Mumbai Metropolitan Region

Despite being the most expensive property market in the country, Mumbai Metropolitan Region continues to be the prime market for attracting investor interest. Structured equity or debt was the preferred route of investment as the city received the major portion of private equity investments in the past year.

Out of the total Rs 19,500 crore, Mumbai received more than 1/3^rd or 34 % investments in the sector in 2015, showed a JLL India study. The city was followed by Delhi-NCR, Chennai, Bengaluru and Pune receiving 29%, 14%, 11% and 5% respectively. Talking about this trend, Shobhit Agarwal, managing director-capital markets, at JLL India said, “The preference for these cities reflects learning from past experience. While investors remain cautious about which cities to invest in, what is interesting to observe is that the ratio of structured equity and debt was more than half of the total investments received.”

Rubi Arya, Executive Vice-Chairman, Milestone Capital Advisors anticipates equity deals to gain a foothold over the next two three years because of an expected increase in commercial  real estate funding due to instruments like real estate investment trusts. Arya said, “We have seen proven returns from such structures and will continue introducing products in this space for some more time. But from a safety viewpoint, structured debt will remain preferred route for investors.”

Core commercial assets are being preferred over asset classes such as residential, hospitality and retail for plain equity investments. The preference indicates how investors are circumspect despite being optimistic about major potential gains in real estate. Also, important has been the preference amongst investors to invest in projects of developers with a good track record and credibility.

While residential and office projects continue to be the focus for PE investors, entity-level investments and platform-level deals come into the limelight, indicating increase in investor confidence. The JLL report said that a total of Rs 6,048 crore worth of entity-level equity yes deals were witnessed. Deals such as Goldman Sachs and Warburg Pincus investing in Piramal Realty and Blackstone buying Alpha G:Corp aggregating to around Rs 4,000 crore were amongst the 10 entity-level investments witnessed in the year 2015.

In terms of asset focus, despite receiving a reasonable share of funding, residential projects have not received much from equity investment. At the same time, a significant sum of equity investments has been towards income-yielding office projects. Although residential and office will attract a majority of investments, retail is expected to soon gain a foothold in the market.

Indian Real Estate becomes attractive for Foreign Investors

Indian real estate market has become increasingly attractive for foreign investors after almost 5 years, as indicated by India-specific fundraisings.

Talking about the improvement in foreign investors’ confidence in real estate market, Shobit Agarwal, Managing Director of Capital Markets at JLL India, said “During the pre-GFC (global financial crisis) phase, 82% of funds got raised in US dollar. This reduced to 57% in post-GFC phase when micro-market understanding was required more than banking on the macro-economy. Interestingly, the contribution, 2014-onwards, has increased considerably to 70% – hinting that the positivity is here to stay for some time.”

The increase in investment gained impetus before the Lok Sabha elections of 2014 and has only increased further as evidenced by funds amounting to $2.2 billion (Rs. 14,860 crore) that has been raised so far in the current investment cycle.

The recent policy measure of easing foreign direct investment rules is also expected to bring more capital in the real estate sector. Encouraged by this, private equity funds are looking to leverage on this rising interest among foreign investors.

According to Rubi Arya, chief executive of Milestone Capital Advisors, “Offshore funds are showing interest in Indian real estate and there is lot of interest from FDI funds back in Indian real estate. We believe this is an opportune time to invest in Indian real estate, with rigorous risk management and strong asset management. We are planning to leverage further on our structured debt and commercial platform to raise money from offshore funds.”

Adding further she said, “FDI funds are looking to invest in pre-leased commercial assets, create strategic-level partnerships with reputed developers mainly through equity deals and make structured debt investments in residential projects”.

The JLL India report says that India-specific cumulative fundraising attained its peak in the pre-GFC period. During this period between 2005 and 2008, there were 50 such funds that raised $16 billion in total. However, post-GFC, only 29 funds got raised in five years, with cumulative fundraising of $3.9 billion.

The current investment period starting in 2014 has witnessed an increase in the volume of investments as well as the average investment size from $ 134 million to $ 184 million.

10 Indian cities having affordable realty markets – JLL

In a recent report by JLL India, Navi Mumbai, Ahmedabad, Pune and Hyderabad have been listed in the 10 affordable property markets of India among other cities like Kochi, Ghaziabad, Jaipur, Nagpur, Surat and Coimbatore. According to the consultancy, these cities offer great low-budget properties between Rs. 30 – 50 lakh.

