Shobhit Agarwal, Jt. Managing Director – Capital Markets, Jones Lang LaSalle India, believes market may be sluggish at the moment, but eventually India stands as a destination for investment. In an exclusive interview with Track2Realty Focus 2012, he says honeymoon is over for the fly-by-night operators and only developers with established market presence and record of delivery will attract investors’ interest in 2012. Excerpts of the interview:
Track2Realty: 2011 has been a sluggish capital market with many IPOs being deferred. Do you get any indication of market revival in 2012?
Shobhit: Global capital is very cautious of India at the moment because of uncertainty about the global economy, lack of clear economic and reform policy direction in India and inflationary and monetary constrains which are restricting domestic consumption.
Most economists and investors are still very positive about India. Though markets may be sluggish in the current context and over the short term, eventually large amount of capital are definitely expected for India.
Track2Realty: What are the options left for realty companies to raise money now?
Shobhit: Some of the large developers (such as HDIL, DLF, Emaar etc) are selling their assets in non-core asset classes or non-core geographies to repay debt. Also, many developers are looking at raising capital from NBFCs to address their mismatched cash-flow situations. The domestic capital being raised by many PE funds is to be deployed over next year.
Track2Realty: Don’t you think raising money through other means would be all the more difficult for unlisted realty companies?
Shobhit: Most of the capital raised in the last 12 months has been from private markets. In other words, there is hardly a difference between listed or unlisted companies here. However, there is no doubt that only those with proven track records are being entertained by investors or markets.
Track2Realty: Some of the other companies, like Muthoot or Lovable Lingerie raised money even in this capital market? Do you feel there is a crisis of credibility for realty companies to raise public money now?
Shobhit: The previous euphoria about real estate is definitely not in evidence right now. More than the credibility of the developers, the growth expectations of the realty sector and the delivery capabilities of the developers have rationalized. Therefore, there is a lower valuation by investors as compared to earlier. Today, only developers who have an established market presence and tested record of development delivery are attracting investors’ interest. Fly-by-night operators are not being entertained anymore.
