Donald
Trump Jr. - the son of the brash American real estate tycoon and
reality-TV star - appeared at the high-profile Cityscape India 2007
real estate conference in Mumbai to give a speech on the subcontinent's
booming property market. Trump, the executive vice president of
development and acquisitions at New York-based Trump Organization USA
LLC, said India's red-hot economy has fueled demand for more
residential development, particularly luxury housing, but also hotels
and resorts for the country's flourishing tourism industry. Before he
departed, Trump indicated his desire to invest in India's real estate
sector, and hinted that he wouldn't wait long to do so. "We feel it is
now time to invest in Indian realty projects as the quality has moved
up and we see emergence of some high-end developers with a product
level that will support our brand," he said in his speech.
It
appears that time is now: Trump announced in late July that he intends
to set up a hedge fund worth up to $1 billion to invest in Indian real
estate. Accordingly, the privately held fund would initially target
property in Mumbai and also include an Indian family as investors.
Thirty year-old Trump did not give specific details about the fund,
such as how he plans to raise the money, or where the first investment
would be made. But in an interview with New York-based media company
Bloomberg LP, he did say that it would start conservatively and expand
as the opportunities presented themselves."The fund will be for
acquisitions of real estate in the high end and across the spectrum,"
Trump said. "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 the
high-end real estate. 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."Trump eschews investing in India's smaller
and less-affluent cities - he stated publicly at Cityscape India 2007
that he has no intention of entering the middle- or low-income segment
because "the best is in the high-end sector." When asked at the
conference which cities Trump Organization would consider for business
deals, Trump responded, "Certainly, the city I'm standing on (Mumbai),
Delhi, Hyderabad and Bangalore, where the IT sector has witnessed a
boom."
FAST FACTS
Trump Organization USA announced plans to launch a $1 billion hedge fund to invest in Indian real estate. Donald Trump Jr.'s interest in the Indian real estate market was sparked in 2007 when he visited the subcontinent for the Cityscape real-estate conference in Mumbai.
Quote:
"We'll start it off relatively small and grow it as we get more
familiar with the Indian market," Trump Jr. said. India's personal
wealth has exploded in recent years. According to the World Wealth
Report 2008, issued June 24 by New York-based financial giant Merrill
Lynch & Co. and Paris-based consulting firm Cap Gemini SA, the
number of Indians with financial assets in excess of $1 million grew by
nearly 23 percent in 2007 alone, surpassing China's 20 percent growth
and Brazil's 19 percent increase."India led the world in
[high-net-wealth individuals] population growth at 22.7 percent, driven
by market capitalization growth of 118 percent and real [gross domestic
product] growth of 7.9 percent. Although India's real GDP growth
decelerated from 9.4 percent in 2006, current levels are considered
more stable and sustainable. India's two largest exchanges - the Bombay
Stock Exchange and the National Stock Exchange - ranked among the
world's top 12 exchanges by end of 2007, boosted by initial public
offering markets and heightened international interest," the report
stated. In an effort to tap this local wealth, Trump Organization is
moving forward with plans to build a luxury residential
and hotel project in Mumbai, announced last year. The company picked
this west-central coastal city of 13 million because of its
status
as an international center of commerce and India's commercial and
entertainment center: Mumbai generates some 5 percent of India's gross
domestic product and accounts for nearly one-quarter of its industrial
output. It is also home to such important financial institutions as the
Reserve Bank of India, the Bombay Stock Exchange, the National Stock
Exchange of India and the corporate headquarters of many of India's
largest companies and numerous multinational corporations.Yet, Trump
will also be entering India at a time when rising inflation has nudged
borrowing costs to their highest levels since 2002, effectively curbing
the country's five-year property boom and sending valuations for many
projects downward. Nationwide, inflation rose 11.98 percent in the year
ending July 19, which prompted the Reserve Bank of India to issue new
policies aimed at curbing the trend. Still, interest rates on home
loans have continued to creep upward by 1-to-1.5 percentage points,
from around 10.5 percent to 12 percent annually. Many analysts expect
inflation to remain at current levels, if not higher.
"We
expect headline inflation to possibly cross 13 percent levels. With
inflation likely to remain in the double-digit range for the next few
months and supply-side measures not really being effective in bringing
inflation down, we expect the Reserve Bank of India to continue to
raise rates to temper demand-side pressure," Citigroup India economists
Rohini Malkani and Anushka Shah said in a July research note.The
younger Trump's plans to launch the $1 billion Indian real estate fund
reflects Trump Organization's push to expand globally. The privately
held company - which does business in a variety of real estate sectors,
including residential properties, hotels, office, golf clubs, as well
as gaming and merchandising entertainment - plans to develop a pair of
mixed-use projects in Istanbul, Turkey, and Dubai. The Istanbul
project, which Trump Organization announced in April, will
consist
of two towers and a luxury shopping center, while in Dubai, the company
has partnered with local developer Al Nakheel Properties to build the
$600 million, 62-story Palm Trump International Hotel & Tower on
the trunk of the Palm Jumeirah.One of the world's most recognizable
manmade landmarks, Palm Jumeirah, an artificial island shaped like a
palm tree off the Dubai coast. It was built by Nakheel and is owned by
the Emirate government. Trump Organization already has properties in
Dominion Republic, Seoul, Toronto, Panama, and Mexico.If the company
succeeds with its plans for India, it will joint various other real
estate and financial-services firms that in recent years have invested
vast sums of money in the Indian property market. The list includes:
*Lehman
Brothers Real Estate Partners LP, which recently invested $175 million
in a Mumbai real estate development that is being built by
Gurgaon-based construction firm Unitech Ltd., and is in talks with
Unitech to invest an additional $525 million in the project.
*RREEF
India Advisors Pvt. Ltd., an India-specific alternative-investments
business launched in April by Deutsche Bank AG's New York-based
alt-investments subsidiary, RREEF Alternative Investments.
Headquartered in Mumbai, RREEF India Advisors plans to invest $1
billion in Indian real estate and infrastructure projects over the next
three years, beginning with a 31-acre, $400 million mixed-use
development outside of Hyderabad.
*JPMorgan
Chase & Co., which acquired a 4-percent stake in New Delhi-based
real estate developer BPTP Ltd. earlier this month for $60 million. The
New York-based financial giant previously invested in Lodha Group, a
Mumbai-based commercial real estate developer.
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