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UAE investors seek exposure in India real estate

Comments Off on UAE investors seek exposure in India real estate   |  May 8, 2014

Dubai: Investors from the UAE are increasingly looking to put their money in India’s real estate in view of the country’s positive environment and long-term growth potential, a financial services company told Gulf News.

ASK Group, which earlier launched funds that are focused on residential real estate in India, has received encouraging response and is bullish to attract a large interest from investors, especially high networth clients, in the UAE.

The company focuses on institutional investments, such as fund of funds, sovereign funds, endowment funds and family offices, which are advisory firms that serve affluent households. It currently seeks to raise $200 million (Dh735 million) offshore fund to be able to invest in housing developments in India.

“Family offices currently are more proactive in participating in India growth story and we hope the process of institutional investors has begun. [We’ve] got encouraging response from family offices and could able to close more than 50 per cent of the fund from UAE currently,” said Sunil Rohokale, managing director and CEO of ASK Group.

Rohokale said both non-resident Indians and citizens in the UAE, including institutions and ultra high-net worth residents, are looking for diversification and are actively seeking India’s real estate as a “de-risking strategy”.

He said the introduction of real estate investment trusts (REITs) in India and regulations such as the Land Acquisition Bill and Real Estate Regulatory Bill, coupled with a stable currency and “healthy macro-financial numbers”, have helped renewed investor confidence.

“Of late, we have seen many [Indian] developers coming to Dubai, setting up their offices and doing road shows to which investors have reacted positively because of currency gains. The property prices in India have bottomed out and in the past, many investors have made money in Indian real estate and hence are more comfortable,” Rohokale added.

ASK Group is a diversified financial services company that has been operating in India for over 30 years. Its asset management business covers equity, private equity and real estate private equity. The company considers UAE as a “very strategic market”.

Investors from the UAE are not just focused on real estate funds. Private wealth is spread across a wide range of vehicles, including mutual funds, traditional savings and long-term investment plans, among others.

A new survey commissioned by Standard Life suggested that investment flows from the UAE are likely to increase, with two thirds of NRIs saying they are optimistic that India will be more investor-friendly after the general elections.


NRIs invest over $2 billion in Indian realty in 2013 on weak rupee

Comments Off on NRIs invest over $2 billion in Indian realty in 2013 on weak rupee   |  May 4, 2014

NEW DELHI: Non-resident Indians invested over $2 billion in Indian real estate in 2013, riding on the back of a weak rupee and heightened promotions by developers to attract them at a time when domestic demand was weak. NRIs spent at least 35 per cent more on buying homes across the country in 2013 compared with the previous year and made for almost 12per cent of total apartment sales in the top seven cities, according to property advisory firm JLL.

This $2 billion investment does not include Punjab, Gujarat and Kerala, states where a bulk of repatriation happens. According to the World Bank, India led remittance flows globally, receiving $70 billion in 2013.

In the year gone by, everything seemed to have fallen in place for Indians living abroad and wanting to buy property in their homeland. The rupee was on a downward spiral, dropping between 15per cent and 25per cent during the year, property developers were under tremendous stress because sales were lacklustre, property prices had not moved up too much over the last 15 months and western markets were experiencing a bounce back.

“These NRIs saw the rebound in the Dubai property market after almost two years of lull. Their reading was that if a stable government comes in after elections, a similar rebound would be in order in India as well,” said Jaxay Shah, vicepresident of industry body Confederation of Real Estate Developers’ Associations of India (Credai) and managing director of Ahmedabadbased Savvy Infrastructure. A large population of NRIs across the globe is from Gujarat. For an NRI, Indian property was at least 30per cent cheaper last year because of a combination of low prices and appreciating dollar against the rupee. Shah said it wasn’t just non-resident Gujaratis who invested in the state last year (like it has been traditionally).

He also saw many Indians settled in South East Asia and West Asia ,too, who are from different parts of India investing in Gujarat. In Kerala, another state, which has a huge NRI base, almost 65per cent of home sales in 2013 were to NRIs, up from about 55per cent in 2012, said Abdul Aziz, managing director of Skyline Builders. “NRIs pushed in a lot of money into property last year as prices were low.” These NRIs mostly bought highend properties in India, said Ashutosh Limaye, head of research at JLL. “But there were some savvy ones who also bet on emerging destinations,” he said.

