As India’s economy sinks, even the Trump brand is struggling
But inside the Trump Towers complex in Pune in western India, employees say that most of the $ 2 million apartments are empty. The group is often empty, sales have slowed and buyers rarely visit.
The Trump brand once looked promising for Indian developers. But it is also struggling to overcome one of the worst economic crises in the country in years.
“In the past, Trump’s name may have helped attract investors, but those days have passed,” said Pankaj Kapoor, managing director of Liases Foras, an Indian real estate research company.
While Donald J. Trump was preparing to run for president, the Indian real estate magnates made a bet for the license of his name to sell apartments. Now India has more Trump-branded projects than any other country, except the United States: six residential towers in four locations, including Pune, a quiet industrial city of more than 3 million people.
But when Trump arrives in India on Monday to meet with Prime Minister Narendra Modi, his first official visit as president, he will enter a country caught in a severe slowdown. As the Indian economy faces its lowest growth rate in more than a decade, developers have abandoned residential projects and reduced prices to attract buyers.
It is not just the Trump brand that suffers from weak demand. Thousands of apartments are empty throughout the country or are caught in construction delays and prices have stagnated. Builders with debt problems cannot get loans.
Real estate agents and developers sold approximately 40% less square meters last year than in 2014, according to Prashant Thakur, head of research at Anarock Property Consultants, a real estate research firm.
In Trump Towers Pune, which was completed a few years ago as the first project in India named Trump, only seven of 46 units are occupied, according to building employees and others with knowledge of occupation and sales.
The real estate market is now so weak that the Trump family members in Pune decided not even to try, at least for now, to sell half of the luxury apartments in the complex, which are sold at 35% more than comparable properties.
Pune, Mumbai, Kolkata and Gurugram, a technology center near New Delhi, have projects under the Trump brand. The agreements in India were negotiated before Trump was elected, and the Trump family said they were contractually obligated to comply. But the decision to move forward has generated conflict of interest questions about the combination of presidential duties with family businesses.
Panchshil Realty, who built the towers in Pune, did not answer questions sent by email. Through a spokesman, the company’s president, Atul Chordia, declined to comment.
When asked to comment on their projects in India, the Trump organization and one of its India-based partners did not question that its real estate projects in India, particularly in Pune and Mumbai, have faced challenges due to the recession in the real estate sector deluxe. market.
But they argued that although they are also suffering, their sales are still better than others in the market.
“Despite the slowdown in India, Trump remains the most sought-after luxury residential brand in the country,” said Kalpesh Mehta, developer of unfinished projects in Kolkata and Gurugram, in a statement.
In most cases, the Trump Organization does not invest in such towers, but licenses its name in exchange for royalties, fees that are paid primarily as individual units are sold.
According to its most recent annual financial disclosure, for 2018, the company earned perhaps as little as $ 200,000 last year in its four projects in India. The maximum revenue reported in the Trump Organization of the four projects in India fell from $ 6 million in 2017 to $ 2 million in 2018, although some income from India could be accounted for as a contribution to other accounts.
Although his brand has not overcome India’s fall of luxury, Trump is still quite popular here, as many Indians see him as tough on terrorism, in favor of business and a crucial ally for Modi, another open populist.
Last fall, Trump joined Modi on stage at a lively cultural event in Texas called “Howdy Modi!” In front of tens of thousands of American Indians, Trump praised the Indian prime minister and emphasized the “common values” of the countries.
“How many Indian prime ministers have been able to visit the United States and get the president to mix with the people as Modi has done?” said Varun Suhag, an Indian pilot who bought two apartments in the development of Gurugram. “In decades, we have not seen such a relationship.”
Shortly after his election in November 2016, Trump met in New York with three of his Indian partners: Atul and Sagar Chordia, brothers who built the Pune towers, and Mehta, who participates in the projects in Kolkata and Gurugram. That meeting raised questions about how involved Trump would be in his family’s business once he moved to the White House.
