Indian companies are expanding into the UAE and the Gulf because of the tremendous opportunity afforded by the region's return to expansive growth and by difficult conditions at home. As Gulf economies witness increased migration in the wake of the Arab Spring, stronger construction demand is benefitting the region's interiors industry and attracting players from around the world.
Waggener Edstrom: Sites and Spaces has designed and fitted-out offices for international communications firm
"In the first year we expect our current total revenue to grow by 15 to 20 per cent from our new business in the GCC. Over a period of three to five years, this may constitute 30 per cent of our total business," Darshan Raghunath, director and founding partner, Sites and Spaces Interior Designing and Civil Works, tells MEI.
Raghunath's company specialises in theme-based commercial and residential projects and has executed interiors design and fit-out jobs for the multinationals such as Volvo and Waggener Edstrom in India, is in the process of launching its UAE operations and hopes to eventually cater to the wider region.
"Being a market closely situated from India, we would be able to use a lot of our experienced experts on the team to deploy projects. It's the perfect market for our first international expansion," he says, adding that companies such as his can tap into the strong existing sourcing relationship GCC firms have with Indian interiors players.
EXPANDING MARKET Many firms are preparing for the slew of new projects announced in the region recently, with the region recording double digit growth.
In 2012, building projects worth over $68.7 billion were completed in the GCC, a 48 per cent increase over the previous year, according to a report commissioned by dmg::events, organisers of the Index International Design Exhibition, the region's largest interiors and fit out show.
GCC projects spent $7.2billion on interiors and fit-outs in 2012 and the market is expected to grow by more than a quarter (28 per cent) to $9.2billion in 2013.
Interior spends now account for 10 to 20 per cent of total GCC project costs across the different sectors. With government spending, Saudi Arabia has the largest market share (38 per cent), while the UAE is a close second at 36 per cent. Kuwait and Qatar are other promising markets. "The GCC interiors and fit outs market is now moving towards a more personality-driven design trend as the market is coming back," says Frederique Maurell, event director for Index 2013 and The Office Exhibition.
The market compares favourably to other international destinations, says Maurell. "Global suppliers are increasing their presence in the GCC as clients here spent more on interiors and fit outs than those in Europe and Asia. This remains true even as average spends on interiors and fit outs have dropped from about 30 per cent in 2011 to between 10 and 20 per cent at present," she says.
Local interiors retailer Danube Building Material hopes to ride this wave to a cool Dh2 billion in sales this year, according to a Dubai-based newspaper report.
Raghunath: The UAE is perfect market for international expansion
Established in 1993, Danube provides more than 25,000 products in stock and in-house value-added services in all of its multiple set of showrooms across the Middle East region and India.
"We recorded 12 per cent growth in sales during the first six months of 2013 and are confident to maintain the same growth rate by the end of the year," the paper quoted Rizwan Sajan, chairman Danube Gorup, as saying. "In the whole region, Danube will offer another 8-10 showrooms in the coming few months," he said.
The company currently supplies building materials to major clients such as the Abu Dhabi and Dubai airports, Dubai World Trade Centre, properties on the Yas and Palm islands and various hospitals, hotels and schools.
Akash Shrivastava is the owner of the UAE free zone company Digital Rain Consultancy, which expanded from Mumbai recently and is already executing a couple of jobs in the Emirates and one in Oman -- as well as projects in Africa.
"We've seen growth stagnating for a long spell since end 2008. But we've known that it was only cyclical. We'd always believed that the regions inherent business-friendly policies will see it through. And it has," he tells MEI.
"In the past two years, we've seen a lot of construction activity slowly gaining momentum. The demand for housing and for luxury spaces in the region is only going to increase and we are expecting the boom to crest during 2018 to 2020."
Shrivastava: Executing jobs across the region; showroom designed for World Tech with a black, white and orange colour scheme (below)
ADVANTAGES One reason Indian companies are looking at expanding into the Gulf is the sheer heterogeneity of their home market. In fact, the real estate consultancy Jones Lang LaSalle India advises clients that India is so diverse that it is perceived as four different countries, Shubhranshu Pani, managing director -- Retail Services, said in an interview last year.
Doing business across India, despite its five per cent GDP growth, may mean having to understand different markets. Add the inherent structural advantages and the GCC, although nowhere near India in volumes, is far more exciting.
"Agreed that the GCC is a much smaller market than India, however, rising operations cost and increased competition at every level make it a challenging market to survive in," says Shrivastava.
"The GCC is a better bet simply because it is easier to do business. And we are looking at business from GCC and beyond and for that very reason, it's a safer, better bet."
Companies come to the region because the opportunities are better here -- despite India's vast opportunities across underpenetrated sectors and what at first glance appear to be favourable market conditions.
Sites and Spaces' Raghunath says there's also a better appreciation for fine aesthetics in this region than there is in India -- where customers are often price conscious and therefore willing to compromise on design.
"The Middle East has always been a market where customised and unique aesthetics -- our strongest proposition -- has always been a core consideration for anyone looking at property development, re-development or renovations alike. We believe Sites and Spaces can carve a unique place for itself in this newly revived market. The timing is right for us to launch," he says. Coupled with payments in foreign exchange, expanding into the relatively homogeneous GCC appears more favourable.
REGIONAL SPRINGBOARD Being based in the business-friendly UAE -- or elsewhere in the GCC -- also allows Indian companies to do business with the rest of the world much more easily.
Danube Building Materials, which is seen as a UAE company, is now looking at new markets, particularly in Africa. Last year, Danube opened two showrooms in Libya and Kenya. "We will continue to expand in Africa with new showrooms in Ethiopia and Tunisia," Sajan was quoted as saying.
Digital Rain's Shrivastava says the Middle East is the gateway to the world for Indian companies. "It's easier to target international business from UAE than from India. Also, a company based out of UAE has more acceptance and respectability in the region. Doing business in and out of UAE is quite transparent, competitive and the infrastructure is on par with the best in the world," he says.
"Also, the Gulf is not a partisan or prejudiced space for doing business. If you are good at what you do, nobody looks at whether you are an Indian or whatever. In interiors as in any other business, if your business model is right and you have the right mix of services that the market wants, you will be successful," Shrivastava adds.
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