Whilst having a drink in Starbucks in Colaba, Mumbai, there was a couple next to me having a conversation, the topic turned to property and I couldn’t help but interject. Like most Indians they were happy to start up animate conversation with strangers, so I wasn’t given the cold shoulder and told to mind my own business.
It turns out the gentleman is a RICS qualified surveyor hailing from both Nottingham and Manchester universities. Having studied architecture in the UK he is now applying his knowledge in India. He lives in Bandra but he and his fiancé come to Colaba once a month just to roam the streets and enjoy the town’s ambience. Understandable, as it has a charm which is difficult to find anywhere else, a mix of the old and the new, every other property is a heritage property, which is the equivalent of a listed property in the UK.
Mumbai is tough market to operate in; like approximately 50% of Indians he works for himself. He does a little work on an employed basis, nothing in India is fixed here you can be both. His work comes mainly from Rajasthan and Jaipur. I asked him why his work is not in Mumbai, logically this is where the money and action is. His answer was this is dominated by the big boys and it’s a very difficult market to penetrate. The smaller jobs are done cheaply and there is no lack of manpower; and the ones which require professionalism are covered by the larger firms.
In his experience anyone who invests in property in Mumbai almost does so with the anticipation that problems will arise.
The property in the city is already owned mostly by the previous generation, and Indians like property, therefore they tend never to sell. As what will they do with the funds? Property is a good place to keep them. This is in the Indian blood and psyche, from the times of the Mahabharat and beyond property and land are seen as the main signs of a man’s wealth.
I mentioned to him I had written about a property in Mumbai which could not be sold due to apparent paranormal activity. In this regard he also had a ghostly tale to tell.
Indians are prone to fear and superstition as well as being fatalistic; a property is probably one of the largest investments they are likely to make so even the slightest notion that there could possibly be something wrong will scare them away in a herd mentality from the property.
It’s not just a property in question when you speak of a supernatural and malevolent influence, it is feared their whole destiny could be altered, and not just theirs but also that of many generations down the line.
It is therefore better not to get involved in a property which may have the slightest suspicion of being haunted, the upside may possibly be profitable, but the down side is downright disastrous on many levels.
If any rumour is started that a property may be possessed, the trouble is you cannot prove it one way or another. The media here is mostly bought and this kind of story may be started and fuelled by another party who may have a vested interest. It is sensational and so helps to sell plenty of newspapers.
During my interaction with Mumbaikars it seems they are a lot more streetwise than in the UK, most of whom accept official versions given to them without any questions like sheep. Here, they know almost everything has an element of a scam in it and nothing is accepted at face value. The difference in Mumbai is they know they’re probably being played.
Going back to the ghostly tale, the building in question is in a top location of Jaipur and till date remains empty. It’s in an area called Bani Park opposite the Pink Square in Jaipur. I asked why on earth was it not sold off plan ages ago or stopped at that point, he said the builder was probably hoping people would forget and carried on building all the way to completion.
I asked what if someone was ready to buy the building at say 20% of the value? The building is worth zero to the builder anyhow. He suggested that would be too low, I counteracted that this is more than it’s worth to the builder now. He suggested a strike price of 50% would be more acceptable. Apparently the builder has written off selling the building.
I suggested perhaps it could be bought and the spirits could be exorcized and using some of the most prominent tantrics in India we could neutralise the ghostly influences; and then have a PR firm to publicise the building again.
They both felt this would not work. I pointed to the fact that Rustomjee had done the exact same thing with a ‘problem’ building in Mumbai, which I wrote about in last week’s article. However neither of them were persuaded. They pointed out that Mumbaikars have a different spirit, they move on, they don’t stay fixated on the same issue. Testimony to this was during the bomb blast in 2008, people carried on using the trains two hours after the bomb blasts, whilst the hostage situation was still going on.
Then there is the fact that property in Mumbai is in scarce supply, and the population dense and getting denser, as a collective they cannot afford to stay fixated on stories like this for too long.
In Jaipur land is in abundance, they have plenty of supply of property and so have other options, perhaps the current builder will have to wait for an entire generation to die and a new one to be born before his building will be sold. It seems he may be stuck with this lump of property for a while.
It is difficult to ascertain what the actual price paid for a property is, often brokers quote a higher price to what the seller wants to the prospective buyer and simply pocket the difference. There are no laws to constrain who they make their money from – they can eat from both sides. In the UK you cannot make from both the buyer and seller in a transaction; it needs to be disclosed.
In an economy where many transactions are still done in both black and white it’s difficult to know what’s actually going on even if you’re are a localite.
Any mortgage, or home loan as they like to call it in India, can only be based on the white element of the transaction.
Here’s a saying I have overused, but nonetheless, it’s a good mantra to keep repeating, you should grow your flowers where you can water them. Home is still London and this is where even if things do not go to plan the property can be handled, the market is fluid, transparent, and there are multiple ways out with a little creativity.
Of course there is the sentiment of owning something in one’s home land. This is more to do with emotions and it’s ok to park some of your money, but not the bulk. Demand for Indian property comes mostly from the locals, some from NRIs; London demand is truly global and with good reason.
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!Tips of the Week
Always focus on the capital growth of an investment property – never sacrifice this as this is how the bulk of your money will be made in property, rental income is secondary.
On a BTL mortgage the rental cap may reduce the amount you can borrow, typically your rental must be 25% higher than the mortgage payments.