ARE TRUMP TOWERS TRUMPING ENOUGH?

Could there be a better example of the strengthening of ties between US & India than the “Trump Towers” being given a thumping response by the “Buyers” in Gurugram? But,

The “Trump Towers” project was launched in January 2018 on the Golf Course Extension Road in Sector 65, Gurugram.

“It is reported that about 50 apartments were sold in 24 hours.”

That would be close to buying commitments of nearly 350 crores in 24 hours. I am doubtful if “Trump Towers” would have got a similar response even in the United States, in spite of Mr. Donald Trump being the President. For the record, I must also state that I have neither suggested nor would suggest any of my clients to take an investment exposure in this collective frenzy of financial imbecility.

I make no claim that the Trump Towers would not provide a superior abode for those who can afford them. Nor do I make a claim that the Trump Towers would not be a good address. On the contrary, if developed as per the promises made, it would be an iconic product.

Is the project a good ‘investment’?

My objection is to the “investment” potential of the proposal. The product is hugely bloated in price. The offering at the price quoted would ensure that there is no capital appreciation for at least next 8-10 years. Let us have a more detailed look at the offering.

At a price point of Rs. 15000+ square feet and additional charges, why is this an overpriced product? It is because of the following reasons.

Real Estate Consultant

1)    There are lot of products from equally good builders at better prices.

The part promoter of the trump tower i.e. M3M has its own offerings in similar locations with similar amenities at much lower prices.

In addition, M3M is finding it extremely difficult to sell this inventory and has been facing this difficulty for quite a long time.
2) Across India, all the products at the luxury end of the Real Estate market have a very long sales time cycle.

So much so that DLF still has inventory available in its one of the initial high-end luxury offerings of Aralias and Magnolias.

The luxury segment usually witnesses a languid pace of sale across the nation including the hottest luxury market i.e. Mumbai.

It can be corroborated by historical data that Luxury Products keep selling, in the primary market, for years after they have been completed and handed over. Hence luxury real estate usually has an inventory overhang.

Now, this is something which usually keeps the prices of a luxury real estate in check, besides a lot of other factors.
3)    The promoter- builders are in a marketing overdrive.

Nearly all the leading dailies carried full front page jacket advertisements, loudly evangelizing how sought after the product was! The builder very aggressively promoted the product by inviting buyers to champagne lunch with Mr. Trump Jr and touted that as a trophy get together.
Now all this promotion proves extremely costly.

Like all businesses this cost gets included in the project cost and would ultimately be borne by the buyers.

A very important question which arises here is that when these buyers would go to the secondary market to sell these apartments would they have access to similar marketing resources?

Also, would such hype get created at that point in time for the secondary market?

Most unlikely! Hence,the buyer,as a seller now, would find it frustratingly long to be able to sell the inventory on the secondary market.
4) Number of counterfeit options available.

When it comes to luxury real estate buyers, after the initial frenzy, they find a lot of substituting options in more established locations at similar prices.

For a property to be called luxury real estate the location address must be very prominent. The Golf Course Extension Road does not fit that description at least as of now and unlikely for next 05-07 years.
5) A very important aspect of a luxury real estate is the idea of privacy to the extent of seclusion.

In high rise buildings,this is not a possibility. Hence, over a period, high rise buildings in the luxury segment tend to fair worse than landed properties like Mansions etc. Therefore, the High-rise buildings in the luxury segment have been extremely top loaded with amenities to make up for this aspect.

But then amenities and such features are technologically dependent and hence have a limited life cycle. What is exclusive today in technology becomes commonplace soon and hence the snob value gets lost.

Therefore, sustaining the perception of luxury in high rise buildings becomes a constant struggle. This may also be a dampener when it comes to a future price increase.

So, are you ready to be trumped?

residential projects

Now, the case being made here is not that the “Trump Towers” is not a good property. On the contrary, it is indeed a very good property. Trump Towers would be an engineering feat and would have all the comforts and conveniences which a rich person expects in his house. Additionally, the property would have all the modern amenities, spaces, and trappings of a modern and upscale residential building and all this subject to the fact that the promises are executed as they have been made. The name will also remain attractive as has happened with a lot of other Trump Properties developed across the geographies.

The case being made is that the reason for purchase, in the case of “Trump Towers”, must be “Chutzpah” the reason has to be “Trophy Purchase”to “Brag Value” and similar.

This purchase should not be masqueraded as “Investment”, which it is definitely not.

It is a self-indulgent snobbery and will remain so.