Capitedge India Investment Advisory, a realty fund and asset management firm floated by six former members of Indian realty team of American banking giant Wells Fargo, is coming out with a residential properties-focused fund in India.
This would mark its first fresh fundraising exercise after floating an independent investment advisory firm, which is also managing the remaining assets of Wells Fargo after it shut operations in the country last year. While the founding partners are closely associated in operations, Hiral Soni is driving the domestic fundraise and investment strategy, as per the company website.
She was previously with Marvel Realtors and had later also set up a boutique investment banking firm catering to real estate and allied debt and equity syndication to M&A, land transactions, etc.
The proposed fundraising plan was first reported by Mint which said the firm is floating two funds with a total target corpus of up to Rs 300 crore. It added the proposed funds will invest in top five cities through both equity and debt structures.
The report added that it would look at a third domestic fund next year.
Capitedge team is led by Saandip Kundu and comprises Ananda Bhattacharya, Raadha Kundu (Saandip’s wife), Prashanth Shetty, Priyank Gupta and Hiral Soni.
Founder and managing director of Capitedge, Saandip has over 16 years of real estate financing and mortgage experience. At Wells Fargo he was responsible for building the franchise and steering the investments.
Prior to joining Wells Fargo, he has worked with LIC Housing, ICICI Bank (Product Head) and Standard Chartered Bank.
This development comes almost a year after Wells Fargo shut its real estate investment unit in India, as first reported by VCCircle.
Wells Fargo was exposed to Indian realty space through Wachovia which it acquired in 2008. Wachovia entered the Indian market in 2006 and started investing across deals in the realty space. In the aftermath of the financial meltdown in 2008 and Wells Fargo buying out Wachovia, the rechristened firm did not make many moves besides managing the existing assets.
It recently exited an old but rare entity level investment in a public-listed Indian real estate developer by selling its entire holding in Gurgaon-based Vipul Ltd with a huge haircut.
The firm had around half a dozen investments and has exited most of them.
Its other previous investments include a project of Hiranandani Group in Chennai, Wadhwa Group’s project in western suburbs of Oshiwara in Mumbai, Vijay Raheja’s Bangalore-based project Pebble Bay and a project by Vatika Group.
Real estate investment fraternity has seen launch of a bunch of new ventures by former executives of realty PE firms.
Mumbai-based financial services company Centrum Capital has teamed up with the former head of property fund Indiareit, Ramesh Jogani, in his real estate private equity company, India Property Advisors. In another such case, Amit Goenka, who moved out of the real estate private equity arm of Essel Finance a year ago, has set up his own venture called NIFCO and is raising two realty funds with a corpus of Rs 800 crore.
Source: VC Circle
Nine years after it was formed, New York-based Brahma Management has lined up big investments for the Indian real estate market . Brahma, an FDI-funded investment and asset management company, has already invested around Rs 2,500 crore in the sector and has plans to put in another Rs 3,000 crore over the next two years.
So far, its investments in the realty sector include Gurgaon-based projects Brahma City and Athena, and The Valley, a joint venture township project in Panchkula. While Athena is a retail and commercial office center, Brahma City is a gated township spread over 150 acres of land.
Indian real estate market has been facing strong headwinds over the past several quarters due to low demand and oversupply in both residential and commercial segments. Gulbir Madan, chairman of Brahma, thinks differently. He says that India is coming out of a cyclical downturn. “We are just coming out of a real estate recession. The largest wealth creator in India will be real estate. I am very bullish on the sector,” says Madan adding that in the US, the single-family homes are the biggest wealth holder, more than bond and equity markets. “Whenever you have a real estate recession, it affects the country dramatically. One of the biggest shortfalls in our country will be real estate.”
Madan says that there are multiple roadblocks for the sector, including the recently introduced land acquisition act. “I think it will become very difficult to acquire large tracts of land. To acquire land for a project like Brahma City will be extremely tedious,” he says. Madan says that he is fortunate to have acquired land (for Brahma City) back in 2009 and 2010. “Going forward, it will be practically impossible to make townships unless developers move out of the cities. But they have to wait for the infrastructure to come up.”
