Mumbai: Donald Trump Jr, whose father built a multibillion dollar fortune in real estate, plans to set up a $1 billion (Rs4,270 crore) fund to buy property in India, betting on the nation’s growing wealth.
Trump may create the privately held fund with investors including an Indian family, he said in a telephone interview from New York on Monday. He didn’t give specifics on how he would raise the money, or when the first investment will be made.
New markets: A file photograph of Donald Trump Jr.
Trump would join Deutsche Bank AG and Lehman Brothers Holdings Inc. in amassing funds to invest in a market that recorded the world’s highest growth in millionaires last year, fuelling demand for luxury homes. The highest borrowing costs since 2002, however, have ended a five-year property boom, curbing valuations of projects and developers.
“The real estate market is in a downturn now,” said Ritesh Vohra, director of investments at Mumbai-based Saffron Asset Advisors, which manages more than $400 million in two property funds. “There’s some more pain left over the next two years or so, and that could be an opportunity to invest.”
Property prices in India are likely to drop by about 20-25%, Sarang Wadhawan, managing director of Housing Development and Infrastructure Ltd, India’s third biggest developer by market value, told reporters on Monday. His comments echo statements made last month by Keki Mistry, vice-chairman of the nation’s largest mortgage lender Housing Development Finance Corp. Ltd, and other developers.
“The fund will be for acquisitions of real estate in the high end, and across the spectrum,” said Trump, 30. “The market place is beginning to understand and appreciate luxury, so there is a great opening for us there, as well as in resorts.”
The number of Indians with financial assets of more than $1 million grew 23% in 2007, according to a report by Merrill Lynch and Co. and Cap Gemini SA on 24 June, surpassing China’s 20% and Brazil’s 19% growth.
New York-based Trump Organization Inc. also plans a residential and hotel project in Mumbai with a local partner.
“Our entry has to be in Mumbai and that’s where everything is going on right now in terms of the high-end real estate,” Trump said. “That’s the place where one is going to achieve the highest prices per square foot. It sets the tone for all of the other future developments.”
Economic growth forecasts of more than 8% for this year are attracting global funds to India, which, expect growing incomes and wealth to fuel demand for property.
Lehman’s real estate fund last month bought a $175 million stake, its biggest investment in India’s realty sector, in a Mumbai project under development by Unitech Ltd.
Deutsche Bank and other private equity investors last year pledged to invest $425 million in Lodha Group of Mumbai.
Deutsche Bank’s RREEF unit, the world’s largest alternative investment manager, in April said it plans to invest more than $1 billion over three years in India’s real estate and infrastructure assets.
Real estate prices in India have climbed for five straight years, boosted by a six-year equity market boom and rising incomes. The rally in property prices may end this year as falling stock prices and rising interest rates slow sales and make it tougher for smaller developers to borrow money.
“The pendulum has started shifting back a little bit to the point where prices have started to become a bit more reasonable,” said Trump. “It will allow companies such as ours to justify buying land. It’s a good opportunity for us.”