Death knell sounding for India property boom?
mercoledì, 25 aprile 2007 10.06
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By Dominic Whiting, Asia property correspondent
MUMBAI (Reuters) - "The grave dancer", U.S. tycoon Samuel Zell, was in a mood to spoil a two-year-long party when he told a gathering of Indian property executives this week they were "on the brink of excess" and their boom would end in tears.

The developers and fund managers could only agree.

The man who earned his nickname, and a $4.5 billion (2.2 billion pound) fortune, picking up cheap offices in the 1990s U.S. downturn and packaging them into a property trust sold last year for $39 billion, said it was "mental masturbation" to believe there were endless riches for investors in India's 1 billion person market.

Only a top sliver of the population can afford to buy the homes being built.

"India's greatest asset today is everyone's imagination," Zell said.

Many in the audience nodded in assent.

The only difference of opinion among some of India's leading property professionals at the conference in Mumbai was how far property prices would drop, probably at some point in the next year -- 10 percent or 40 percent?

The last time a property bubble burst in India prices slumped by as much as 70 percent between 1995 and 2001. But this time around, a raft of international funds raised by the likes of Citigroup (C.N: Quotazione, Profilo), Morgan Stanley (MS.N: Quotazione, Profilo) and Credit Suisse (CSGN.VX: Quotazione, Profilo) are likely to step in looking for bargains and cushion the fall.

"Our expectation is that sometime in the course of this year you'll see a 30 to 40 percent drop in prices," said Ajit Dayal, chief executive of fund manager Quantum Advisors.

An estimated $10 billion was raised internationally for Indian property funds last year.

But rising mortgage rates and a doubling of property prices in major cities in the past two years will lift home prices beyond the reach of even the 40 million richest Indians that developers are targetting, Dayal said