Going… Going… Still Going

Thanks to the economic downturn, Indians who dreamt of a fancy residence in London can now get one. Even Lakshmi Mittal has one on offer.

Well-off Indians have always considered London their second home. It’s a tradition that dates back to Indian royalty during the days of the British Raj, and has only been reinforced over the last 60 years by thousands of Indians with relatively modest claims to lineage who have migrated to this tiny island. Now, as the property market here goes through a downturn, a new rush has begun—more and more Indians are buying homes in the British capital. “Once Indians have a property in India, the next place they look to buy is London,” says Jaideep Singh, head of the India desk at Knight Frank, an estate agent which specialises in selling and renting property in Central London.

Indians now rival Americans as buyers, according to Savills, another estate agent which recently carried out a survey of deals in prime areas of Central London like Knightsbridge, Mayfair, Kensington and so on. “Three per cent of the properties bought in the year 2008-09 in prime London areas have been by Indians. This is on par with the Americans, which puts the numbers into perspective,” says Charlie Bubear, head of Savills’ Knightsbridge branch. “Indians were beaten only by the Russians at 4 per cent and those from the Middle East at 11 per cent,” he adds.

Unlike some countries, Britain has no restriction on foreigners buying property in the UK. The only language the real estate market here understands is money. The international rich have always thought of London as a great place to have a home, and prime property is still regarded as an excellent investment and status symbol.

Steel baron Lakshmi Nivas Mittal currently owns at least four properties in Central London, including one in The Bishops Avenue, known as millionaires’ row, and two in Kensington Palace Gardens, where he and his son Aditya now live. After a crash in the property market in Britain in 1996, Mittal picked up The Summer Palace, his Bishops Avenue mansion, for a mere £6.5 million. Today, the 11 bedrooms, 12 bathrooms and six reception rooms, together with a glass lift, swimming pool, jacuzzi and steam room, are estimated to be worth £40 million. “To an international buyer, the name The Bishops Avenue is worth 20 per cent more than a comparable house anywhere else. No one ever lost money buying here,” claims Trevor Abrahamson, managing director and founder of Glentree Estates, which handles the sale of almost all properties on millionaires’ row.

In 2004, Mittal went even more upscale. He moved to Kensington Palace Gardens, known as billionaires’ row, befitting his prominence on the Forbes list of the world’s richest. He bought a 15-bedroom home for a record £57 million and spent another £13 million doing it up, making it the most expensive house in the country at the time. Over the last year, though, The Summer Palace has been on sale for £40 million, but there have been no takers, thanks to the decline in the property market. Sources say Mittal would be ready to sell even for £30-35 million, but there are just no buyers around. Recent newspaper reports claim that Mittal is tired of waiting and has decided to rent out The Summer Palace for £10,000 per week, though a reliable market source says this is not true. “It would fetch up to £20,000 per week if Mittal were to really rent The Bishops Avenue house,” says the source, “but he is not interested in renting it, he wants to sell it off.”

Mittal may have a long wait. The neighbouring Jersey House, a 20,000 sq ft, eight-bedroom home, was on the market for £45 million and received an offer from a serious bidder of only £28 million, nearly 40 per cent below the original asking price. The offer was refused, but the vendor did not mention a price its owners were willing to accept.

The worldwide recession, which began across the Atlantic with a housing market implosion, has hit London properties in the £10 million-plus bracket particularly hard. Big buyers are said to be waiting on the sidelines for prices to fall further, before they pick bargains. This, despite the fact that luxury residential properties in London are selling for just 40 per cent of the price they fetched at the peak of the housing boom.

Estate agents don’t see a bottoming out just yet. Jeremy McGivern, who runs property consultancy Mercury Home Search, bought a Kensington property for a client that was 40 per cent below the price of a deal struck last year. “Ultimately, many top-end properties will fall more than 50 per cent—there are already examples of this, particularly from forced sellers who need to free up cash,” says McGivern. Large price hikes by ambitious vendors at the market’s peak in late 2007 are partly to blame for the steep fall, according to agents. More than a fifth of estate agents in the Mayfair area have had to shut shop over the year due to stagnant sales.

“The 15 to 20 per cent drop in all properties around Central London has meant that prices are a lot more sensible and realistic,” says Singh of Knight Frank, “Until two months ago, no one was buying, everyone was waiting and watching, but now interest from Indians is again slowly reappearing.” Sales in the £10 million-plus bracket, though, are still stagnant. It is homes for £1–3 million (or less) that are selling. “Over the last two months, there has been a feeling that the recession is tapering off and buyers are more confident that they are getting a good price,” says Singh.

In a sense, the Indian purchase mania foreshadowed the fall in prices. It began in 2006. “Until then, there were hardly any Indians wanting to buy in London except those who were already living here,” explains Singh, “But by the property peak in 2007, my phone was ringing off the hook with Indians.” Knight Frank’s India desk is over a decade old, but until 2006 he had dealt mostly with UK resident buyers of Indian origin.

What happened next forced even Savills, Knight Frank’s main competitor, to set up an India desk and hold a roadshow in India of British luxury properties. “They want as prime as it gets. The most popular areas for Indians are the most exclusive areas of the capital like Belgravia, Mayfair, Knightsbridge, Oxford Street, Marble Arch, St John’s Wood and Kensington. They don’t want to go beyond Kensington,” says Singh. There are also those who wish to buy in Ealing and Southall to be near friends and relatives who live permanently in West London. These buyers are not millionaires alone, but parents wanting to school their children in the UK, businessmen with work commitments or even Indians with spare cash looking for a good investment. “I get many calls from parents whose children are going to Imperial College. Rather than having their children live in rented accommodation during their tenure here, they buy a flat here for them, and even later it is a good investment,” says Bubear. “There are also many Indian firms which want a London office. They buy a flat, convert one room into an office and use the rest as a guesthouse for staff or themselves. It works out cheaper than using hotels,” adds Singh.

Indians feel at home in London thanks to the vast desi crowd and multiculturalism that the UK encourages. More importantly, the British pound remains strong, and so they know their money is safe. “They prefer flats, generally two to three bedrooms, as they can lock them up and go back to India without any hassle,” says Singh.

According to a recent industry report by independent analysts Oxford Economics, buyers should wait at least two more years before purchasing a house in London, as the market will not recover until 2011. The average price in London is expected to drop by 16.1 per cent this year, then a further 3.4 per cent next year. From 2011, a recovery is projected to begin—leading up to the 2012 Olympics scheduled in London. So if you’ve been mulling a nice little place of your own in the world’s most multicultural city, start Google Earthing those maps in advance. Zeroing in on bargains is only going to get easier.

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Sajeda Momin