In 2018, Donald Trump Jr visited Mumbai, the coastal commercial capital of India, to attend a brilliant sales party near the construction site of the more than 75-story Trump Tower, a building of 400 gold-colored units where Residents will have access to a private jet service.
Amruta Fadnavis, the wife of a former prime minister for the state of Maharashtra, which includes Mumbai, predicted in a speech at the party that the Trump brand would drive the project to success.
“Because of this tower, it will increase the confidence of international investors,” a Who’s Who of fashion designers, government officials and real estate titans told the crowd.
The visit coincided with an extensive advertising campaign. An ad in the Times of India occupied two full pages, with a large photo of the young Trump, and asked: “THE TRUMP HAS COME. YOU HAVE?”
The announcement offered those who deposited in units in Gurugram the opportunity to dine with the president’s eldest son. For buyers interested in Mumbai, there was a champagne reception.
Trump brand projects in India are worth around $ 1.5 billion, according to Mehta, founder of Tribeca Developers. The apartments in the buildings sell for between $ 600,000 and more than $ 2 million. The Kolkata project, with the less expensive apartments, has worked better than the others, selling around 80% of its units.
But the first sales figures are only part of the story, real estate analysts say. Kapoor of Liases Foras said that real estate developers sometimes offer a variety of incentives, including price discounts, to increase numbers.
Pawandeep Singh, the managing director of 3D Realty, a wealth management company that helps sell apartments in the Trump project in Gurugram, said the Trump brand was still desirable in India, but that property prices had stagnated and international investors stayed away.
Sales have slowed in the Gurugram project, he said, and most purchases occur within the first months of its launch in early 2018.
“Even Trump, with the brand he is, cannot extract the money he would have had if the market had been better,” he said.
Some buyers have begun to reevaluate their investments.
Ritesh Shah, a diamond merchant, said he and more than 50 people received a 10-15% group discount when they bought apartments, around 2014, at the planned Mumbai tower, where units start at approximately $ 1.1 million. He thought that the strength of the Trump brand would help accelerate construction in a city where construction delays are common, and expected an appreciation of 60% or 70% in value by the time the tower opens.
Now, in light of the difficult economy, Shah said he only expected a breakeven point. And the completion date of the tower has been delayed from 2018 to 2020.
“Because it’s Trump, the tower will appreciate it, but much slower than we had thought,” he said.
Trump’s partner in Mumbai is Abhishek Lodha, whose Lodha Group, one of India’s largest real estate developers, did not respond to requests for comment. In an interview in October with Economic Times, an Indian media outlet, Lodha said the company planned to reduce premium housing from 30% of its properties to 17%, and that all of its new investments were made in affordable housing and offices.
As the Indian market was liberalized in the 2000s, buyers found it easier to obtain mortgages and there was a construction boom.
But in recent years, banks have stopped financing projects, responding to a growing number of doubtful businesses. Builders struggled to obtain government authorizations. The projects faced long construction delays, and buyers with immobilized money sued the developers.
According to many measures, Pune has been hit remarkably hard.
In the last decade, as the city experienced a boom in the information technology sector, luxury buildings were quickly built, and the spacious apartments at Trump Towers Pune are among the most extravagant options.
A promotional video for the towers gathers images of a plane, a speedboat and a glass of champagne. Buyers included the famous Bollywood actors Rishi and Ranbir Kapoor, and Rajesh Uttamchandani, one of the founders of Syska, the great Indian lighting company.
But between 2018 and 2019, the number of unsold luxury apartments in the city increased by 56%. For the third quarter of 2019, Pune property prices fell 3.5%, the worst performance among large cities in India.
Anil Deshmukh, a real estate agent in Pune, said that the mere power of the brand was not enough to overcome the challenges of India’s real estate market, and that a change in the next five years was unlikely.
Would Trump’s visit to India help?
“If the investment promise is fulfilled, that could give consumers a new confidence,” he said. “Let’s see.”