Narayanan Sadasivan lives at the end of a dirt path that winds up the main road for a quarter of a mile through coconut palms and mango and tapioca trees. All the houses along the path are traditional mud-brick huts with thatch roofs.

But Sadasivan has a "pukka" house of fired bricks covered with plaster, with electricity and ceiling fans. It is painted in startlingly bright colors.

Sadasivan is one of the new rich of the Indian state of Kerala. He and thousands of others have gone to seek their fortunes in the oil-rich countries along the Persian Gulf, and they send back an estimated $500 million a year to their families who remain here.

Since the gulf employement boom began for Kerala in 1973, the money that an estimated 300,000 laborers have sent home has been spent mostly buying property and building fancy new houses. This in turn has produced rampant inflation in construction costs and land prices.

It had also broken through some caste and class lines and has allowed poor women to "marry up" because their families had work permits in the gulf. Men who work legally in the gulf are considered better marriage catches than even Indian civil servants or those who can legally work in the United States. The dowry they can demand has more than tripled in the past four years, to $6,000.

But little if any money has been invested in the economic development of Kerala, one of India's poorest states, which has one of this country's highest unemployment rates.

In addition, there are now growing signs that Kerala's bubble in the gulf may be bursting.

The gulf states, especially the United Arab Emirates and Kuwait, have begun cracking down on the thousands of illegal workers there, many of them from Kerala.

Moreover, the gulf construction boom appears to be slackening and Indian workers here fear that they are being undercut for the few remaining jobs by Sri Lankans and Koreans, who ask even lower wages.

But it is mainly new labor laws and the crackdown on illegal workers by the gulf states that have spread what the Statesman newspaper described as "panic" through Kerala.

Marriage brokers in the Trichur District spoke of "unprecedented gloom" -- at least 100 marriage contracts have not been completed because of the unsettled work situation in the gulf.

Already there are estimates that 10,000 illegal workers will be forced to leave the United Arab Emirates alone. Some have been jailed and raids showed they had no papers, and about 1,000 have been shipped back in the past week.

On of the first actions of the newly elected, Marxist-dominated state government was to ask for assistance from the national government of Indira Gandhi and to urge it to negotiate with officials in the Emirates to help Indian workers.

While the impact of the crackdown on the economy of the state will not be great, since so little of the money is invested, it could be disastrous for families who have mortgaged themselves for funds to send a relative to tap the riches of the gulf.

One man, for instance, sold everything he had to get there. Unable to find work, he now sits penniless in his brother-in-law's house with no land of his own to till.

These people are joining an estimated 1.2 million already unemployed in Kerala. One economist said he feared that they will be forced to leave their villages for the already overcrowded cities to find work.

For those able to find steady work, however, the gulf has proven to be the pot of gold at the end of the rainbow.

Sadasivan, for one, was part of the early migration to the gulf. He went to the Emirates in 1970 as an electrical worker and later got a more comfortable job in a hotel. In those 10 years he has been home on vacation seven times. He expects to continue working another three years, and then use his savings to buy a business in Trivandrum, Kerala's capital, about an hour's drive from here.

Sadasivan said he has sent back $250 a month -- a fortune in a state where the per capita income is $120 a year. With that money his family has built what economists E. T. Matthew and P. R. Gopinathan Nair called a "pukka" (first-rate) house -- one that cost more than $1,250 to build, with a slate roof, real bricks and electricity to run appliances such as cooling fans on the ceilings.

These houses are sprouting all over Kerala, usually painted garishly birght colors that somehow do not fit into the lush green landscape of the southern Indian state.

V. Surendren still lives in the traditional thatched-roof hut, despite 22 months of construction work in Dubai. But as he cut open coconuts from a tree outside his house for visitors, he explained that he plans to build a "pukka" house soon after returning to the gulf.

He said he sent back almost $200 a month, but most of it was used feeding his family of 10 and bettering their living standard. They now eat fish two or three times a week instead of a few times a month and his wife wears a sari instead of the less expensive sarong-like wraparound skirt.

For Kerala, the boom has been magical. Jewelry stores have multiplied in the state's commerical center, Cochin, as families have followed the traditional Indian practice of putting cash into gold and silver.

And like the newly rich all over the world, residents here have sunk their money into cars. Kerala leads all states in the country in new car sales, and there are so many taxis that no more licenses are being issued.

They also put their money into land, generally a good investment. But economists here say land prices have shot up tenfold, making it a good buy no longer.

Construction prices also have soared. Material such as cement is scarce and expensive, and carpenters' and masons' wages have tripled to almost $3 a day.Fish, a staple food in this state that runs along the Arabian Sea, now costs almost four times as mucha as it did four years ago.

Hardly any of the gulf money has been put to industrial use, however. Critics of this lack of investment in industry point out that expansion of Kerala's economic base would enable the state to keep its manpower at home.

Despite the apparent drying up of the gulf market for workers, the flow from Kerala continues. Air India's four flights a week from Trivandrum to Kuwait, Abu Dhabi and Dubai still run full, although the waiting list for seats is no longer six months long.