Friday, August 31, 2007

Real estate boom in india will continue in 2007

The real estate boom of 2006 is set to multiply itself in 2007 to get India a foreign capital of over Rs. 8000 crore with leading international investors establishing their presence in its richly rewarding real estate development, providing new employment opportunities for over 2 lakh skilled and unskilled workforce, according to estimates made by The Associated Chambers of Commerce and Industry of India.
Overseas real estate giants such as Royal Indian Raj International, Blackstone Group, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property Investors, Lee Kim Tah Holdings, Salim group, Morgan Stanley and GE Commercial Finance are likely to bring in a collective capital of US $ 80 billion investments to suitably reward them benefits with India’s opening up of its real estate sector to 100% FDIs.
The estimates point out that the US-headquartered investment bank Morgan Stanley already forayed into India's booming real estate sector in March 2006 through its real estate investment arm Morgan Stanley Real Estate investing Rs 300 crore (around $68 million) in Mantri Developers Pvt Ltd, a Bangalore-based real estate developer. Morgan Stanley plans to invest more than $1 billion over the next 4-5 years in the Indian real estate sector.
It also points out that Tishman Speyer's tied up with ICICI Bank to invest $1 billion in the country, while Kotak India Real Estate Fund closed its domestic tranche raising $100 million and this trend will continue to lure many more such investors to retain their interests in domestic real estate business.
The Chamber is of the view that as the government allowed 100 per cent Foreign Direct Investment in real estate, an efficient regulatory framework, simpler tax regime and proper regulations are imperative to boost public-private participation and bring in managerial and technical expertise.
According to findings, the biggest US pension fund, CalPERS, hedge fund Farallon Capital Management, US-based developer Tishman Speyer and NRI fund Trikona Capital too have drawn plans to invest in the booming market. Domestic funds including Kotak Realty Fund, HDFC India Real Estate Fund, Pantaloon Retail's Kshitij Real Estate Fund and UTI Venture Fund were also very active.
The two most active investor segments were High Net Worth Individuals (HNIs) and Financial Institutions. Both these segments were particularly active in commercial real estate. With the rules related to investing and repatriation relaxed to a large extent, an estimated 25 million Non Resident Indians (NRIs) living across 125 countries are investing in immovable property in India. NRIs have been keener in investing in residential properties than commercial Properties.
Strong economic growth, rising income levels, growing middle class, increasing urbanization and improving transparency brought resurgence for the Indian real estate sector in 2006 which will continue to grow further in 2007 with easy availability of financing facilities growing still further.
The Chamber forecasts that real estate growth will go from $12 billion in 2005 to $90 billion by 2015. Greater integration with the global economy and the increase of domestic as well as foreign investments are encouraging demand for real estate. Despite ill found doubts of a bubble, foreign investors are lining up.
While HDFC introduced real estate mutual fund in its sector specific mutual funds, Industry major Parasvnath Developers Limited came up with Initial Public Offer, DLF decided to bring IPO, Global big names such as Morgan Stanley, Lehman Brothers, HSBC and ABN Amro queued up to pick up stake in local realty firms, Year 2006 truly belonged to Realty.
Though criticized as an opportunity for the builders to grab land, Special Economic Zones offered tremendous opportunity for the Industry both for the commercial sector as well as for the industrial and logistics sector. The government finalized the guidelines for the development of social infrastructure, besides setting criteria for developers. The Reserve Bank of India directed commercial banks to treat exposure to Special Economic Zones as lending to commercial real estate sector. “However, there is case for relaxing the guidelines for the sector.
According to Chamber, emergence of IT and ITES sector and organized retail are the major growth drivers. Growth of IT and ITES created vast demand of office space and appearance of malls all over the country tendered huge scope for land development. Analysts peg the total demand for commercial office real estate in Bangalore, Chennai, Delhi-NCR, Mumbai, Pune, Hyderabad and Kolkata alone to be over 25 million sq ft in 2006.
Booming hospitality with the booming economy brought additional reasons to cheer for the Real Estate developers. Tier II cities such as Nagpur, Ahmedabad, Vadodara, Indore, Raipur, Jaipur, Agra, Siliguri and Kochi emerged as investment destinations in the current real estate scenario. The development of suburbs such as Navi Mumbai also generated immense opportunities.
“With stock market being highly volatile, investment in real estate has begun to look attractive and competitive with typical yields being 20-25 per cent per annum. Real estate will offer a good investment alternative to stocks and bonds over the coming years” added the President.
Markets also welcomed real estate with a cheer. The public issues of Parsvnath Developers and Lanco Infratech was oversubscribed by more than 50 times and 10 times, respectively. Parsvnath Developers Ltd. made a debut at 80 per cent premium to the offer price of Rs 300 on the BSE. The stock opened at Rs 540 on the BSE. The initial public offering of Sobha Developers Ltd was also subscribed 108.51 times on the bourses.
Eredene, a private equity fund raised $ 100 million earlier this year followed by another private equity fund Trinity Capital, which raised $500 million through AIM. Ansal Properties & Infrastructure Ltd, garnered Rs 681.75 crore through QIP, the overall book was subscribed by over two times. IVRCL Infrastructures & Projects Ltd raised Rs. 555 crore in a private placement via QIP route. The issue was oversubscribed multiple times. IVRCL is the first infrastructure construction company to raise equity through the QIP route.