For Bangalore-based Nitesh Estates, sales to NRIs made for about 20per cent of its luxury segment sales (of apartments in the Rs 5-20 crore price range). “Marketing spends for promotions to NRIs across markets have gone up significantly for us,” said Nitesh Shetty, managing director of the company. Several developers spent heavily on road shows in markets such as Dubai, the US, the UK, Singapore, countries where there are large Indian diaspora.

For Gurgaon-based builder Raheja Developers, at the time when the rupee was at its lowest in the middle of last year, almost about 50 per cent of the company’s sales came from NRIs. Home sales in India dipped considerably over the last 12-18 months because of the messy situation of the economy and a deteriorating job scene in most urban centres.

Source: ET – By Ravi Teja Sharma

Mixed-use realty development in vogue now

Comments Off on Mixed-use realty development in vogue now   |  February 22, 2012

Experts say mixed use will be the future of buildings as retail is becoming more organised, and FDI in multi-brand retail may be allowed

As real estate in India goes vertical, developers are focusing in a big way on mixed-use development. Experts call it the need and future of real estate in the country with land being a scarce resource. Internationally, mixed use development has been quite popular for long.

Back home, Supertech has Supernova in Noida, a mixed-use development building, and is planning to come up with more. The first three floors will be commercial and thereafter residential. Multiplex major PVR has acquired space already. Talks are on with MNCs who are interested in buying space in office building right next. “We have sold 600 units of the total 1,500 residential units,” said R K Arora, CMD, Supertech.Amrapali Group is developing two such buildings in Indirapuram (Ghaziabad, UP), Manesar (Haryana) and Indore (Madhya Pradesh), which will cater to retail and residential both. “We have five per cent space for retail as residents do not want too much of chaos or noise, where they reside,” said Anil Kumar Sharma, CMD, Amarapali Group.

Similarly, in Mumbai, the Phoenix Mills is developing mixed use projects in Pune, Mumbai, Bangalore and Chennai, after the success of its High Street Phoenix project in South Mumbai.

In Lower Parel, Mumbai, Phoenix has a hotel on top of a mall. In Kurla, Mumbai, it has a mall on the lower floors and office on the top.
While these projects have malls, which will provide steady cashflows to the company, Phoenix Mills is selling offices to repay the debt in each of the project. Bangalore and Chennai projects also have residential components, which give additional cashflows to the company. However, the company has put its hotel plans in these projects on hold, given the slowdown in the market.

Hiranandani Developers is another group which is developing mixed use projects in Panvel near Mumbai and in Chennai. It has already developed two such projects in Powai in Mumbai and Thane in Maharashtra which have residential complexes, offices and a hotel.

NCR-based R G Group is looking at opportunities to build mixed used buildings. “Things are in pipeline right now. Mixed-use buildings are surely the future of the country,” said Aman Gupta, executive director, R G Group.

As retail is becoming more organised, and FDI in multi-brand retail may be allowed sometime soon, mixed use will be the future of buildings in India, say experts.

Mixed-use development is taking place primarily in large townships where office, retail, housing and commercial projects are coming up. It reduces the risk for the developers, explained Samir Jasuja, founder and chief executive officer at PropEquity. That is, if one segment is not doing well, the developer can focus on other segments. Once the whole township is developed, which can take 10-15 years, developers can command significant premium over sales and leases, Jasuja said. While investors can expect higher return, end users get the convenience, he added.

“Land will be a problem in the coming years, therefore mixed-use buildings and going vertical is the way out for efficient use of land”, said Saloni Nangia, president, Technopak. Technopak also noted that traffic problems can also ease out with such buildings, with shops being right below the residential buildings.

Consultants say mixed use projects are becoming popular due to easy financial closure and use perspective.

“These projects are becoming popular among multi-national corporate occupants as mixed use complexes will have food courts, night clubs, and serviced apartments. They think it is best tool for employee retention,” said Raja Kaushal, BNP Paribas Real Estate and Infrastructure Advisory.
However, R R Singh, director general National Real Estate Development Council, said in India we do not need mixed use development buildings as the culture is not balanced, unlike developed countries. “How can you accommodate lower income groups in these mixed-use buildings. They do not go to malls,” he asked. He said in India, we already have shops in the residential colonies for daily-use items and do not need separate buildings for the same.


