Experts debate urban housing challenge and the way out

Budget projects, vertical expansion and easy finance options could be the way forward to meet the surging demand of housing in the national capital region (NCR) as well as in the country. At the Mint Real Estate Conclave held recently, this was the consensus that emerged among a panel of industry experts and decision makers who debated on the challenges that confront the real estate sector amidst growing skepticism after the global economic slowdown.

Getamber Anand, vice-president, Confederation of Real Estate Developers’ Associations of India, pitched for relaxed monetary policy for the sector.

“The real estate sector has least Non-Performing Assets (NPAs) in comparison to other sectors like power. And yet, when it comes to giving us easy finance options, we are seen skeptically,” he said.

National Real Estate Development Council president Navin M Raheja too agreed. “We are prepared to take on challenges if the policy makers trust us,” he said even as he vouched for high-rise buildings as the solution to make up for scarcity of housing options.

Romi Roy, urban planner, DDA, said there was a need to develop civic infrastructure to cater to the rising number of homebuyers.

She also admitted that urban planners haven’t been able to deliver promising solutions to the problem of affordable housing and viable city infrastructure that could accommodate pressures of rising population.

Source: http://www.hindustantimes.com/India-news/Haryana/Experts-debate-urban-housing-challenge-and-the-way-out/Article1-787580.aspx

India realty likely to see up to $5 billion PE exits in 2012

MUMBAI: Private equity (PE) funds are expected to exit between $3 billion and $5 billion worth of Indian real estate investments in 2012, international brokerage Jones Lang LaSalle said on Tuesday.

Most of these investments were made in the country in 2005/06 and are now coming to the end of their 5-7 year cycle, triggering the exit, the brokerage house said in a report.

Over the last four years, PE investors have already exited $3 billion worth of real estate investments, accounting for 23 percent of their total investments since 2005.

Indian developers are already struggling with a lack of financing options as property sales in India's major cities are flat with higher interest rates deterring potential homebuyers, cutting off cash to developers, many of whom have racked up high debt levels.

Source: http://economictimes.indiatimes.com/markets/real-estate/realty-trends/india-realty-likely-to-see-up-to-5-billion-pe-exits-in-2012/articleshow/11183025.cms

Real estate houses most PE investments in 2011, attracts $1,700 million

AHMEDABAD: Real estate emerged as the popular parking place for private equity funds who invested $1,700 million in the sector during 2011. Power sector that topped the PE charts during the first six months of the year finished third with $892-million investments behind automotive sector that could attract $1006 million private equity funding.

Overall PE investments during the year rose to $7.7 billion through 347 deals, up from $6.2 billion and 253 deals in 2010. However, the country's total investment in the private sector was a tad lower than last year.

In 2011, PE players signed 29 deals in real estate at a time when the sector found it tough to receive bank funding, a report by consulting firm Grant Thornton says. "Banks have become too cautious to lend to the sector and PE players found a new opportunity. They expect high returns within a year or so," says Raja Lahiri, partner, transaction advisory services, Grant Thornton India. Of the 100 transactions handled by the firm, more than half are into real estate.

Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, says Vikram Hosangady, partner, KPMG. "Limited partners (who write cheque for funds) expect 15-25% returns from real estate deals. Foreign investors are optimistic about India. All they want is prompt action and friendly policies," he says.

Automotive, power & energy, banking & financial services and IT & ITes received PE investments of $1006 mn, $892 mn, $816 mn and $783 mn respectively. The sectors were ahead of telecom, metals & mining, pharma & healthcare, hospitality who saw a declining interest from private equity firms.

Bain Capital and Govt of Singapore clinched the top deal of the year of $849 million when they together took 30% stake in Hero Investment.

Macquarie SBI Infrastructure Investments, Blackstone and a consortium of Standard Chartered PE (Mauritius), JM Financial and NYLIM Jacob Ballas have invested $200 mn each in separate deals. "Though the outbound deals have seen lesser activity due to weak global conditions, PE firms continue to attract better deals," adds Lahiri.

The year saw $50.9 billion invested through various forms of private investments like mergers & acquisitions, PE deals and qualified institutional placement (QIP). The invested amount in 2011 was however, lower than $62.2 billion investments in 2010 and so were the number of deals that fell to 961 deals from 971 deals last year.

