Private equity investment in realty sector jumps over two-fold to Rs 8900 crore

NEW DELHI: Private equity investment in the real estate sector jumped more than two-fold to Rs 8,900 crore till September this year as developers were forced to raise funds from PE firms to meet their capital requirements, property consultant Cushman & Wakefield said.

"This year alone PE funds have invested close to INR 89 billion (USD 1.5 billion) in the real estate sector until September 2014, more than double the amount invested during the corresponding period in 2013 (INR 42.7 billion/USD 0.7 billion)," C&W said in a report.

PE investments in the realty sector during the first three quarters of 2014 have surpassed the total investment levels for 2013 by 21 per cent, it added.

"This substantial increase in investments has been predominantly in under construction residential projects followed by acquisitions of leased office assets," the report said.

Total number of deals also increased to 46 in the first three quarters of 2014 compared to 40 in the whole of 2013.

"Post the global economic slowdown in 2008, the RBI had discouraged banks from providing capital to the real estate sector. This led to an increase in cost of capital for developers borrowing from other lending sources, which was quite high and availability for which was limited.

"To meet capital requirements, developers are increasingly partnering with PE funds," C&W said.

The consultant said that investment activity, which was vibrant in the first two quarters of 2014, gained further momentum in the third quarter.

"Investments worth INR 49 billion (USD 0.8 billion) were committed during the third quarter. While domestic funds contributed majorly (57 per cent) to the overall investments in 2013, foreign funds dominated in the first three quarters of 2014 with a 69 per cent share in overall PE investments," the report said.

In terms of locations, Delhi-NCR, Mumbai and Chennai witnessed increased investments from PE funds during the first three quarters of 2014, with an increase in both transaction volume and number of deals from the corresponding period last year. Investment levels in Bengaluru remained stable while it declined in Pune.

About 41 per cent (INR 36.7 billion/USD 0.6 billion) of the total investments during the first three quarters of 2014 was witnessed in Delhi-NCR, which is an increase of close to 6 times compared to the first three quarters of 2013. In NCR, the PE investments were primarily in leased office assets.

By asset-class, office sector attracted highest PE investments at Rs 4,420 crore. Residential sector witnessed investments of close to Rs 4,180 crore while retail sector saw PE investments of Rs 300 crore.

Investor interest in the hospitality sector remained low with no investments in the segment recorded till September 2014.

Source The Economic Times.

Know whether to rent or buy a house in your city

Property prices in most cities are still out of reach for many and the high interest rates on home loans only add to the misery of the common middle-class Indian. Though owning a home is a dream for many, the financially-stretched individual is caught in a perpetual dilemma of whether to keep paying the rent or sign up for an EMI. 
The average age of a real-estate buyer in India is close to 30 years, the youngest across various developing markets.

The society, as a whole, favours buying property and believes that the buy decision is the best to make irrespective of the ground reality. Combining this with a backdrop of expensive real estate and high interest rates, any misstep in a buy versus rent decision can wreak havoc on the personal finances of the individual and their families in the foreseeable future.  

Multiple aspects need to be evaluated before you can determine which is more practical between buying and renting property. Important factors such as the average monthly take-home salary, existing loan payments, expected EMI from the desired property and expected rent for the same property (can be identified with the nature of rentals in similar location), need to be taken into account. 

Also, you need to consider the benefits that can be availed by buying through tax savings. Having a right amount of liquidity after the payment of EMI should be a key point before deciding to buy a home. All this, together, can be difficult to grapple with may make decision-making difficult. 

To help you out a little, we did a research across eight major cities in India and evaluated them on three important aspects/ratios-- affordability to buy (compares the income with expected EMI), affordability to rent (compares the income with expected rent) and rent to ownership ratio (to compares the rental cost with expected EMIs). Here is the city-wise analysis: 

Bengaluru: The rise in the rental values from 2012 by 37.51 per cent is more significant than the buying values which are at 12.64 per cent., This shows that Bengaluru is the most-preferred place to rent. Being the most opportunistic place, immigrants prefer to rent a home. There was an increase in NHB index of the city by 7 per cent from 2007. For professionals with less than 20 lakh annual income, renting a home is more optimal than buying. Mysore Road and Old Madras Road are the most affordable places to rent or buy a home. 

