Is the Trump Organization too late for India's real estate party?

Posted by: Prashant Gopal on August 19, 2008

Donald Trump Jr., The Donald’s 30-year-old son and the Trump Organization USA’s executive vice president of development and acquisitions, recently announced that he’s launching a $1 billion Indian hedge fund that will focus on luxury real estate investment.

He got the idea last November after speaking at a real estate conference in Mumbai. At the time, India’s real estate market was in the fifth-year of a boom and international funds were investing heavily in apartment buildings, hotels, and shopping centers across the country.

The market has changed quite a bit since then. Inflation and interest rates are climbing and shares of Indian builders, home price appreciation, and demand for land are slowing.

Of course, this might be a good time to jump in and pick up land at distressed-sale prices. But he will be competing against established players (including U.S. companies such as Wachovia, Trinity Capital, Vornado Realty Trust, and Tishman Speyer). Dubai firms have been investing heavily in Indian estate for years now and have good connections with landowners and government officials and a deep understanding of the country’s shadowy world of land acquisition and development.

Trump says his fund will start slow, investing first in luxury real estate in Mumbai before expanding to cities such as Bangalore, Hyderabad, and Delhi where the IT sector is strong.

India’s population of U.S.-dollar millionaires is growing faster than any other place in the world, according to a recent study. And Mumbai has some of the most expensive real estate in the world.

“The fund will be for acquisitions of real estate in the high end and across the spectrum,” Trump told a reporter at Bloomberg. “We’ll start it off relatively small and grow it as we get more familiar with the Indian market. Our entry has to be in Mumbai, and that’s where everything is going on right now in terms of high-end real estate.”

Reader Comments

IndianBull

August 20, 2008 8:35 AM

Its quite foolish to think the party is over when it hardly began. We have hardly scratched the surface as far as the real estate is concerned. The long term growth prospects look great with increasing income levels and subsequent propensity to spend.

anjani choubey

August 20, 2008 10:01 AM

civil con.

Squeezebox

August 20, 2008 11:47 AM

With the Goodwill Games set for India in 2012, this is a no-miss proposition.
All Junior has to do is figure out where the venues will be, and give equity rather than direct bribes (which are illegal according to US law) to key players. If the deals are lucrative enough, they'll get done in time.

BW writer Prashant Gopal

August 20, 2008 1:38 PM

IndianBull, you make a good point. The longterm prospects for India's housing market are strong. The population is ballooning as are the salaries for IT professionals, bankers and even journalists (The newspaper and magazine industries are booming in India). I do think that builders have focused too much on luxury real estate and could do more to provide housing for the huge number of potential customers with big aspirations and small bank accounts. Weakening land prices will only help make it feasible for developers to build affordable housing and reach this largely untapped pool of buyers.

Bram

August 20, 2008 2:53 PM

It all looks nice and rosy in the beginning but many of those properties are already overpriced. Mumbai's real estate is already as expensive as New York. This is the beauty of the real estate mirage - In the beginning everybody thinks real estate prices can go only one way. People in US woke up to this reality an year back and still kicking themselves for the mistakes of past. Asian markets might be seeing their turn in few more years, perhaps months.

Sri

August 20, 2008 4:23 PM

Bram, India has one third land and four times larger population when compared to America(roughly). That makes Indian RE 12 times more attractive from demand-supply perspective. Also, Indian "baby boomers" are aged between 0 and 25 now.

Raj

August 20, 2008 4:34 PM

@Squeezebox: Goodwill Games? That game ran out of good will years ago. And who knows how long Commonwealth Games will survive after New Delhi, good luck with your investment strategy.

Kamlesh Pandya

August 20, 2008 5:41 PM

RE: Prashant's revert to Indiabull.
One shouldn't be too optimistic. The fact is, where India's economy is concerned, no one's sure and there's confusion all around - why? Its very simple: India's economy is at a stage which is comparable to a spaceship at lift-off: fighting earth's gravity to move out of its ambit and enter outer space. Will it get through - or will the gravitational pull be too strong?
Put the Indian economy fighting factors that choke economic growth, and the analogy becomes all too clear.
And this is where it gets interesting: none of the big players in Indian real estate are willing to say JUST WHEN price and demand trends will change. Whether the change will be positive or negative is a question they've not even thought of as yet.
I was at the CITYSCAPE INDIA exhibition, and heard Trump Jr - nice speech. But, if its taken him so long to put his money where his mouth is - he'll learn, the hard way.
Real estate, anywhere in the world, follows some very simple rules. So long as Trump Jr plays by those rules - it will be profitable. As will anyone entering the Indian realty scene - pick the right ones, enter at the right prices and you can't go wrong.

