Realty sector to close year with Rs 43,600 cr worth PE transactions

Year 2016 is proving to be a bumper one for real estate and is expected to record the highest level of private equity investment in the sector since 2008. Based on the current pace of investments, Indian real estate is estimated to close the year with an inflow of Rs 43,600 crore through PE transactions.

More than half of this total – over Rs 24,500 crore – is likely to be invested in the second half of 2016, with the first half recording transactions of Rs 19,100 crore, says a report by global real estate services company Cushman & Wakefield.

Investments in office assets jumped 157% to Rs 4,236 crore in the first six months of 2016. Factors such as increased foreign investment and leasing activity, strong GDP growth and economic forecasts, improved governance and government initiatives have contributed towards attracting investments.

Indian real estate has seen good traction from both domestic as well as global investors on the back of reviving economic confidence breaching previous levels. This bull run is expected to continue in the short term with more investments being made in completed/leased corporate assets and other commercial activities such as retail and hospitality and we expect 2016 to be one of the best years in recent past for the RE sector,” said Anshul Jain, managing director-India at Cushman & Wakefield.

PE investment into real estate jumped 64% in the first half of 2016. The number of deals concluded during the period increased to 57, up 24% from a year ago. Domestic investors accounted for 63% of the investments in office assets owing to some big deals. Foreign investors brought in 25% of the investments and the remaining 12% was made by joint ventures of domestic and foreign investors, the report said.

The residential segment commanded the largest share of 44% of the total investments made during the first half, while commercial office asset class accounted for 22%. Retail gained the most, with its share of investments increasing to 18% from 2% recorded a year ago. Hospitality and mixed-use asset classes cumulatively accounted for the remainder at 17%. Domestic investors poured in 80% of the money put into residential assets, with the remainder being made by foreign investors.

Of the major property markets, Mumbai continued to attract the highest share of investments at 36%, followed by Delhi-NCR at 33% and Bengaluru at 11%.

However, by mid-2017, there could be a scenario of suitable projects drying up, with investments committed in most properties. Some developers may hold on to projects to cash in on the advent of real estate investment trusts (RIETs) and may only release their properties to such options, Jain said. The cumulative value of stakes likely to be sold by Indian developers in the rest of 2016 is estimated at between Rs 21,500 crore and Rs 24,000 crore.

With the improving economic outlook and an uptick in leasing for office spaces, some PE firms are increasing their portfolio of such assets, possibly with the intention of launching their own REITs. The relaxation in FDI norms in food processing, defence and pharmaceuticals is expected to attract investments, which, in turn, may boost demand in the real estate sector.

All of these are progressive FDI policies and effective implementation of the announced policies in infrastructure development, land digitization, RERA (real estate regulatory authorities) implementation, title insurance and the GST will be key to further growth, the report said.

Source: Economictimes.Indiatimes.Com

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Global investors keen on Indian real estate

Global investors are looking at the Indian real estate sector with a great deal of enthusiasm, following the recent policy reforms, including Real Estate Regulatory Act (RERA), 100% FDI in construction and easing of REITs regulations, said Colin Dyer, CEO of US-based JLL Inc.

The reforms, according to Dyer, are helping property markets in India get more transparent, prompting institutional investors to increase their exposure in the country. “The penchant for development is clear from the efforts that the current government has made during the past two years or so. World’s leading multilateral institutions and fund managers are taking a note of this and have bestowed their faith in India’s progress,” Dyer said in an exclusive interaction with ET.

“Currently, every metric, be it the Ease of Doing Business (by World Bank), Global Competitiveness Index (by World Economic Forum) or sovereign ratings (by S&P and Moody’s), has shown India favorably, improving by a significant proportion.”

He expects the private equity flows into India to remain strong in line with record levels touched in 2015 as the current developments with regard to RERA and REITs are major factors that could help improve India’s transparency ranking further. India saw around $2 billion poured into realty sector by foreign private equity firms in 2015. “Given the speed with which reforms are happening, we expect Indian tier-I cities to progress from the ‘semi-transparent markets’ group to the ‘transparent markets’ group by 2018,” Dyer said. In JLL’s global real estate transparency (biennial) index for 2016, India’s tier-I cities secured a rank of 36 amongst 109 countries, a major improvement from the 48th place it had secured in 2012.