Office space absorption to reach 132 million sqft by 2017: Report

MUMBAI: Bullish on the revival of the economy after general elections, real estateconsultancy firm Cushman & Wakefield expects nearly 132 million sqft of office space, across the eight major metros, to get absorbed by 2017. 

However, the report said the current year (2013) will see a 26 per cent fall in office space absorption to around 22.5 million sqft over the past year due to the ongoing slump in the economy. 
The supply of office space between 2013 and 2017 in the top eight cities-Delhi-NCR, Mumbai, Bangalore, Chennai, Hyderabad, Ahmedabad, Kolkata, and Pune is expected to be around 143 million sqft. 
Of this 143 million sqft, around 90 million sqft are currently under various stages construction and is expected to get completed by 2015, the report said. 
"The office market is expected to remain attractive for occupiers with steady increase in absorption after a trend of decline in 2013. 
"With the economy expecting more stability in the post-election phase from 2015, the absorption trend is also expected to pick pace especially in established markets of Bangalore, Mumbai and Delhi-NCR," Cushman & Wakefield executive managing director forSouth Asia Sanjay Dutt said. 
The report said the absorption of office space will decline in 2013 over 2012, mainly due to the current economic slowdown, which has made many companies defer their leasing requirements. 
According to the report, office space absorption in top eight cities including is expected to be over 22.5 million sqft in 2013, a decline of around 26 per cent over 2012. 
However, going forward the trend in absorption is expected to pick up at a steady pace with 2015 with an estimated absorption of 28 million sqft. 
Dutt said that the commercial office sector has seen substantial deferment of supply in the recent times due to slack in demand and delays in regulatory clearances. 
"Similar trend is expected to continue in the next few years owing to issues such as demand from occupiers as well as funding issues that developers have been facing," he added. 
However, growth is expected to set in from the second half of 2014 when an increase in leasing activities both on account of entry of new companies into the country, expansion of existing companies and indeed relocation and consolidation activities that are expected to continue, Dutt said.

Source: The Economics Times, 2 - October - 13

Housing demand picks up in NCR; sales up 18% in January-June

NEW DELHI: Housing sales have risen by 18 per cent in the Delhi-NCR region during the first half of this year at 35,000 units, showing signs of improvement in the property market that has been facing slowdown in demand. 

"During H1 2013, the NCR residential market witnessed a total absorption of 35,000 units showing an increase of 18 per cent from H1 2012. This increase in sales can be ascribed to the high number of project launches in the affordable category," property consultant Knight Frank India said. 
The absorption in Greater Noida rose almost four times compared to the same period in 2012 suggesting a strong demand for affordable options, it added. 
Greater Noida witnessed sales of 14,300 units in H1 2013, as against 3,750 units in the year-ago period. 
The absorption levels dipped in both Gurgaon and Noida, largely due to increasing unaffordability of housing options available in these markets. 
"The NCR market is striving for a better equilibrium. Developers are focusing on project completion and deferring new launches," the consultant said. 
Knight Frank said that sluggish buyer sentiments have discouraged sales in some areas, but locations like Dwarka Expressway, Noida Expressway and Greater Noida would continue to lure investors. 
On supply side, nearly 49,000 units were launched during the January-June period, showing increase of 11 per cent compared to H1 2012. 
Nearly 5.4 lakh residential units are under construction in the NCR market. The unsold inventory is pegged at about 1.32 lakh units, comprising unsold units in ready as well as under construction projects. 
"The NCR residential market indicated signs of stability in H1 2013," Knight Frank India Chairman and Managing Director Shishir Baijal said. 
The developers are keeping new launches in check in order to bridge the supply and demand gap, he added. 
"Over the past two years, the NCR market has experienced a fall in launches by nearly 40 per cent compared to the peak levels of 2010. Both short term and long term moving average of launches confirm a plummeting trend," Knight Frank's Chief Economist & Director Research Samantak Das said. 
"However, demand has recently stabilised and improved in the last few quarters, which sketches a healthy residential market scenario for NCR and if the supply-demand gap tapers further, the region is likely to face an upward pressure on property prices," he added. 

Source : Economics Times 24 – Oct - 13