Track2Realty Exclusive: As the country heads towards the General Elections with policy uncertainties expected to get clarity ahead once a new Government assumes office, it seems Indian real estate is yet again high on the wish list of the investors, both domestic and international. If the investments and the policy announcements since the second half of 2013 are any indication, there has been a clear indication that the phase of over-cautious market sentiments is getting over. Furthermore, there is a general feeling that the new government will have more industry friendly policies in general and with regard to the real estate in particular.
The market that has been quite flat for nearly three years now is again buzzing with activities and even the incumbent government at the centre has rolled out the policy initiatives, including clarity over Regulator, Land Acquisition, REIT, SEZ among others, to give the market reasons to feel optimistic. Analysts maintain that the year 2013 has been the beginning of the revival of the Indian real estate market. They believe even if the sentiments have not been bullish from the sales perspective due to high interest rate and overall macro-economic sentiments, the year has been reasonably well from the standpoint of sector’s quest for finance and the direction in which the sector can look forward to.
Facts speak for themselves. As per a recent report by Cushman and Wakefield the total inflows during the year 2013 stood at Rs 7,000 crore ($1.2 billion), compared to Rs 6,200 crore in 2012 ($1.1 billion). Overall private equity investments across sectors in India have also increased by 11 per cent from $9.49 billion in 2012 to $10.5 billion in 2013. The increase in private equity inflows was primarily due to rising investments in residential assets and other sectors like retail and hospitality. While the number of deals has increased to 40 in 2013 compared to 34 in 2012, the average deal size has declined marginally and was approximately Rs 175 crore ($28 million).
Sanjay Dutt, Executive Managing Director South Asia, Cushman & Wakefield says, “A number of large global investors, including a number of sovereign funds, have taken the first move by partnering with successful local investors and developers for investing in the Indian real estate market. This is expected to result in high transaction activity especially in income yielding commercial office assets during 2014.”
Sachin Sandhir, Managing Director-South Asia of RICS reminds that in the last few months, whether it was Land Acquisition Act, whether it was Regulator Bill, whether it was REIT guidelines, suddenly there was plethora of activities and buzz happening in the Finance Ministry and also about the measures that can be taken to get the economy back on track. So, from sales perspective it has been what it was. But looking ahead from the policy perspective there has been some measures which at least give you some element of hope that post elections depending on which way it pans out there would be some progress. He believes some of these developments have the ability to change the market dynamics significantly.
“Looking forward, all depends on the elections and there has to be a decisive mandate. That will decide the overall macro-economic sentiment. One would still believe with the great India growth story and the real estate as the best asset class and there will be some rebound in the second half 0f 2014. I believe there will be more rationalisation from the policy perspective and price point. Post the Lehman crisis it has been monitored that in some markets the new launches with the price rationalisation has propelled the transactions and led to resurgence,” says Sandhir.
Neeraj Bansal, Partner-Real Estate & Construction with KPMG India is of the opinion that the rules of the game are changing and he feels in 2014 the developers will be forced to put their own house in order. “Consumer is very aware now and then competition is increasing. So, with REIT some good capital coming in if you have a good game plan in place then 2015 or 2016 can get you on a smooth ride,” says Bansal.
However, Gaurav Gupta, MD of SG Estates has a caveat here when he says that everyone is expecting the developers to put their house in order. No one is talking about the government putting the house in order. According to him, the new government must be clear with policies and guidelines on all the regulatory measures.
“We are often confused with the price point of the product in absence of clear guidelines. We don’t need a regulator; we need a facilitator who not only controls us but also helps us in getting certain approvals in time-bound manner which also helps us in delivering on time and helps us in improving our image. We are suffering from image deficit due to policies,” says Gupta.
Beyond these discussions over policy facilitation, or rather lack of it, the fact of the matter is that the international players are looking at the Indian realty market with some renewed interest. For example, Kuwait-based investment company Hayat Invest as part of foraying into the domestic real estate business has announced its first residential project in India to come up near Chennai, under its joint venture Indian partner XS Real Group.
Hayat Investment Company would invest about USD 100 million in next couple of years. For the first two projects it will invest about USD 25 million. The two companies, in which Hayat Invest holds the majority stake, have jointly launched a special purpose vehicle — Jacaranda Properties — to manage the real estate entity. The first project to come up on a 14 acre land at Siruseri near the SIPCOT Industrial Park would have about 1,500 apartments.
This may be one major foreign investment into the Indian market after a lull phase, but definitely indicates the change of mindset as far as Indian realty as an investment destination is concerned. The Indian market is definitely poised to attract major investment this year and the analysts are unanimous that post the General Elections the capital flow into the sector will revive the fortunes of Indian real estate.
