Alastair Hughes, CEO (Asia Pacific) of Jones Lang LaSalle (JLL), who was in Bangalore to hold a board meeting of the Asia Pacific region comprising China, Japan, Australia, South East Asia and India, spoke to BusinessLine to share the real estate market sentiment and key issues on corporate leasing.
How is the realty market in India as compared to other countries in Asia Pacific ?
India has seen a dramatic recovery. The hangover did not last very long as it had in 2010-2011. The market is very dynamic here right now. While Asia-Pacific began to recover in 2012-2013, India went through a lull, largely due to lack of business confidence, driven by political situations.
Now, it feels like India is in sync with the rest of Asia-Pacific, which is in recovery mode post the global financial crisis. I would like to admit that 18 months ago, people were talking about China, Indonesia, different parts of South-East Asia and Japan. India didn’t feature much in the conversation with international investors because people were a bit concerned about the direction the country was going in. Now everybody is talking about India.
With India back in the reckoning, what is the likely flow of investment?
In terms of volume of money coming into the market globally, it will be about $125 billion this calendar year. 2007 was the last big investment year at $110 billion. Post the Lehman Brothers crisis, it fell dramatically to $40 billion in 2009.
These numbers include both the buying out of assets and leasing. Of the $125 billion this year, a small proportion of it has flown into India.
For India, the cumulative flow from 2007 till the third quarter of 2014 was around $14 billion. But from January-September of 2014 about $1.3 billion has already come in.
So, out of the $125-billion worth of transactional volume of Asia Pacific investments in 2014, only about $1 billion dollars is for India. Now with a stable Government at the Centre, there could be a potential capital inflow. So, we are looking at Real Estate Investment Trust (REIT).
If the Government offers taxation relief, then by March 2015 we shall be looking at $10 billion of REIT that can be listed straight away. The top 18 developers in India have got ready stock that has potential for REIT, the valuation of which is about $10 billion.
Are you considering any time frame for both the REIT and taxation relief?
At this moment, due to double taxation, it does not make sense, something which the industry has represented to the finance minister. We anticipate it by the next financial year or early 2016.
What kind of demand do you expect international investors to have?
At present, we see an increase in liquidity. Last year, about 60 per cent of investment came from outside the UK, which includes the Middle-East, Singapore or China.
Interestingly in Shanghai, which you would consider to be Communist after all, about 40 per cent of buyers came from somewhere outside China. In India, at present, small volumes are coming from outside.
What is the profile of the $1.4 billion committed to India?
It is mostly from foreign direct investment (FDI). If you were to look at institutional Indian private equity, it is half a billion dollars.
So as a proportion, FDI is till more than the Indian institutional investment and the primary reason for that is that in India, insurance companies and pension funds are not allowed to invest in real estate.
Hence, very little institutional money is available other than the pure private equity money that has been raised in the domestic market.
Source: Business Line
BANGALORE: When Sameer Rana was looking for a dream property last month, he was spoilt for options in the real estate market. Yet, the 44-year-old investment banker was not sure whether he had all the information to spend Rs 2 crore on an apartment.
“Is the area safe? Are the nearby schools good? Will the builder give possession of the house on time? All such questions plundered my mind and I did not have the time to go through every property myself to decide,” Rana said, adding, “Brokers could not be trusted.”
But now online start-ups, including Housing-.com, PropTiger, and CommonFloor, are setting up their own teams, data science labs and open forums to provide such information. “Technology and analytics will be the biggest differentiator and game-changer in the online real estate industry in the future,” said Rahul Chowdhri, partner at Helion Venture Partners and an investor in real estate portal Housing.com.
Softbank and Accel-backed PropTiger have collaborated with social enterprise SafetyPin to provide information regarding safety quotient of new projects in Delhi and National Capital Region (NCR). “The parameters used to come up with this score include presence of street lights, visibility of vehicles, crowd at important times and access to modes of public transport, among others,” said Prashan Agarwal, co-founder of PropTiger, which is set to expand to other cities soon.
Its larger rival Housing.com was the first online real estate company in the country to launch its in-house data science lab in 2012. The portal focuses on lifestyle rating, locality scores, connectivity scores, child friendliness index and price heat maps across categories, including rentals, resale, paying guest accommodation and new projects across 40 cities.