“Real estate projects elsewhere in the world succeed because they have 10-lane highways. People can travel 30 miles out which will take them 30 minutes. They are not constrained in a city. It becomes too difficult to move out 30 miles here. That’s why the pricing gets skewed,” explains Madan.
With a big presence in Gurgaon, the fund is now planning to foray into other markets such as Bangalore and Mumbai. “We don’t buy things for appreciation. We don’t expect booms. We buy things to make a business return out of it.” Brahma also claims to be a debt-free company. “The problem in India is that half of the developers are levered. I get projects constantly which are half done and they cannot complete it because they are out of funding. They offer us projects. None of my projects have any funding because the cost of money is around 15 per cent. We have put in all our equity,” says Madan.
Source: Business Today
Investment in the real estate sector in January-March, 2014, has more than doubled to $800 from the previous quarter of only $317 million, mainly driven by corporate land sales.
Around $597 million was invested in the sector a year ago. More platform deals and equity stake acquisitions can be expected. “Although India is not yet a significant player in the regional real estate investment market, going forward, we expect the entry of real estate investment trusts (REITs) to provide alternative funding channels to the sector and trigger strong growth in its investment volumes,” said Anshuman Magazine, chairman and managing director, CBRE South Asia.
For the quarter ended March 2014, nearly $800 million was invested into India’s real estate sector. This translates to almost Rs 4,800 crore having been injected into the sector through the private equity route over the past few months, the CBRE report said.
“This couldn’t have happened at a more opportune time for a sector faced with liquidity crunch, high land acquisition costs and stringent due diligence from the banking sector—which continues to perceive real estate as a high-risk domain in India. It is this selective attitude towards lending to particular assets and markets which has provided opportunities to non-bank lenders such as pension funds and insurance companies to begin to consider funding India’s realty industry,” said Magazine.
One of the first foreign pension funds to invest directly in an Indian company is the Canada pension plan investment board (CPPIB) and Caisse de depot et placement du Quebec (CDPQ) in partnership with Oman’s state general reserve fund (SGRF). The entity invested Rs 2,000 crore. Around Rs 1,000 crore was invested in phase I while the remaining amount will be funded within a period of 12–18 months in Larsen & Toubro’s infrastructure development arm, L&T Infrastructure Development Projects (L&T IDPL), during the first quarter of 2014.
More than 60 per cent of realty investments were sale of land parcels by corporate entities seeking to maximise returns, primarily in the Mumbai metropolitan region (MMR) and realty developers for housing development projects. Some of the most significant deals in this category involved the sale of a 25-acre land parcel owned by Tata Steel at Borivali East, Mumbai, to the Oberoi Group for approximately $187 million for a luxury residential project.
Other similar land sales in the MMR included town planning agency, city and industrial development corporation of Maharashtra (CIDCO), selling off three of its land parcels in Navi Mumbai to local developers for residential as well as commercial development. While the CIDCO plot at Khargar was bought by the Bhagwati Group for about $24 million to be developed as a housing property, two more plots at Ulwe’s Sector 19 were sold to Shagun Enterprises and Varun Enterprises for nearly $7 million and $6 million, respectively.In another land deal, Ardent Properties, a 100 per cent subsidiary of realty firm, Tata Housing Development Company, bought a 7-acre plot at Thane for nearly $36 million from KEC International for developing a premium housing project.
“It is interesting to note that these are all corporate deals which goes to show that an increasing number of firms are now open to monetising their defunct real estate assets for the right valuation,” Magazine said. Industrial assets remained sought after. Q1 of 2014 saw quite a few investments in built-up commercial assets.
Source: Financial Chronicle, By Jharna Mazumdar
Mumbai: Brookfield Asset Management Inc., a Canadian asset management company that manages investments worth $181 billion, is set to acquire all of Unitech Corporate Parks Plc (UCP), a London Stock Exchange-listed, India-focused real estate investment firm, paying `3,000 crore.