“These ten cities offer ample choices for investment in real estate with reasonable property price levels as well as opportunities for future capital appreciation and healthy returns,” says Anuj Puri, Chairman and Country Head, JLL India.

On Hyderabad, The report stated that after the end of political turbulence and prolonged slump, the real estate market in this city is all set for an upswing. Puri said Hyderabad is conceivably one of the most affordable cities among all tier 1 cities of India. Even the well-developed residential localities like Manikonda, Kukatpally, Miyapur and Sainikpuri present homes in the budget of Rs 30-50 lakh.

While Mumbai is increasingly becoming unreasonable for the common man, Navi Mumbai still presents affordable choices in similar price range. “The proposed SEZs at Dronagiri, Ulwe and Kalamboli, and the impending international airport at Panvel are expected to generate employment and drive demand for commercial as well as residential real estate,” Puri said.

About Pune, the report said that this Tier II city has documented substantial growth in the affordable housing segment over the last couple of years. These projects offer small 1-2 BHK flats with basic amenities and are located in the periphery of Pune.

“Well connected via metro and roads to the job markets of Delhi-NCR, Gaziabad mainly gratifies the mid-segment home buyers. With a very good supply of ready-to-move-in apartments offered by reputed developers in the affordable range of 30 – 50 lakh, the city is emerging as a residential neighbourhood of Delhi,” Jll said in the report.

On Kochi, the report observed that the residential real estate market of the city is dominated by affordable housing segment, which accounts to about 60 per cent of the total housing projects.

Image credits : DNA

Two major Indian cities; Mumbai and Delhi have made their entry into the top 30 list of the world’s most productive, powerful and well connected cities.

Global Top 30 List:

According to research report of JLL India, the international real estate consultancy, Mumbai which is also the financial capital of country has been ranked 22^nd whereas; our national capital Delhi has been ranked on the 24^th spot in the list of 30 super cities of the world. However; in the list the top five cities were; Tokyo, New York, London and Paris. The Tokyo, New York, London and Paris are the cities which are the destination of more than 50 per cent of all foreign capital investment, says Global Top 30 list of JLL India. According to JLL, “All top 30 cities account for 64 per cent of the total cross-border investment as their common interest are commercial attraction or economic attraction and real estate power and status.

List of Improvers:

Apart from that Mumbai is also ranked in the top 10 list of “Improvers” that needs more development and past one year has increased the commercial attraction. However; the other cities which have increased the commercial attraction includes; Tehran (Iran), Madrid (Spain), Riyadh (Saudi Arabia), Milan (Italy), Jeddah (Saudi Arabia), Lagos (Nigeria), Cairo (Egypt), Jeddah (Saudi Arabia), Istanbul (Turkey) and Jakarta (Indonesia).

.According to the reports of JLL India, with growth of more than 7 percent in the cities over past three years, it is no wonder that Mumbai and Delhi has made its entry into the Global Top 30 list with strong presence. The more they added that these reforms are undertaken by the government and it is boosting the confidence in the economy of nation. According to reports, the Mumbai is making its strong presence into the hub for global corporations with the help of firms which are among the world’s 2,000 largest companies and they all have headquartered in the city by rising 50 per cent over the last 10 years. The index of commercial attraction is the primary benchmark of JLL in terms of size and strength of the city’s real estate market and economy development.  As per the statement of Anuj Puri, Chairman and Country Head of JLL, “In Mumbai construction levels are high and it is increasing the Grade-A stock by 26 percent in last three years and it is expected that in next three years it will add more 22 percent. Apart from that Mumbai is also enhancing its position as a hub of global corporations because here you can easily find the headquarters of world’s 2,000 largest companies.

List of Global 300 Cities:

In context of the Global 300 cities, Mr. Puri stated that cities which make up the Global 300 are the world’s most productive¸ connected and powerful. Their 1.3 billion citizen’s account for nearly 40 percent of global economic activity, more than Europe and North America combined. These cities have hosted that more than 88 percent of the headquarters of the world’s 2,000 largest listed companies, which are able to generate the 40 percent of the world’s finance as well as business employment. In this list you can see the overwhelming focus of international corporations, hotel brands, real estate investors and retailers. The Global 300 cities are representing the bulk of commercial real estate market activity.