Global investors, including Blackstone Group, Singapore’s sovereign fund GIC, Canada Pension Plan Investment Board (CPPIB), Goldman Sachs and Qatar Investment Authority, have already been investing in Indian realty assets for the last few years. Apart from these, several new funds are also eyeing investment and alliance opportunities here.

Foreign investors’ appetite for Indian real estate is on the rise, owing to relatively better economic growth and, therefore, returns.

The current developments relating to RERA and REITs are major factors that could help improve India’s transparency ranking further during the next assessment year in 2018. Given the speed with which reforms are happening, we expect Indian tier-I cities to progress from the “semi-transparent markets” group to the “transparent markets” group by 2018.

Consumers are looking for fool-proof information and protection against builder malpractices, and the Real Estate Regulatory Authority would take care of both these concerns, according to Dyer. Bringing approval authorities, too, under the ambit of the regulator will help reduce delays on that front and will be helpful for investors remove uncertainties from project funding.

However, the issue of affordability for mass housing would still remain and in that regard, successful implementation of the ‘housing for all by 2022’ initiative of the Modi government would be crucial. It is definitely a gigantic task and political will is of utmost importance to ensure that success is achieved, he said.

India’s residential sector currently has unsold inventory close to its peak levels of 39 months. However, there is definitely a trend of this getting gradually reduced over the next 18 months or so.

“By no means, this indicates lack of demand for houses. In most cases, fence sitters are holding back purchases either for want of the right products or due to lack of market confidence. Therefore, all stakeholders currently feel the need to adopt confidence-building measures, including the developer and government. We hope that with RERA in place, we would soon see confidence coming back,” he said.

Dyer does not foresee further price rationalization in India, given that discounts are already offered by many developers, particularly those with high inventory, of 12-15%.

However, few developers with execution track record have been able to sell their inventory in record time despite a slow market otherwise, and therefore, price may not be the real reason for sluggish sales in many cases.

Boost Fund Flows

Heightened investor interest is good augury for real estate. We do need to step up funds flow into the sector. In the mature markets, real estate accounts for about half the annual growth in GDP. The corresponding share in India though remains hardly 9-10%, which clearly needs to rise. The way ahead is to boost transparency in approvals and clearances for real estate projects, so that project follow-through is time-bound and smooth.

Real estate does offer attractive returns on investment for pension and other long term funds.

Source: Content.Magicbricks.Com

Indian real estate may attract $2 billion investment from Japan

Japanese developers and private equity investors are looking to enter Indian property market and could invest at least USD 2 billion over the next three years in residential as well as industrial projects, says JLL.

Realty consultant JLL India said in a report that the country is emerging as major investment destination for Chinese and Japanese developers.

China’s biggest developer Wanda has signed an MoU with Haryana government earlier this year and more developers from China and Japan are expected to enter the Indian realty market, it said.

Private equity investors from these two countries are also looking at entering India’s real estate sector, it added.

“Japanese developers are keen to explore strategic partnerships and enter into joint ventures with Indian builders, and are particularly interested in industrial projects. There is likely to be an inflow of at least USD 2 billion in investments from Japan into the Indian real estate market over the next three years,” JLL India Chairman and Country Head Anuj Puri said.

After 100 per cent foreign direct investment (FDI) was allowed into the real estate industry, it was only a matter of time before foreign developers made big investment announcements, he said.

“One of China’s most prominent developers, Dalian Wanda Group, signed a memorandum of understanding (MoU) earlier this year with the northern state of Haryana to develop ‘Wanda Industrial New City’. The investment of USD 10 billion, phased out over the next decade, is a very significant outlay by any Chinese company in India,” Puri said.

Other Chinese developers are also interested in India and most likely to follow suit, he added.

The RICS-JLL survey this January had shown that 62 per cent of the respondents felt that institutions from Japan and China could come knocking to the Indian real estate market in 2016.

Source: CredaiNCR.Org