“Our algorithm takes into account the most basic needs and sought-after luxuries, and weighs them according to their importance. We use around 50 parameters to get this data,” said Advitya Sharma, co-founder of Housing.com.
BANGALORE: Online real estate portal CommonFloor has raised $30 million (over Rs180 crore) in its fifth round from existing investor Tiger Global. In January, the Bangalore-based company had raised about Rs 65 crore from Tiger Global and Accel Partners.
Sumit Jain, cofounder and chief executive officer of CommonFloor, confirmed the investment. “We will invest in technology, product development, hiring and expanding to at least 22 new cities in the next one year,” he said.
While the company did not disclose the valuation it received, Jain said that Common Floor expects to earn a revenue of $25 million in the next one year. “We have grown 100% in terms of revenue and traffic since January.”
Jain and his IIT-Roorkee classmate, Lalit Mangal, founded CommonFloor in 2007 along with another friend Vikas Malpani, an alumnus of Visvesvaraya Technological University.
While individual users can list advertisements for buying, selling and renting of property for free, the company earns revenues from builders and brokers who pay a fee.
The housing classifieds market is getting increasingly competitive, with start-ups like Housing.com and Commonfloor backed by venture capital funding, competeting hands on with companies like 99Acres and Magicbricks.
Last week, ET reported that rival property portal Housing.com is in talks to raise as much as $30 million (about Rs 180 crore) from existing and new investors, including Russian venture capitalist Yuri Milner in his personal capacity and Tybourne Capital.
It is estimated that the real estate market in the country will reach $180 billion (over Rs 11 lakh crore) by 2020. In just residential property, the top eight Indian cities will see an additional demand of 2.8 million units in the next five years, according to property consultant Cushman & Wakefield.
BANGALORE: Property has always been a major investment avenue of the rich. Now, some of the people one would expect to focus on enterprising ventures are also looking at rent-yielding property.
Infosys co-founder NR Narayana Murthy’s family office has bought high-end luxury apartments in Bangalore and Mumbai, said sources familiar with the development. Catamaran Ventures, which manages part of Murthy’s wealth, has previously invested in e-commerce, FMCG and education ventures.
Another source said that Premji Invest, the family office of Wipro chairman Azim Premji, is also scouting for real estate assets in metros. A couple of years ago, Premji, in his personal capacity, had picked up a few properties in Mumbai that were subsequently rented out, sources in the real estate industry said.
Sources told TOI Catamaran Ventures, which manages Rs 600 crore of funds, had invested at the pre-launch phase, providing scope for steep appreciation once the projects are completed. TOI couldn’t ascertain whether Catamaran is also considering investment in commercial real estate. An email sent to Catamaran remained unanswered at the time of going to press.
Murthy’s colleague and former Infosys CEO S D Shibulal’s penchant for real estate has been much reported. His family office, Innovations Investment Management, has property investments in the US, including in New York and Seattle, as also in Germany and India. In Seattle, it has a portfolio of over 700 apartments. The real estate investments, managed by a professional team, comprise both residential and commercial assets.
Another Infosys co-founder NS Raghavan, through his family office Nadathur Estates, manages an investment portfolio of multiple asset classes, including hospitality and real estate.
“Residential real estate does not bring the highest yields globally, but it is a reliable source of rental revenue coupled with capital appreciation and relatively better monetizing potential than commercial real estate,” said Anuj Puri, country head of real estate consultancy JLL India.
While A-grade commercial office space gives a annual yield of 10% in India, residential properties give an average yield of 3%-4%. In some luxury residential properties, the yield could touch 7%.
“Residential properties sit well on balance sheets and in inheritances, too. Not surprisingly, it is a preferred investment class for Indian HNIs with global reach and business interests,” said Puri.
J Vishnu Shankar, founder of real estate consultancy firm Crorepati Homes, said that much of the investment action by family offices has been happening in top dollar markets like Mumbai and New Delhi. “My guess is that Bangalore has a limited number of properties that cost Rs 20 crore upwards, which is the typical asset class that interests such high-profile buyers,” he said.