A definitive agreement to this end is likely to be signed this week in London, said four persons directly involved in the deal. None of them wanted to be named.
“We do not comment on market speculation,” said Brookfield Asset Management in an email response. Routhu Nagaraju, executive vice-President at Unitech Ltd, said, “UCP has announced that it will sell six projects and the process has not seen anything adverse. It should go through at some point in time.”
UCP, which is incorporated in the Isle of Man, is developing six special economic zones (SEZs) and information technology (IT) parks in India. It had formed a 60:40 joint venture with Unitech,
India’s second largest realty company by market capitalization, to develop these assets.
Last year, UCP was in talks to sell its Gurgaon IT SEZ but the deal did not materialize. In April, Unitech had informed the stock exchanges that UCP was in talks with an investor for selling Candor Investments Ltd, the holding company, for its 60% interest in the six real estate projects.
The market capitalization of UCP was `2,750 crore as on 9 June and Brookfield Asset is offering a 9% premium. RBS AA Holdings (UK) Ltd owns a majority share in UCP at 20.08% followed by Brookfield with a 16.65% stake in the company.
Property consultants Jones Lang LaSalle (JLL) India has been advising UCP on the transaction. The firm declined to offer any comment on the deal.
With this transaction, Unitech will take home is `1,200 crore. But people familiar with the situation indicate that Unitech needs to pay infrastructure company IDFC Ltd from the proceeds after the latter converted its debt into equity a few months back.
Two persons directly involved in the transaction, who did not want to be identified, said, “Yes, it is true that IDFC has an equity stake in the 40% that Unitech owns in UCP. The stake was given to offset the debt of IDFC in Unitech.”
A text message to an IDFC spokesperson went unanswered. Nagaraju of Unitech declined to comment on the IDFC deal.
UCP had raised about £360 million by issuing and placing its ordinary shares on the Alternative Investment Market (AIM) of the London Stock Exchange on 20 December 2006.
Two analysts tracking the company, who did not want to be identified, said the transaction will not reduce Unitech’s debt materially.
The Economic Times, on 4 April, reported that Brookfield was looking to acquire 100% of UCP.
This is the first transaction for Brookfield since it started to officially manage AIG Global Real Estate India’s portfolio from January.
UCP’s total portfolio is to build 21 million sq. ft of commercial assets, of which it has developed close to 6 million sq. feet. It was earlier looking to sell the asset located in Gurgaon, but the sale of the asset was stalled due to a “third-party” problem.
According to the AIM admission document filed by UCP during its listing, the group, through Unitech Developers and Projects Ltd (UDPL), is developing the project pursuant to a joint development agreement with a third party called Gurgaon Infospace Ltd (GIL).
Unitech neither owns nor has leasehold interest in the land, but has commercial rights only through a revenue- and profit-sharing arrangement with GIL for this project. GIL is a subsidiary of IST Ltd (a company involved in manufacturing of precision turned, milled and drilled components. IST, Unitech, GIL and UDPL entered a joint development agreement on 16 November, 2006, which entitles UDPL to 72% of the gross sales and GIL to the rest.
The real estate sector is pinning hopes on the new government for revival.
Confederation of Real Estate Developers Association of India (CREDAI) Chairman Lalit Kumar Jain expressed hope that the new government would bring in a positive change to real estate developers and buyers by introducing reforms given the challenges of slump in sales, high prices and liquidity crunch that the sector has been facing.
‘Housing for all’
“We expect the government to take concrete steps to implement its promise given in the BJP manifesto of ensuring ‘Housing for All’ in eight years,” he added.
For an immediate plan of action, Jain suggested efficient and accountable governance in building approval process to be initiated at the Centre and be strictly followed by all states.
He also suggested that realty sector reforms should cover administrative, banking, tax and legal aspects. “It is imperative to go for single window system of approvals and a balanced land policy that will help the farmers as well as developers,” added Jain.
According to global realty consultancy JLL, India’s developers are hoping that the new government will expedite the process of granting regulatory approvals as the chronic lag in this regard has been a major obstacle for most of their projects.
