Some foreign investors thought they could earn a quick buck from India’s property boom. How wrong they were. The country has avoided a subprime crisis, but is still suffering from a real estate crash.
The boom was impressive. Residential and commercial property prices in cities such as Delhi and Mumbai skyrocketed—rising by as much as 300% in the three years until 2007. The stock market priced in still more. Indian property companies were valued at as much as 60 times trailing earnings.

Foreigners couldn’t get into the game directly, thanks to India’s tight foreign investment rules. So the Dubai and Abu Dhabi route of buying apartments was out, but listed property funds were in.
Ishaan Real Estate Plc., Hirco Plc., Unitech Corporate Parks Plc. and Trikona Trinity Capital Plc. all listed on London’s secondary exchange, the Alternative Investment Market, starting at the end of 2006.
But despite tight bank regulation and the absence of a subprime bubble, India has not escaped the global downdraft in property prices. The funds’ values were falling even before they had all arrived in London. Investors caught the falling knife.
Property prices have fallen roughly 40% since their peak. The share prices of India’s property funds have fallen by more than twice as much. They now trade at discounts of around 90% to their last reported net asset values.
The discount reflects doubts about what will happen to the property portfolios. The country’s investment rules don’t allow developers to do quick flips of their property. The three-year holding period, much of which is used to acquire land and to construct buildings, looks like a long time in today’s markets.
Hedge funds, which dominate the private investor base of these listed real estate groups, increasingly can’t afford to wait. They need cash to meet redemptions. They’ve been calling for share buy-backs, which brings them cash and might narrow the valuation discount. One hedge investor in Trikona has even demanded the company sell all its assets and return the proceeds to shareholders.
It’s hard to see what’s in it for companies. No wonder that Indian property funds such as Ishaan are understood to be mulling an exit from listed life.

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