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?