In its latest report, JLL stated that the pending Real Estate Development Regulation & Development Bill is expected to be passed and land acquisition parameters are also expected to be eased so that availability of land is no longer a major constraint.
The report further highlighted that with the slowdown in home sales, developers have been battling a severe liquidity crunch and a rise in their inventory levels.
“Many prospective buyers have abstained from investing in property because of market negativity, high inflation, and high interest rates on home loans. Now, with pick-up in market sentiment, buyers are expected to snap into action. Increased sales, along with availability of funds from both domestic and foreign investors, will bring significant respite to developers and finally bring an end to the liquidity crunch that they have been facing,” the report added.
3 major promises
The three major promises made by the NDA in their manifesto that have direct pertinence to the real estate sector comprise development of 100 new cities, implementing a new land use policy and planning for low-cost housing.
Modi’s pledge to implement an affordable housing policy and thereby provide homes to every Indian family presents a $150-billion business opportunity to the sector. “The real estate industry now also has real hopes of being granted the coveted industry status, which will further ease fund flows,” said Santosh Kumar, CEO-Operations, JLL India.
“Meanwhile, consumers are optimistic about the impact that the new government will have on real estate pricing, and expect a reduction in home loans, implementation of the proposed GST framework and the implied tax benefits to buyers,” he added.
Source: Manish Jhan for The Hindu Business Line
While the the stock markets, the corporate world and a large section of the country’s citizens are celebrating the election verdict, 45-year-old Shailesh Singh, a Delhi-based executive, is a worried man. Singh has been hunting for an apartment in the National Capital Region (NCR) for the past six months but has not been able to zero in on one. Now he is afraid that in the euphoria generated by the Bharatiya Janata Party’s (BJP) decisive victory, real estate prices may start rising again, making his purchase more expensive.
Why prices won’t move up
Singh’s worries might be premature. Realty experts are of the view that while there might be some euphoria-driven rise in transactions and a marginal rise in prices, this will dissipate soon. “It will take another 12-odd months before prices begin to rise within the sector. And that will happen only if the new government has a successful first six months and its initiatives put the economy on a higher growth path,” says Anshul Jain, chief executive, DTZ India.
One reason why prices may not rise immediately is that they are already very high in most major metros. The economic slowdown has had an impact on salary revisions, and hence on urban buyers’ purchasing power. “Economic activity has to pick up and purchasing power has to rise before we see more demand in the housing sector,” says Anshuman Magazine, chairman and managing director, South Asia, CB Richard Ellis. High interest rates are another deterrent. “In the near term, the new government can’t down interest rates, especially with inflation reining high,” adds Magazine.
Urgently needed reforms
While the new government can’t engineer a quick revival of the real estate sector, it can take several steps that would have a salutary impact in the medium to long term. One, it could expedite the process of granting approvals to real estate projects. “We expect the new government to be more efficient in granting approvals to real estate projects,” says Lalit Kumar Jain, chairman, Confederation of Real Estate Developers’ Association of India (CREDAI). Developers complain that the authorities too should be made accountable for not granting timely approvals. But remember that since real estate is a state subject, the central government can at best create a model of best practices for offering quicker clearances and persuade state governments to adopt it.
The new government also needs to get the Real Estate Regulation and Development Bill passed. “By making developers more accountable, the Bill will revive trust in the sector. Low trust in developers’ ability and intent to deliver a quality product on time is one reason why buyers are staying away,” says Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy. However, some of the harsher provisions of the draft Bill need to be modified. Currently it says that if a developer doesn’t comply with certain rules, he could be jailed. Experts feel that it would be more prudent to punish an economic offence with a penalty rather than treat it as a criminal offence.
The slowdown in sales has caused a severe cash crunch among developers, forcing them to borrow from non-banking financial companies (NBFCs), private equity players and private lenders at high rates, thereby making housing more expensive. “Fund flow to real estate from banks and housing finance institutions needs to improve,” says Kumar. This will happen only if RBI relaxes the provisioning norms and caps applied to realty lending.