Opportunity knocks

Comments Off on Opportunity knocks   |  February 9, 2012

Can private equity investors turn the tide in favour of real estate developers this time round?

Private equity (PE) investors, who had virtually shut the door for real estate players two years ago, are slowly walking back into the sector, amid prospects of lucrative returns and a minor drop in risk perception, especially in residential projects. As usual, PE investors are overtly cautious and investments in the sector are happening at a rather slow pace. A slew of PE deals that were concluded in last couple of months have turned out to be a big confidence booster for the sector.

Apart from PE funds, some real estate-dedicated funds are also active in the market, scouting for deals. In the last six months, projects with reputed developers and with lesser risk have been able to attract investments from these investors, say industry experts. While the first round of real estate-dedicated funds matures, a small breed of PE funds is also attempting to go back to their investors for fresh subscription

Pirojsha Godrej, managing director of Godrej Properties, which recently sewed up a PE deal, is elated. “This fits in well with GPL’s strategy for efficient capital management,” says Godrej, adding that it is no longer difficult for the developers with good track record to attract investors. His company sold 49 per cent equity stake in its subsidiary, Godrej Premium Builders Private Limited (GPBPL) to SUN-Apollo India Real Estate Fund. SUN-Apollo invested Rs 45 crore, out of which Rs18.3 crore has been paid to GPL for sale of stake while Rs 26.7 crore has been invested in GPBPL.

Mumbai-based Omkar Realtors & Developers is another player that has successfully signed a PE deal recently. According to Gaurav Gupta, director of Omkar Realtors & Developers, “Developers with a credible track record and sizeable land parcels are being targeted by investors.” Omkar is getting good response from the investors, he adds.

For instance, IndiaReit Funds Advisors has invested, through a structured deal, Rs 200 crore in Omkar Realtors & Developers mixed-use project at Worli in Mumbai. The deal ensures that the fund gets 100 per cent return in the next four years on completion of the project. “Investors’ confidence is high as Omkar has already delivered nine projects. Both these projects are to be launched in 2012,” claims Gupta.

According to the deal structure, the PE fund will also get 10 per cent incremental return and will control 30 per cent of the special purpose vehicle executing project until these returns are delivered. The developer had also raised Rs 250 crore through another PE transaction with Red Fort Capital, for its Malad project.

Anuj Nangpal, director (investment advisory) of DTZ India, points out tha private equity funds were not able to get the kind of returns from their earlier transactions. “Now they are cautious and investing in projects that carry lesser risk. The returns the private equity firms are expecting is also higher — around 25 per cent and in some cases even higher than that. Moreover, they are not willing to invest in purchasing of land or in pre-approved projects like they did earlier. The investment is happening in the under-construction projects with lesser risk,” says Nangpal.

For some developers, the situation is more desperate as they are trying to bring down debt through sale of properties to investors. Recently, DLF along with its joint venture partner Hubtown sold 100 per cent of their respective shareholding in DLF Ackruti Info Parks (Pune) for around Rs 810 crore to an entity controlled by real estate fund affiliated with the Blackstone Group, BRE/Mauritius Investments II. DLF plans to use the entire cash flow to retire debt. “The entire value received from the sale will go for debt reduction. Till 2013, we are planning to cut debt worth Rs 6,000 crore. We are looking at monetising our non-core assets for the same. Aman Resorts is on the block for the next quarter,” says Rajeev Talwar, executive director of DLF.

According to Nangpal more such PE transactions are likely to take place as many cash-strapped developers are desperate to restructure debt. “Developers get more flexible payment options and longer tenure with private equity players. For this they are willing to pay high interest rates and borrow from PE investors,” says Nangpal.

Shobhit Agarwal, joint managing director (capital markets) of Jones Lang LaSalle, is however bullish about PE investments. “As of now, PE investment remains flat compared to last year but going forward, it is expected to gain momentum. To tap this opportunity, different asset managers are seeking to raise money through new real estate PE funds that will be floated.”

According to Agarwal, around 12 different asset managers are seeking to raise money via new real estate PE funds to be floated. These funds are expected to invest around $2-2.5 billion in real estate projects in India, says Agarwal.

