by HOWARD ROBIN
FIRMS AND MOGULS CASH IN ON UK REAL ESTATE RETURNS
COMPANIES and private individuals from the Indian subcontinent have been pouring money into prime UK property, targeting some of Britain’s most prestigious and historic tracts of real estate.
The transactions range from luxury apartments in London and Manchester to massive development schemes worth hundreds of millions of pounds.
In one of the most spectacular projects to be announced recently, Indian media mogul Dr Subhash Chandra revealed he is in advanced talks about taking over the 62-acre Silvertown site in London’s Royal Docks and building a £1 billion peace park. And last month Indian billionaire Yussuffali Kader’s Lulu Group revealed it has bought a Waldorf Astoria hotel in Edinburgh for around £90 million.
The Abu Dhabi-based conglomerate previously struck a £110m deal with UK property developer Galliard Homes to turn the historic site of the original Scotland Yard Police Station in London into a luxury hotel.
Other large-scale development projects include the sale of the Canadian High Commission at 1 Grosvenor Square, one of the most prestigious addresses in the capital, to India’s Lodha Group for £306m.
The Mumbai-based company has also purchased a historic Lincoln Square property, situated next to the Royal Courts of Justice, to be turned into luxury apartments at a construction cost of £150m. Meanwhile Blackrock’s UK Property Fund revealed last month it had sold 5 Strand on Trafalgar Square in London to a private Indian developer for more than £80m.
While institutions and developers have captured the headlines, there has also been a surge of activity by private individuals. In central London, purchasers from India now form the second largest group of buyers of high end property, accounting for 22 per cent of sales last year. The higher rate of transactions to this group rose from just five per cent two years previously.
Analysts say the jump was sparked by a relaxation in the rules governing how much money Indian buyers can take out of the country. The Reserve Bank of India adjusted its so-called liberal remittance scheme in 2015, meaning that a family of four can take out $1m instead of a previous maximum of $400,000.
Camilla Dell, managing partner at buying agency Black Brick, said: “It means that a family of four, after one year, will have $1m to spend, and after two years $2m. It quickly adds up and explains why a lot of our Indian clients are buying in the £1m to £2m range.”
Another factor attracting Indian buyers to property in central London is that prices of luxury flats have fallen since 2014. Coupled with the fall in the value of the pound, this has made it easier for international buyers to acquire properties.
Naomi Heaton, chief executive officer of London Central Portfolio, said: ‘Despite two years of slower price growth due to tax headwinds and the UK’s Brexit vote, prime central London has remained attractive to international buyers as a safe haven.
“As India has become a more challenging place to invest in with high loan interest rates and rising prices in the main urban centres, together with increasing global political and economic uncertainty, Indian buyers with a larger amount of capital to spend have increasingly turned to London as an investment destination of choice.”
She added: “As sterling has weakened against foreign currencies, representing a 20 per cent discount for US$ denominated investors compared with two years ago, we are now seeing Indian buyers becoming an increasingly dominant force in the marketplace. They have overtaken buyers from the Middle East, who have fallen to third place.’
Of all the developments involving Indian investors, perhaps the most audacious is Dr Chandra’s. The tycoon, who is India’s 19th wealthiest individual with a fortune of £3.5bn, wants to build a giant “peace theme park” on the Silverton site.
He flew to London last month to talk to mayor Sadiq Khan about his vision, which involves the construction of a £1bn cultural centre spotlighting the achievements of Indian and other ancient civilisations over the past six millennia. Using animatronics and 4D technology, it would replicate how the world looked 6,000 years ago and how it has evolved.
Visitors will start at the top of the centre and work their way through museums, art galleries and interactive experiences highlighting the origins of the Indus and other civilisations to the modern day. The centre will also provide space for mediation, yoga and dance as well as a conference centre, exhibition facilities and global news and TV studios.
Dr Chandra’s company the Essel group, an Indian conglomerate with diverse interests in such sectors as media, entertainment, packaging, finance and technology, said if its bid to buy the site is accepted it would be transformed into a major world class attraction and a “cultural landmark” for London which will “defy traditional tall build typologies” and transform the city skyline. Spanning 2.5 million square feet, the centre would also include museums, a theatre, shops, restaurants, a botanical garden and a luxury hotel – delivering 5,000 jobs in London’s east end.