The Securities and Exchange Board of India had released the draft SEBI (Real Estate Investment Trusts) Regulations, 2013. “Making REITs a reality will make more funds available to players,” says Jain of DTZ. The new government needs to give the required tax exemptions to REITs at the earliest.
A couple of tax benefits would provide an immediate fillip to the real estate sector. The UPA government had allowed an additional tax deduction of `1 lakh to persons taking a home loan of up to `25 lakh. This benefit, however, expired on 31 March, 2014. Also, the government had introduced the provision of tax deduction at source (TDS) at 1% on transfer of immovable property priced at `50 lakh or more. “Extending the tax deduction by another year and levying TDS on properties priced at `1 crore or more will provide immediate fillip to the sector,” says Sachin Sandhir, managing director, RICS, South Asia.
The new government could provide an indirect but strong fillip to the real estate sector by improving urban infrastructure. “Providing urban infrastructure will release more land for real estate development, increase supply, and thereby help cool prices in the major cities,” says Magazine.
What should you do?
If, like Singh, you too are hunting for a property, the general elections and the formation of a new government at the centre don’t change the situation much for you in the near term. Unlike the stock markets, which are liquid and nimble, a turnaround within the real estate market takes time. So keep looking diligently and don’t lose sleep over prices rising immediately.
Source: Economic Times
BANGALORE: Global private equity funds more than doubled their investment in India’s real estate sector in the quarter to March as they foresee an improvement in economy leading to stable long-term yields, according to a report by brokerage Cushman & Wakefield.
PE funds invested Rs 2,800 crore in the country’s commercial and residential real estate during the period, a 145% jump over the year-ago quarter, the report said. “This is the highest quarterly private equity investment since Q2 of 2009 by private equity funds in the realty sector, driven by huge investment in commercial real estate and steady fund raising by developers in the residential asset class,” it said.
Sanjay Dutt, executive managing director for South Asia at Cushman &Wakefield, said investor interest is expected to grow in office as well as residential property this year. “Improving economic conditions and stable long-term yields are expected to result in increased investor interest for commercial office assets in 2014,” Dutt said. “Considering the attractive returns in the residential sector, along with the high funding needs of developers, steady investments in the residential sector are anticipated.”
The report said average deal size increased 35% to Rs 156 crore per transaction during the quarter. The construction development sector saw foreign direct investment (FDI) inflows worth Rs 1,430 crore in the quarter, which is the highest level of investment since the third quarter of 2009.
The report said global fund houses such as Xander Group, Peninsula Brookfield, Stan-Chart RE and Blackstone committed big bucks to the Indian real estate sector.
While Blackstone and Standard Chartered together invested in Rs 1,150 crore in Vrindavan Tech Village, a special economic zone being developed by Embassy Group on the outskirts of Bangalore, Mantri Developers raised Rs 250 crore from Peninsula Brookfield for a residential project in Bangalore and Oberoi Realty bought a land parcel in Mumbai from Tata Steel for Rs 1,155 crore. “Most investors, especially those who are growth investors, don’t see this sector as a very attractive investment destination currently.
This may be a great opportunity for those who can price the fundamentals, work the real estate, have a longer-term view, a stomach for volatility and patient capital,” said Siddharth Yog, founder and managing partner at Xander Group Inc. Jasmeet Chhabra, principal at Red Fort Capital, said the last three years did not see much FDI in the real estate sector, but things are improving now. “It has become more lucrative in terms of valuation, demand-supply mismatch continues to hold. Once we see a stable government, the deal momentum will pick up,” he said.
While the commercial office sector saw investments worth Rs 1,440 crore during the quarter, the residential sector got Rs 1,070 crore of inflows, contributing about 51% and 38%, respectively, to overall investments mentioned in the report.
“The capital would help fund much needed real estate investment to create and hold facilities to house the economic activities,” said Jonathan Yap, assistant group CEO for overseas funds and India at Ascendas.