Saturday, August 25, 2007

India next big market for leisure real estate

With its booming economy and burgeoning middles class, India is the next big market for the leisure real estate market, according to Kenneth May, chairman and chief executive of global leisure real estate leader Group RCI.
"India is poised for growth in leisure real estate and is at the helm of explosive economic growth," May said, inaugurating a 'Leisure Real Estate Symposium, in New Delhi on Friday.
"The market for leisure real estate (in India) today is expected to gain further momentum over the next few years," he added.
Over 100 representatives from India's hospitality, real estate and travel industry attended the daylong event, which deliberated on trends in leisure real estate or non-hotel holiday accommodation facilities and opportunities for Indian industry.
Referring to the growing middle class in India, May said, "With growing disposable incomes and aspirations and the enormous tourism potential in India, the time could not be better for the industry to launch new leisure real estate models that will meet the needs of the evolving consumer."
Speaking on the occasion, Amitabh Kant, principal secretary (industries & commerce) in the Kerala government, said, "With the growing purchasing power of the Indian, holidays are involving experiential and aspirational experiences for the traveller."
Kant, a former joint secretary in the tourism ministry, said that the 'Incredible India' campaign of the government opened up newer destinations and new experiences like rural tourism and medical tourism for both the domestic and international traveller.
"Indian tourism is expected to grow at the rate of 20-25 per cent per annum till 2017, posing a huge opportunity for wealth creation in the country," he said.
A Group RCI press release, quoting a World Travel and Tourism Council (WTTC) report, stated that India is expected to be the third fastest growing country in the world in travel and tourism demand over the next 10 years.
That growth, coupled with the 19.8 per cent increase in the number of Indians living in India with financial assets of over $1 trillion, are important factors to promote the growth of leisure real estate in India, it stated.
In Friday's symposium, several panel discussions were held on issues like relevance of shared ownership leisure products in India and Asia, asset optimisation in real estate investment and implementing successful marketing and sales strategies.
Among the leading Indian companies which attended the event were Cushman & Wakefield India, Indian Hospitality company, Reliance Industries, Parsvnath Developers, Starwood Hotels and Ambuja Realty.

Investors take stock of realty

Real estate sector emerges as a safe and lucrative option after the recent upheavals on the Dalal Street, says Peeyush Agnihotri
The stock market tanked for the fourth time this year. A number of factors contributed to the two recent ‘monsoon’ crashes — FII pullout, global cues and more recently, RBI’s check-inflation policy.
With stock brokers facing liquidity problems and margin money issues, pensive investors have yet again started looking at the real estate-cum-housing sector that has been left untouched by the RBI this time.
Though cyclic, investors always wear own sense of logic up their sleeves. Yet again, they are looking at the realty zone with the corner of their eye. For one, real estate sector promises a fixed return on investment, even when there is a slump, and secondly, this sector never ever oscillates dangerously.
Susheel Vats, DGM, M-Tech Developers, says RBI’s latest move is driven by both sectoral and democratic considerations. “But they would definitely go a long way in betterment of the realty sector,” he opines.
“The safety factor of the investment and past track record of the realty sector, which has consistently given 19 per cent return on investment over the last 60 years and the recent experiences with the stock market have just reaffirmed the investors’ faith in realty,” Vats says.
Traditionally, the stock and mutual funds may be good options from a short or medium-term perspective. “For long-term investor, realty is the sector,” he adds.
Real estate has been a traditional area of investment. Investment in shares is being considered risky and the past experiences have shown its volatility.
“The recent policy review by the Reserve Bank of India has no major changes in relation to the real estate sector. The general sentiments for this sector are positive and the demand for properties in the residential and commercial sectors continues to be robust,” concludes Avneesh Kumar Singh, MD, SNG Developers.
“Mutual funds, however, are the flavor of the season and are gaining wide acceptance amongst the investors. But, historically, real estate investments have yielded better returns in the long term than shares or mutual funds,” he adds.
Madhur Mittal, JMD, Triveni Infrastructure, says with the RBI leaving the home loan segment untouched in the quarterly review, home loan applicants may breathe a little easier.
“This is the first indication that the upward movement of the interest rates may have peaked and stagnated and now because of many persons repaying the complete home loan, the banks would have surplus funds, for which they have to now find new users/borrowers.
The banks will need to lower the interest rates to be able to make the home loans attractive to the borrowers, which in turn will fuel fresh demand of reasonable priced property units. “The shakeup in the stock market, which was waiting to happen, will encourage people to book profits and divert the funds to the housing and real estate sector,” he asserts.