Source: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/real-estate-houses-most-pe-investments-in-2011-attracts-1700-million/articleshow/11216641.cms

Tamil Nadu is 2nd-most transparent in real estate deals

Chennai:  Tamil Nadu ranked second in the Indian Real Estate Transparency Index 2011 among 20 states surveyed, according to a report by real estate services firm Jones Lang LaSalle.

The ranking was based on factors such as availability of market information, reforms in urban local bodies, progressive business environment, protection of property rights and inclusive and sustainable development.

Tamil Nadu also ranked second in inclusive and sustainable development, reforms in urban local bodies and availability of market information and third in protection of property rights.  However, it came only ninth in the progressive business environment category.

Neighbouring Andhra Pradesh, which is ranked first, overall, is way ahead of Tamil Nadu on progressive business environment, according to the Index.

Real estate services related to land records and registration and water supply services are perceived as being corrupt in Tamil Nadu, as per the India Corruption Study 2008 by Transparency International India. However, these problems are likely to be alleviated in the long run as all reforms related to computerisation of land records have been initiated and are in progress, the study said."Tamil Nadu rates highly on market information, urban reforms and property rights. In the report, Economic Freedom of States of India published by Academic Foundation, the state ranked high on legal structure and security as well as regulation of labour and business, due to its good governance," the study said.

Source: http://www.ndtv.com/article/tamil-nadu/tamil-nadu-2nd-most-transparent-in-real-estate-deals-158357

Myths about real estate

MYTH 1: There is a ‘bubble’ in the Indian real estate market, and it will burst soon.

Fact: There is no evidence of a ‘bubble’. When a bubble develops in any market, it is because prices for that particular commodity or asset have gone through the roof and beyond affordability. This is far from the case in Indian real estate.

The residential sector is led by end-users and it is they who dictate the state of the market. Neither is there a significant correlation between the state of the stock market and that of the property market. There are no indications that investor activity has overtaken genuine buyer activity. In residential, the proportion is approximately 80% end users and 20% investors. In the commercial sector, the proportion is almost 100% end users who are taking property on lease. There are instances of overheating but these are localised.

MYTH 2: Indians do not figure very large as property buyers on the international property market.

Fact: Residential rates at Mumbai’s Nariman Point or Cuffe Parade are priced anywhere between Rs 25,000-55,000 per sq feet. For the price of a 2BHK flat in these areas, one can buy a villa in Dubai or London’s suburbs, a luxury flat or a standalone house in New Jersey. Many Indian buyers have woken up to this fact and are buying homes abroad.

Myth 3: Thanks to India’s booming economy, higher salaries, higher aspirations and easier home loans, most Indians are buying high-end homes now.

Fact: The accent is still very much on affordable housing. As before, the Great Indian Middle Class is not motivated by its need for greater convenience, but by the ability to pay for a home. In that context, the greater demand will always be towards affordable housing options.

MYTH 4: Major Indian developers are abandoning the MIG sector and concentrating on high-end residential projects because it makes better business sense.

Fact: Most big-banner developers still see sense in constructing mid-income housing projects, since they can construct more volumes. The demand in terms of units is phenomenal and developers getting into this segment can build for years to come. They have the assurance of sure-shot absorption, as well. Most major Indian developers are NOT shifting from affordable to high-end housing-only branching out. While they get into middle-segment housing, they continue to build high-end projects.

Myth 5: The metros are still the best places to invest in real estate.

Fact: The real estate boom is causing many of our metros and even some of the previously popular Tier II towns to saturate at an incredible pace. Property prices there skyrocket beyond the reach of middle-income homebuyers, causing them to look a little further afield each year. Investors observe these migration trends, analyze the magnitude and scope of activity, and identify one or the other new town as the next coming thing.

A fundamental real estate investment mantra is that emerging localities are preferable to established and often saturated ones. Established areas eventually reach a peak in terms of appreciation potential, after which the growth rate either slows down or stagnates. Moreover, there is little scope for new market drivers such as malls to find a place in saturated localities - meanwhile, prices remain high.

This is not the best of scenarios from an investment point of view, since optimal investment requires low entry levels and appreciable growth within a realistic time-frame. Therefore, as one or the other destination reaches its peak potential on all these counts, new ones come into the limelight.

Source: The Times of India