Another private equity fund, Red Fort Capital, is also in the process of raising around Rs 1,500 crore real estate-dedicated fund in 2012. According to a senior official from Red Fort Capital, they are in the final stages of closing the deal.

However, unlike before, many funds are raising money for investment in structured instruments that resemble debt rather than equity: Desperate developers offer as much as 36 per cent per annum yield on investments.

Kotak Realty Fund recently raised a yield fund of Rs 523 crore entirely from domestic investors. “Given the demand potential, residential projects would be the primary focus of investment followed by commercial properties,” states a Kotak Realty Fund release.

“In a challenging fund-raising environment, we are gratified to see the confidence that both existing and new investors have placed in our funds. This is based on our strong track record,” says Vikas Chimakurthy, director of Kotak Realty Fund.

In another instance, Peninsula Land and Brookfield AMC have announced a joint venture to launch a real estate fund shortly, which will raise money from domestic investors.

On the flip side, several private equity funds are also expected to exit in 2012. “Most private equity real estate fund managers have either hit the exit phase already or are readying themselves to exit investments to repay investors in their funds. In 2012, such funds are expected to sell assets worth around $2.5 billion,” says Anuj Puri, country head of Jones Lang LaSalle.

The real estate consultancy forecasts that realised returns for these funds will continue to be low given the negative market sentiment and weak economy. As a result, fresh investments by real estate PEs are expected to be under $1 billion in 2012, according to Puri.

“In 2010 and 2011, a total $3 billion of real estate private equity exits took place with an average return of only 1.2 times, much lower than expectations,” says Puri. “In the past two years, funds were under pressure to liquidate as their investment period was coming to an end. Also, the negative sentiment and uncertain economy and price correction of real estate projects have yielded low return,” says Puri.

Since many residential projects are nearing completion and will be on offer for sale, real estate funds will have a natural exit in 2012 as well. “The returns in these exits may be marginally better than those realised in the past two years,” adds Puri.


India’s small and medium enterprises welcome 100% FDI in single-brand retail

Comments Off on India’s small and medium enterprises welcome 100% FDI in single-brand retail   |  January 28, 2012

NEW DELHI: Welcoming the government’s decision to allow 100 per cent foreign direct investment in single-brand retail, India’s small and medium enterprises (SMEs) say the mandatory 30 percent sourcing from micro and small industries will help them achieve higher growth.

A Confederation of Indian Industry (CII) survey found that the SME industry, by and large, supported 100 per cent FDI in single-brand retail.

“The government’s decision of mandatory sourcing of a minimum of 30 per cent from Indian micro and small industry will help SMEs to achieve higher growth in sales, size of the industry, capacity addition, increased orders, qualitative improvements and branding of the products, technology upgradation, employment etc,” said the survey on the impact of FDI in retail on SMEs.

According to the survey, mandatory sourcing will provide for expansion of the scales of production facilitating domestic value addition in manufacturing, thereby creating a multiplier effect on employment, technology upgradation and income generation, demand and further investment.

The SMEs are also bullish about 51 per cent FDI in multi-brand retail and expect its earlier and speedier implementation would lead to the growth of organised retail.

“India’s growing retail boom is a success story. Fifty-one percent FDI in multi-brand retail and its early implementation would give a major boost to the all round growth of organized retail in the country having substantial positive impact on the growth of SMEs,” said Chandrajit Banerjee, director general, CII.

The CII survey was based on a large sample size covering different categories of SMEs according to sales turnover. This included companies with a turnover of Rs.25 lakh to Rs.1 crore, between Rs.1 crore to Rs.5 crore, Rs.5 crore to 25 crore and those having turnover between Rs.25 crore and 100 crore and above, from different regions of the country.

Asked how the SME industry considered the entry of MNC (multinational corporation) retailers, over 66 per cent of the respondents said it was an opportunity. Around 21 percent of them perceived it as a threat. About 12.5 per cent of respondents said the decision would have little or no impact on their businesses.

Over 98 per cent of the respondents said opening of the FDI in retail will augment growth of sales of their products. Of them, around 21 percent foresaw the growth of sales to escalate more than 20 per cent while 31 per cent expected the impact in the range of 10-20 percent.