NR Narayana Murthy: Residential properties in Mumbai and Bangalore
SD Shibulal: Residential and commercial properties in New York, Seattle, Germany and India
NS Raghavan: Investments in hospitality and real estate
After a lacklustre first half, home sales across the top six cities in the country are expected to rise 26 per cent in the second half of 2014 compared to a year ago, according to a research report by property advisory firm Knight Frank.
A negative sentiment among home buyers due to the slow economy, high interest rates, inflation and also political uncertainty had tempered home sales in the first half of the year. While new launches in the period dropped 32 per cent, sales volume was down 27 per cent.
But now, with a positive election result, a stable government at the centre and sops for the housing sector in the interim budget and other measures to shore up the economy by the new government, there are signs that the tide might be turning.
Mumbai and Bangalore are expected to lead the recovery in sales volume with 49 per cent and 26 per cent growth respectively in the second half of the current year, says the half yearly report by Knight Frank.
New, launches, though, are expected to rise only 5 per cent in the next six months as developers may like to focus on getting rid of their large inventory of unsold homes that has piled up over the quarters.
The national capital region (NCR) saw a drastic drop of 37 per cent in home sales in the first six months of the year to nearly 28,500 units compared to 45,300 units a year ago. Launches of new homes too fell by 43 per cent at 35,500 units during the period but despite the lower number of launches, there were 167,000 unsold units in the NCR market in June which would take at least two years to be sold.
“The government’s intention to revive economy growth of the country seems to have stuck the right cord among investors and we do notice a substantial change in sentiments for the better,” said Shishir Baijal, chairman and managing director of Knight Frank.
Demand for homes in Mumbai, said Knight Frank, dropped by 25 per cent in the first half of 2014 compared to a year ago whole new launches were down 38 per cent. The Mumbai Metropolitan Region has an unsold inventory level of 213,742 units which would take about three years to sell.
The report, however, expects an uptick in the Mumbai property market with four important infrastructure projects coming up in the city including the part-opening of a monorail system, the commissioning of Metro Rail and the Eastern Freeway.
Bangalore as a market has seen healthy demand for homes despite the slowdown however the momentum has somewhat slackened in 2014, said Knight Frank.
In contract with the housing market, the office market has seen an improvement in its fortunes. Vacancy levels have come feom from 21 per cent in the second half of 2012 to 19 per cent in the first half of 2014. The combined absorption of office space in the top six cities has increased from 14.7 million sq ft in the second half of 2012 to 17.9 million sq ft in the half just ended.
Knight Frank forecasts that this will increase to 18.7 million sq ft in the second half of 2014. “For the full year 2014, we expect absorption to touch 36.5 million sq ft, a jump of 8 per cent from the 33.9 million sq ft reported in 2013,” the report said.
Mid-segment residential properties witnessed the highest appreciation in Bangalore in the past three years, while in the high-end category the credit went to Pune, says a study.
As per the report by global real estate consultants, Cushman and Wakefield, mid-segment residential property prices almost doubled in the north-west part of Bangalore, while they were up nearly two-thirds in some areas of Pune.
The study spanned between first half (January-June) of 2011 and first half of 2014.
In the mid-segment, Chennai with 27 percent, Delhi region with 22 percent and Kolkata with 17 percent, also saw some noteworthy increases, while Mumbai saw the second-lowest jump with 16 percent, following Hyderabad with 14 percent.
In the high-end properties market, Pune recorded the highest increase in capital values of 39 percent while Bangalore recorded 37 percent average increase in capital values in the period between 2011 and 2014.
The high-end property segment in Chennai market recorded an average increase of 34 percent in capital values in the three-year period, while Mumbai and Delhi-NCR recorded identical average increase of 24 percent. Hyderabad with 16 percent remained at the last on the table for average increase in capital values over three years.
“Despite the disparity in levels of average appreciation in capital values in the past, it is heartening to see that against poorer economic sentiments, all markets have recorded capital appreciation. It is interesting to note that markets which are largely end user driven are also the ones to record highest average increases in capital values while investor driven markets such as Delhi-NCR and Mumbai have remained contained in appreciation received over the period,” said Shveta Jain, executive director, Residential Services, Cushman & Wakefield.
