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Jewellers shaking hands with builders
MORE AND more city jewellers are entering into the real estate business by shaking hands with local builders. Bad or good, the trend is catching up fast because of fat returns it promises. Jewellers feel they earn 10 to 15 per cent more through such deals with the traditional business giving them only 7 to 8 per cent returns due to global gold price surge.
MORE AND more city jewellers are entering into the real estate business by shaking hands with local builders.
Bad or good, the trend is catching up fast because of fat returns it promises. Jewellers feel they earn 10 to 15 per cent more through such deals with the traditional business giving them only 7 to 8 per cent returns due to global gold price surge.
But, capital-savvy jewellers are playing safe by getting the real estate ventures financed through banks. And that makes it a 30:70 game—30 from the jewellers and 70 from the builders.
To begin with, they have confined their investments to upcoming apartments and shopping malls.
However, President of the UP Sarafa Federation OP Agarwal has been cautioning jewellers against risking their money in real estate projects.
He says: “The trend among jewellers to buy land for developing multi-storeyed apartments and malls is certainly a bad idea. The real estate bubble would burst anytime in future and they would be left with nearly 60 per cent of the unsold properties in any project”.
Most of the jewellers investing in land for developing real estate projects aren’t investing capital entirely from their own coffers. They (jewellers) are taking loans from banks at competitive interest rates and putting the capital in projects such as shopping malls and residential apartments not just in Lucknow but even Agra in the state, says Agarwal.
“They should remember that their core competence is making jewellery and not building residential apartments or malls. And that says it all,” he says.
The profit margins are getting thinner in the jewellery business across the country resulting in jewellers hedging their losses by buying or selling flats in the beginning which had now transformed into investing in development of real estate projects, Agarwal says.
The shopping malls aren’t sending cash registers ringing for all the retailers who are setting up outlets in the malls. While there are retailing majors having their large outfits within malls doing roaring business, there are several others who are registering huge losses due to their highly focused product profile, he says.
“There are at least 4 shopping malls in Agra and it is unlikely that all retailers having their outlets in them are making reasonable profits. In a nutshell, the global bullion markets would float and sink but investing in land for developing property is certainly not the best course of action for the jewellers”, others say.
