India’s realty sector is set for robust inflows of USD 4—5 billion from overseas investors in the next couple of years, with Bangalore, Delhi and Mumbai emerging as the favourites, global real estate consultancy giant Jones Lang LaSalle has said in Devos.
“The early foreign investors in India, who came in around 2006—07, did not have very good experience, partly because of their inexperience in doing business in India and partly because of global financial crisis,” JLL Asia Pacific CEO Alastair Hughes said here.
“However, foreign investors are now looking with a renewed interest at India, given its still robust economic growth rate as that bodes well for good returns to their investments,” Hughes said.
Hughes, who was here to participate in the World Economic Forum Annual Meeting, said foreign fund inflows were expected to pick up in the Indian realty sector going forward.
He added: “They (investors) are now looking much more closely at India to put in their funds into Indian real estate sector. They had come in between 2006—2007 and first half of 2008, but they completely went away in 2009 and have been mostly away since then.
“The overseas investors are now looking to come back and what they are looking for right now is good partners in India, because it is a difficult place to do real estate business because of various reasons.”
Right now, many Indian developers and fund managers are seeking to get international money and that is much more likely to come in, Hughes said, adding that there is more international money today waiting to be invested in India than any of the last five years.
Overseas investors have invested USD 14 billion into the Indian real estate sector over the period from 2006 to 2012.
In the last two years, foreign investment into Indian real estate has been around USD 1.2 billion per annum.
Around half of all transactions were invested in residential property, a quarter in the offices sector and the remaining quarter was split among the other sectors.
Regionally, half these investment come from US with rest coming from the Middle East, Singapore, the UK, Hong Kong and Germany, Hughes said.
Terming the next two years as much more promising, Hughes said that 2013 and 2014 will have a total of USD 4—5 billion come into the sector, mainly to buy income yielding SEZ assets at a capitalisation rate of 10.75 per cent.
“We expect interest from global and US investors to maintain. Favourite location foreigners will be Bangalore, New Delhi and Mumbai,” he added. (Source PTI).
Realty firms eyeing pre-launches in markets such as Mumbai, Bangalore to sell large inventories, test new markets
Key property markets such as Mumbai, Delhi and Bangalore are seeing a return of project
pre-launches, signalling rising momentum in real estate sales as buyers and investors regain
confidence in the sector.
Mumbai will see a spurt in pre-launch activity this year after the state government removed
hurdles in obtaining regulatory clearances for real estate projects.
In a pre-launch, real estate firms begin selling a project ahead of a formal launch and buyers
and investors, in return, get sharp discounts of 10-15% or more at this stage as an incentive
for the risk involved.
Over the past two years, pre-launch activity had dropped, especially in Mumbai, because
of the depressed real estate market as well as uncertainties in obtaining approvals. That’s
changing now.
If the pricing is right, investors who have been sitting on the fence for long due to the lack of
launches in Mumbai will come in,” said developer in Bangalore.
Pre-launches offer developers an opportunity to lure back investor interest in the Mumbai
realty market, as project approvals are trickling in and sales are picking up, and mop up
much-needed cash flows. Investors had shifted their attention to projects in neighbouring
Navi Mumbai and Thane districts where more projects were being launched.
“Developers will also offer buyers attractive pre-launch benefits in a bid to accelerate sales
momentum in the initial months following a launch,” he wrote.
Developers who traditionally avoided the pre-launch model are now adopting it for projects
in new markets.
Consolidating
Many companies, taking advantage of a sluggish real estate market, are consolidating or
moving their headquarters to bigger and better offices. Multinationals like VW, Bayer Crop
Science, FedEx, Pepsi-Co and L'Oreal along with Indian majors such as Cipla, Britannia and
HDFC have cleverly used the market trend to save on two fronts — cost and space.
With office rentals and capital values having dropped nearly 25-40% since the 2008 peak
in most parts of the country, including Mumbai, many occupiers are planning to relocate
to newer, safer buildings, with larger floor plates and better amenities," said Ramesh Nair,
managing director, West India -Jones Lang LaSalle India.
Most office space deals for shifting headquarters are either done on an outright basis or
leased for long tenures since a corporate headquarter often symbolises a company's power
centre, and companies usually avoid shifting headquarters for fear of sending wrong signals.
Global financial majors like Citigroup and Goldman Sachs have also used the current
downturn to strike large realty deals for consolidating their operations in Mumbai and
Bangalore, respectively.
In 2012, the country's office market saw new supply of 30 million sq ft and absorption at
27 million sq ft. In 2013 also, new supply is estimated to be around 40 million sq ft with
absorption of 29 million sq ft, and the climate is ripe for negotiating better price and terms.