Essel Group spokesman Parul Goel said: “London remains the beating heart of Europe, and the Essel Group is committed to making a huge investment. With Brexit looming, this kind of investment into the UK represents a massive coup for the Greater London Authority and mayor Sadiq Khan. The cultural centre will be like no other in the world, and we aim to put this part of London back on the map.” If the plans are approved, the Essel Group’s proposed development of Silvertown could see the cultural centre open by 2023.
One huge Indian-led project that is definitely coming to fruition is the brand new Great Scotland Yard Hotel, which is set to open in the autumn. It comes after Indian billionaire Yusuffali Kader’s Dubai-based LuLu Group struck a £110m deal with UK property developer Galliard Homes to transform the site of the original Scotland Yard Police Station in London into a 235-room, five-star hotel.
The 92,000 sq ft building was the original headquarters of the London Metropolitan Police and later served as a recruitment base for the British Army. In keeping with its character, the outer facade of the original Edwardian building has been fully maintained, while the interior has been ripped out.
It is Lulu Group’s second London investment after it previously bought a stake in the East India Company. Twenty14 Holdings, its hospitality investment arm, has also just completed the acquisition of a Waldorf Astoria hotel – The Caledonian – on Edinburgh’s famous Princes Street.
Kader, one of India’s richest men with a range of interests, from supermarkets to food processing, already runs Hyatt and Marriott hotels in southern India and other hotels in Oman and Dubai through Lulu Group.
Asked about the effects of Brexit on his UK projects, a Lulu spokesman said some developments had actually “picked up” since the referendum decision. He added: “When Brexit does happen, there will be fund movement, which would naturally bring certain financial constraints. However, unless a proper solution or decision is taken, it is too early to opine or reach a conclusion on the matter.”
The jump in Indian purchasers has been set against a substantial drop in the number of European investors following the pro Brexit vote in June 2016.
As the group most affected by the UK’s withdrawal from the EU, Europeans’ proportion of the market has slumped by over two thirds. But it seems Indian investors may have taken up some of the slack. That said, Lodha Group, one of the biggest property developers in India and most famous for its Trump Tower in Mumbai, was already growing its UK presence at the time of the vote to leave.
Lodha moved into London’s residential property sector in 2013 where it is currently developing two projects including luxury apartments in historic Lincoln Square. Lodha said that in the first month of putting the apartments on the market in May 2017, nearly a year after the referendum vote, it had done £125m of sales.
Meanwhile its transformation of the former Canadian High Commission building in Mayfair is due to be completed at the end of 2019 with the 44 apartments offered at a starting price of around £7m.
A Lodha spokesman said: “The immediate aftermath of Brexit was concerning, but I think since then, things have actually been quite good. We are a business which likes scale... and we felt that the scale of Mumbai cannot be replicated anywhere else in India and therefore one had to look outside.”
He added: “We felt London was a market which has sizable scale, had an absence of very large-scale developers, and where one could do high-quality development. The price points were there to support the high quality of development. The overall attractiveness of London as a city, as well as the resilience of the UK economy, has really surprised a lot of us.”
According to the 2018 Wealth Report compiled by global consultancy firm Knight Frank, the number of Indians with assets of more than $50 million rose by 54 per cent between 2012 and 2017, making it third in Asia after China and Japan with respect to the size of its super rich population. The number is set to rise by nearly 71 per cent to 4,980 by 2022.
The Wealth Report 2018 said that at 54 per cent, India records one of the fastest growth indexes in its super prime population of individuals with a net worth of $50 million between 2012 and 2017.
Amit Goyal, CEO of India Sotheby’s International Realty, the luxury real estate advisory service, said that with prices of high end property in places like London levelling out, and in many cases substantial discounts being offered, there was steady demand among ultra-rich Indians.
He added: “We have an India desk in the London office. It handles those clients or developers from India who wish to buy or market their properties in the international market among Indian diaspora. We also hold events and roadshows in these markets. We have also set up a desk in Dubai and one in the US.”