Around 48 per cent of the respondents said the decision would have a positive impact whereas 35 per cent expected no change in the employment scenario.


India mulling infrastructure JV with Abu Dhabi investment arm

Comments Off on India mulling infrastructure JV with Abu Dhabi investment arm   |  January 17, 2012

India is exploring the possibility of the Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign funds to set up a joint venture with an Indian infrastructure institution — IDFC or ILFS — to make big ticket investments in the infrastructure space where the government has plans to invest US $1 trillion over the next five years.

India is also exploring if ADIA can invest directly in the infrastructure sector through a wholly owned subsidiary. The other opportunity being explored is for ADIA to contribute to the DMIC project implementation fund by way of debt or equity which is being set up as a trust. This will ensure nullifying investment risks.

The Gulf countries are diversifying their investments in emerging countries like India and China following economic problems in Europe and the US. The Abu Dhabi team’s visit is part of a series of engagements where the Gulf countries are exploring investments in India.

ADIA has expressed keen interest in investing in India. ADIA managing director Sheikh Hamed bin Zayed al Nahyan met Commerce & Industry Minister Anand Sharma to discuss the opportunities of investment in India. Both sides agreed to finalize a joint working group to expedite the process. “This is an opportunity to enter this huge market,” al Nahyan said.

Sharma said India planned to invest $1 trillion in infrastructure over the next five years and huge opportunities existed, including along the Delhi Mumbai industrial corridor.

Keeping in mind the worsening investment climate in developed nations both sides agreed that UAE and India should engage more. Sharma underlined the need to diversify the investment portfolio and proposed that 3-4 new areas must be identified for closer interaction like pharma, services sector and engineering along with agro processing.

The United Arab Emirates is India’s leading trading partner in the entire West Asia & North Africa (WANA) region, accounting for about 63% of India’s total trade with GCC countries in 2010-11. Bilateral trade has jumped over threefold in the last five years. Total trade in 2010 touched $60.3 billion. Bilateral trade between January to November 2011 was at $66.5 billion.


‘Green’ touch for affordable housing

Comments Off on ‘Green’ touch for affordable housing   |  January 15, 2012

The International Finance Corporation (IFC) has decided in principle to support affordable housing in the Rs 5-7 lakh range for the Indian lower-middle and less-affluent segments.

IFC, which has embarked on a major initiative in the housing finance sector in India for the first time, is looking at supporting mass housing and ‘truly affordable housing’. Dovetailed with this initiative will be efforts to keep the housing projects that it will support in line with appropriate green building initiatives — environment-friendly, energy, water and other resources-efficient structures.

It plans to work with multiple agencies, including the government bodies and private sector players. IFC is also keen on supporting the private sector house builder, who is capable of delivering value housing, It will bring in the expertise that it has built up internationally, particularly in economies in Latin America and South East Asia, where it has solved the problem of affordable housing, despite high GDP growth rates that are driving up the costs.

The investment arm of WB is working with the National Housing Bank on a report for addressing country’s need for affordable and environment-friendly housing.

IFC will also address the regulatory side by working with the authorities concerned on the mandatory minimum standards of efficiency. It has built up experience in Indonesia and other countries, and is keen on bringing similar initiatives to India and China.

While the IFC will work with agencies such as the Bureau of Energy Efficiency, its focus will be more on working at the ground level with state-level agencies. It is keen for ‘traction at the ground level’. State governments in Rajasthan, Gujarat and Tamil Nadu are moving in the right direction, and can benefit from support in developing knowledge in human resources among the authorities.

It is looking at a line of financing that lays emphasis on green housing. IFC is talking to some developers in major cities to explore opportunities for direct financing of projects.

The IFC is also partnering with the National Housing Bank to set up a mortgage guarantee company, IMGC. This will be a Public-Private Partnership between NHB, IFC, Asian Development Bank and an international mortgage insurance holding company, Genworth Financial International Holdings, a part of the US-based Genworth Financial, a financial services company.

IMGC will provide credit risk coverage to residential mortgage lenders, to protect them in case of borrower default. IFC will invest Rs 80 crore during the next five years, to take up to 19 per cent equity stake in the company, to be headquartered in NCR, Delhi. — S.C. Dhall


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