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