How to turn high net worth snobbery into higher net worth
We are surrounded by everything foreign — and a plethora of colours that cry, styles that suck, at prices that are beyond our middle-class sensibilities. In other words, utter rubbish. Gautam Chikermane elaborates.business Updated: Apr 04, 2010 21:24 IST
Looking for tiles at a company showroom in Connaught Place, a visibly-wealthy shopkeeper or manager twitches her nose, gives me another once-over, raises her plump and manicured hand and says: “Oh, we don’t stock that stuff.” She means the cheaper, made-in-India tiles. We are surrounded by everything foreign — and a plethora of colours that cry, styles that suck, at prices that are beyond our middle-class sensibilities. In other words, utter rubbish.
For fear of being further humiliated or me blasting off into aggressive territory (my wife’s raised eyebrows warned me to stay cool), we mumble a polite, “thanks” and run for cover. Now in Greater Kailash. Another company-owned showroom. Another round of outrageously expensive and equally disgusting products later, we are told that if we want to buy Indian tiles — the ones we shortlisted on the website of the same company — we’ll have to go to either West or East Delhi.
Surprisingly, in the Jor Bagh showroom of another company-owned tiles outlet, one we thought would be very expensive, we find not only great tiles but also sensible prices. The manager, a distinguished Sikh, takes great pains to show us his ware — imported and Indian, expensive and affordable. He offers us options. We are sold.
In the evening, as we wondered what this Italian or Spanish fixation — a low-brow form of snobbery that I thought had passed on with the previous generation — was all about, my Indian-born Australian friend dropped in. He’s on way to Latvia where he currently resides from Nagpur where his mother stays. Over grilled fish he says the properties he’s bought in Nagpur have given him the biggest returns over the past decade. But the quality of those properties would be just unacceptable to any of his clients.
His existing properties in Montenegro, Riga and St. Petersburg are down 50-90 per cent. A 700-sq foot top quality sea-facing apartment is going for Euro 50,000 (Rs 30 lakh) or about the cost of a Nagpur apartment. Prices are similar in the Baltic States of Estonia, Latvia and Lithuania. “But the best prices today,” he says, “are in Greece and Spain.” Current yields on such properties are at 5 per cent.
This is fantasy world for me, so I pushed my fantasy further. What are the prices in Montenegro, the place where the last scene of James Bond film Casino Royale, I asked. Those, he said, are expensive — Euro 90,000 (Rs 54 lakh) plus. That’s because a lot of former communist leaders from China and Russia would come to holiday around this great locale on the Adriatic coast still do and hence these properties are very liquid.
“You won’t have to worry about tiles,” he said trying to control his laughter. “Everything will be perfect.” Inspiring as it might sound, this is not the kind of money journalists make, I told him. But after leaving him at the airport early morning, I thought his proposal makes great investment sense.
The first rule of investing is to buy when the market is in panic and sell when it is exuberant. That was the stage in the past thee years when property prices there increased by three to five times. Now, with most of Europe — Ireland, Baltic nations, Spain, Portugal and Greece in particular — running for financial cover, demand has almost disappeared, prices have crashed, and the area has become a “buy” opportunity. It’s not as if these countries are going to be down forever. When they recover, so will investments.
But behind such opportunities lie risk caveats:
* How much will it cost to transact? Will it involve trips to those countries to get it registered as it does in India?
* If being there in person is crucial, how easy is it to get a visa?
* If it is bad news you’re investing in — as you should — how long will you need to hold on to it? My friend says two years, but the crisis could spill over for longer.
* When Europe does turn, which countries will rise first? That would mean tracking macroeconomic parameters — not difficult, but nothing to gloss over.
* Most important, is the investment liquid? That is, will you be able to get a fair price when you want to sell it?
So, buy Spanish tiles if you wish and help these economies recover. But if it’s a true snobbery line you’re looking for to throw at Page 3 parties, buy their assets, and say: “You know, my apartment in Montenegro, the one where Casino Royale was shot? Well…”