QASIM HASHMI

August 21, 2008 5:31 AM

we are an real estate consultant having good projects in hand, looking out for inverter to invest in mumbai real estate.kindly contact us for your requirements.
best reqards
thanks
qasim hashmi. cell no. +91 9967 92 44 54.

rob

August 21, 2008 9:52 AM

YES< a civil conversation for once.

Has anyone noticed that of all nations in the world, INDIA on forums inspires the maximum jealousie and hatred? BusinessWeek is not able to publish ONE single positive article about India without some idiot (usually a Muslim or Paki posing as a white man) asking why on Earth anyone dares to speak anything posiitve about India, when there are so many negatives.

I'm just waiting for someone to come in here and spoil this thread...

Anyone wanna lay bets on when that will happen? I've got 10-1 odds on the next two hours.

Shankar

August 21, 2008 11:10 AM

The only real oppurtunity for luxury development in India is along the 5000km
coastline, which largely is public accessible.
In Mexico, a large chunk of the coastline is privately developed and the
public cannot access many beaches !
There will be a public/private debate for development of the country's coastline over the next thirty years.
India already is struggling to feed its
people with the available agricultural
land.
Developing agricultural land for private
luxury development has huge risks for
food production.

Harish

August 26, 2008 4:57 AM

Good time to invest, but equity type returns could take a long time.
Indian real estate is essentially a shady business - black money, no regulator, terrible infrastructure. Getting out with gains (which none of the US investors have tried to do so far) will be a HUGE problem. All the best to the big names mentioned in the article. JUST TRY EXITING !!!

Also do not agree with the limited land argument. There is more than enough land available, but the infrastruture and zoning is constrictive. Real Estate will take atleast 5 years to give returns in excess of 10% pa. It is that bad.

Rahul

August 28, 2008 6:02 AM

Well, the real estate is still in demand for the elite clientele, its not anymore for the commom man. This could work, if he invest it in the right place.

& People like 'Rob', are here to just spoil the comments section. I am sure Rob isnt his real name.

Anyone wanna lay bets on that? I've got 10-1 odds on it. - sheesh

Kishore

September 1, 2008 8:28 PM

Over priced and over bloated. Not to mention, it's extremely difficult to buy and hold on to your property without someone trying to encroach when you are not there.

Take a look at the condition of roads, water supply, electricity and sewer/drainage. Appalling. For the prices to be at the same level as what you have in Tokyo, London and NY is utterly ridiculous.

Bottomline - not worth it. May be if there's a 80% correction from today's prices.

riathareja

September 11, 2008 8:14 AM

The world is now looking at India as the nation of the future. More significantly, India is well on its way to emerging as a first-world economy in the fields of information technology (IT), biotechnology, pharmaceuticals and the automotive sector, pushing the thrust now on to the retail sector to facilitate the creation of a new surging modern India. The real estate boom in India will not only propel the economy to sustainable heights, but will also generate employment for several millions. It is strongly expected that the growing Indian economy and growing opportunities will ensure that the foundation is laid for India's tryst with destiny and for it to be fully integrated into the world economy.For more view- realtydigest.blogspot.com

Bipin Agarwal

September 27, 2008 12:43 AM

The kind of development being planned in India by this ultra high end is not an issue. There is more money then you think. For the project announced in Bangalore, only thing missing is the helicopter service to airport. It is an excellent project otherwise.

hyderabadrealestate

February 26, 2009 5:34 AM

Real estate market is very slow in hyderabad. around 35,000 flats are for resale by banks dueto non payment of emi by the customers.
by march 2009 few more thousand flats will come for resale. prices are down by 30%- 40% . it is the right time to by a flat in hyderabad.
Hyderabad Real estate

www.indiarealestateproperties.com

June 20, 2009 4:37 AM

Take a look at the condition of roads, water supply, electricity and sewer/drainage . If the deals are lucrative enough, they'll get done in time.

Post a comment

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

BW Mall - Sponsored Links

Buy a link now!