owned investment conglomerate that led the emirate’s expansion, to agree to a standstill on billions of dollars of debt as a first step towards restructuring.

Only a few Indian companies have said they have exposure to Dubai.

New Delhi-based Omaxe Ltd had in June 2008 set up a subsidiary, Rohtas Holdings (Gulf) Ltd, for its real estate operations in Dubai. It planned to construct two residential projects in the Palm Islands at a cost of Rs2,850 crore.

Omaxe said it may consider exiting the projects as it had not yet got possession of the land from Nakheel, though it has paid about Rs40 crore as its first instalment. Its shares fell 2.25% to Rs93.25 on the Bombay Stock Exchange on Friday.

“Omaxe has still not gained any rights from master developer, Nakheel, for development," said Rohtas Goel, chairman and managing director, Omaxe. “We may exit keeping in view the current real estate markets both in Dubai and India."

Sheth Estate (International) Ltd, a subsidiary of Mumbai-based Sheth Developers Pvt. Ltd, entered Dubai in 2005 and has five ongoing residential and commercial projects worth $545 million (Rs2,545 crore), but Jitendra Sheth, director, finance and marketing, said the firm has not slowed its projects and construction was going on.

The property market contributes 38% to Dubai’s economy. Since September 2008, property rates in the emirate have crashed by at least half, resulting in Nakheel and Emaar Properties PJSC, Dubai’s two realty czars, being stuck with incomplete mega projects.

Last November, newspaper Emirates Business 24/7 reported that Nakheel and its affiliate Limitless Llc, controlled by Dubai World, would halt property sales until Dubai’s real estate market improved. Projects by Indian realty firms, too, were struck.

“We were planning to start the (second) project but we will wait for another six months. India is the safest place to invest in given the current circumstances," said Hiranandani, who also heads Hircon International Llc, a joint venture between Hiranandani Developers and Dubai’s ETA Star Property Developers Llc.

G. Nandagopalan, project co-ordinator, Kap (India) Projects and Construction Pvt. Ltd, recalls having to return home this March after he lost his job at a project management consultant in Dubai that looked after Nakheel’s multiple projects.

“All their projects were shelved and we had no work. The entire team of 90 was asked to leave," Nandagopalan said in Bangalore.

Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, a property advisory, said what was happening in Dubai was a corporate default situation involving construction firms.

“It was evident that Dubai’s real estate market was not long-term sustainable since it was not driven by end-user demand. For a long time now, a multitude of apartments there have been standing unsold, held largely by speculators and investors who had bought them to sell them at higher prices that never happened," said Puri. “The big question now is how many of these investors have the ability to service their mortgages."

Among Indian firms, DLF Ltd, the country’s largest developer by market value, and Unitech Ltd, the second largest, said they have no exposure to Dubai.

DLF earlier had a joint venture with Limitless to develop the Bidadi township on Bangalore’s outskirts but the two companies parted ways because of a delay by the state government in acquiring land. “We never had any projects in Dubai and we no longer have a joint venture with Limitless,"Rajiv Talwar, DLF group executive director, said.

Emaar MGF Land Ltd, a joint venture between Emaar Properties and Delhi-based MGF Development Ltd, said its business and funding plans were on track. “Emaar MGF has operations only in India and the developments in Dubai have no impact on Emaar MGF’s business or operations," a spokesperson for the firm said in a statement.

Emaar MGF had in September filed a draft prospectus for an initial public offering to raise Rs3,850 crore. Emaar has a 42% stake in the joint venture.

Sobha Developers Ltd, too, said it has no direct exposure in Dubai, but the group does operate in West Asia through various companies unrelated to the Indian-listed firm.

“Sobha in Dubai is completely different from Sobha here. All these companies have nothing to do with Sobha (Developers) in terms of ownership," chairman P.N.C. Menon said.

He, however, said he personally owns stakes in West Asian companies with other partners and has operations in Bahrain, Dubai and Oman. Menon said the West Asian business group had completed and sold three commercial business towers and one residential tower.

HBS Realtors Pvt. Ltd, another Mumbai-based firm, is unperturbed by the developments. It is planning ultra-luxury residences in downtown Dubai and is negotiating with a couple of large state-owned companies for land. “Prices are close to bottoming out and we are hopeful that there would be appetite and confidence in the market as soon as the debt crisis is over," said Sandeep Shah, managing director, HBS.

Bloomberg contributed to the story.