“This is largely because of the fact that in the last few years due to factors such as slower economic growth, devaluation of the Indian rupee against dollar and general unrest on account of factors such as inflation, slower rate of real estate development etc. which has led more probable markets of Delhi-NCR and Mumbai to see a slower rate of appreciation,” Jain added.
In the last three years, Bangalore witnessed the highest average capital value appreciation in the mid segment of the top seven Indian cities. Chennai witnessed steady capital value appreciation in both mid and high-end segments during the period, while Hyderabad witnessed capital value appreciation of 14 percent in the mid segment and 16 percent in the high-end segment.
The high-end segment in Kolkata witnessed average capital value appreciation of 26 percent in the last three years. Average capital values in Mumbai’s mid segment increased 16 percent during the period and capital values in Delhi-NCR appreciated 22 percent in the mid segment and 24 percent in the high-end.
Also, the residential segment in Pune witnessed high levels of capital value growth in both the mid and high-end segments.
Source: Yahoo Finance
BANGALORE/MUMBAI: After a lull of nearly three years, sale of large land parcels is picking up across the country amid a general improvement in sentiment on expectations that the new government will focus on infrastructure development.
Not only developers but private equity (PE) players, too, are keen on joining hands with builders to acquire land parcels at fair valuations without having to pay a premium as corproates try to unbolt the value of their real estate properties, inspiring the realty market out of its trance.
Some of the builders looking for sewing large land transactions include Tata Housing Development Company, Oberoi Realty and Runwal Group in Mumbai, DLF in Delhi, Prestige Estates Projects in Bangalore, VGN Developers in Chennai and Kolte-Patil Developers in Pune. Most of the properties on block are non-core assets, real estate and manufacturing facilities of corporates that can easily be converted to residential or office projects.
“Developers have access to liquidity and are putting war chest together in anticipation of high growth and conducive interest rate,” said Ambar Maheshwari, managing director of corporate finance at property consultancy JLL India. “Such transactions help corporates get money to put into expansion of their core business, while builders get access to clean land that is 30-50% cheaper than the market value.”
In July, Prestige Estates Projects bought an 8-acre prime plot of land in south Bangalore for Rs 345 crore from engineering and electronics conglomerate Siemens.
The deal was preceded by Mumbai-based Lodha Developers buying 87 acre in Thane, near Mumbai, from Clariant Chemicals (India) for Rs1,154 crore and Oberoi Realty’s 25 acre land purchase in suburban Mumbai’s Borivali from Tata Steel for Rs1,155 crore.
A crucial factor like toned down expectations of sellers is also prompting developers to consider deals, which would have otherwise taken longer to conclude.
“With outlook on economy looking positive hereon, we are looking at acquiring land parcels now as values are looking more realistic,” said Sandeep Runwal, director, Runwal Group. He, however, refused comment on the ongoing transaction of Crompton Greaves’ land parcel, for which the developer is believed to be one of the contenders.
Crompton Greaves is looking to sell its 32-acre land parcel in tranches. A stable government that is perceived to be quick in taking firm policy decisions has also boosted confidence of the developers.
“With a stable government in power, we are witnessing slow and steady recovery in the economy and should catch steam with festive season around the corner,” said Brotin Banerjee, CEO and MD, Tata Housing Development Company.
“We believe this is the right time for both consumers and developers to proceed with their purchase decision as these deals may vanish soon. We are utilising this opportunity to increase our footprint of quality land parcels in city centres of major metros as the demand will start picking with improvement in macro economy by end of this year.”
Tata Housing acquired a 7-acre land parcel in Thane from KEC International for Rs225 crore in April. Besides, the developer is looking to invest Rs3,000 crore in acquisition of more land in the premium home category across major cities in the current fiscal.
According to property consultants, over Rs3,100 crore worth of land deals have taken place in the last 6-8 months with similar amount of deals expected to be concluded in the next few quarters. “There is a revived optimism among realty developers,” said Rajeev Bairathi, executive director, capital transactions group & north India at Knight Frank India.
“They know that prices will move upward going forward. Therefore, they are clear about this being the right time to build inventory of the most important raw material for their business — land parcels.”