Sunday, April 13, 2008

Foreign Banks Exit Own Mumbai Apartments

Desutsche Bank and Citibank, which are being quoted in newspapers as pouring heaps of private equity money in to projects of real estate developers, are themselves abandoning their residential properties in Mumbai.

Deutsche Bank is the same bank which has been reported as co-investing $500 million along with Lehman Brothers in a Unitech SPV.

Of course, no one expects them to give us the real reasons for selling these properties, but a change in the compensation structure is being quoted, along with the fact that these flats are located in "distant" South Mumbai, far away from the bank's current locations, and hence no senior directors want to stay in these houses.

However, until 3 months ago, Citibank itself had sold a property in NCPA Building in Nariman Point for Rs 34 crore, and has now put another residential property on Altamount Road for sale.
CB Richard Ellis (CBRE), the broker handling this transaction, has fixed a floor price of Rs 32,000 per sq ft.

It would be interesting to watch the price at which this property sells, or will it be doctored in back-end rebates to some NRI.

Some argue that these banks are only freeing fixed assets and releasing capital -- however, it is unusual for a bank to sell an asset with interminably rising value, if developers, brokers and some newspaper supplements are to be believed.

Recently, American Express Bank also sold some of their residential property, and HSBC has been selling property since 2006. Amex was also the bank that sold a Malabar Hill property to investor Rakesh Jhunjhunwala for Rs 25 crore.

Foreign banks have moved their operations from South Mumbai to business districts in suburban Mumbai, and now prefer to give their employees a fixed cash compensation every month, which the employees could use to pay the house rent or the instalments of a home loan.

So question is, what are these banks planning to do with the cash released by sale of these fixed assets. Real estate investments?





Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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