Altico to finance Mumbai & NCr projects for Rs. 130 cr

With a focus on senior secured lending to residential projects in the real estate sector across Tier-1 cities in the country, Mumbai-based NBFC, Altico Capital has closed two deals worth Rs 130 crore for residential projects in Mumbai and the NCR.

“We have closed an Rs 50 crore transaction with Noida-based Lotus Greens group for a residential project named ‘Arena I’, which is a part of a larger Sports City development in the city. And In the second deal, we have invested Rs 80 crore in Mumbai-based Shree Sai group for a residential project called ‘The Nest’ being developed in Andheri,” the company said in a statement.

“While the funding for the Arena-I in NCR will be utilised for construction of the project, Shree Sai will use the capital for refinancing the existing lender as well as for completing the construction of the project,” the release added.

“We are looking at last mile financing for projects in advanced stages of construction and sales,” Altico’s Chief Executive, Sanjay Grewal said, adding that the company will also evaluate and fund projects wherein corporate houses like  Godrej have tied up  under joint development arrangements  with existing land owners and developers to market and construct projects under their corporate brands.

Real Estate Sector

Real estate experts believe that the 2016 will start with the positive note for real estate sector and in coming year it may witness pickup in the sales with improvement in the number of unsold inventories. In simple words we can say that year 2015 was little bit good for realty sector as it has witness some  regulatory changes, which will do the big impact in year 2016 as regulatory changes have relaxed the foreign direct investment laws, after the direct approval of Union Cabinet and it was much awaited Real Estate Bill. On Real Estate Bill there were mixed reactions from real estate experts, but broadly everyone sees it as a positive move as currently real estate sector is in sluggish mood.

As per real estate experts, In September the rate cut of 50 basis points by the RBI under monetary policy review will also increase the demand and supply in the real estate sector as well as government panel is also planning to bring seventh pay commission. As per the reports of Financial Express, “Investment in the real estate sector in 2015 was about $ 8 billion or Rs 53,000 crore and it was even year high even when the sector is not in a good shape. However; BSE Real Estate index also plunged by more than 16 percent on a year to date basis at the December 18. According to reports of Cushman and Wakefield private equity players have invested about $ 2.8 billion or Rs 18,700 crore in the real estate market till end September 2015. Add to that estimation $ 4.5 billion, or Rs 30,500 crore was of NCDs till the end of November 2015 and due to that the overall tally was up by 74 percent in comparison of last year which was about Rs 17,600 crore.

As per the statement of Anuj Puri, Chairman and Country Head of JLL India, “In past two years the real estate market is seeing some improvement and it has been adjusted to new trends in terms of aligning supply for relevant demand. The more he added that now real estate developers are paying more attention to the requirements of buyers and they are developing more property as per need of middle class which is in the price range of Rs 75 lakhs to Rs 90 lakhs in tier-I cities”.  According to Vikas Malpani, co-founder and Head of CommonFloor Groups, “The real estate bill approval is positive sign for real sector, which along with other trends could shape the real estate sector in 2016”. There are many experts, who are giving thumps up to the recently approved Real Estate Regulatory Bill as it can be helpful to clear the unsold inventory. We all know that whenever any new bill or law comes in the existence, the real estate developers tend to adopt a wait and watch approach. And due to that in present, the completions of existing projects are the prime focus of developers for some more months.

On the other side at the positive note the developers are focusing more on completing their existing projects as well as clearing the inventories and according to JLL India listed that following regions as the best bet for real estate sector in 2016; Noida & Greater Noida, Thane – Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Nagar Road – Pune, Whitefield – Bangalore, Navi Mumbai – Mumbai Metropolitan Region ( MMR), Viman Nagar and Kochi.

Commercial real estate

Capital value expectations as well as monthly rentals both have marked growth in September quarter for commercial real estate segment in India, but still its lower than the expected as per the RICS (Royal Institute of Chartered Surveyors), UK based qualifications and standards authority for property, construction and land. Apart from that the Indian commercial property monitor also indicated that maximum number of tenants and investors felt that market valuation for commercial real estate segment is much expensive in comparison of previous quarter. In contrast, the percentage of tenants and investors who felt that price of commercial dipped in third quarter of 2015 was about 30 percent in comparison of earlier quarter.

According to Devina Ghildial, MD, South Asia, RICS, “The commercial property segment in India was always upswing because demand was outstripping supply, but growth in rentals value was modest with its early expectations”. The more she added that in India, there is dearth for grade A office space under commercial segment in major cities because many new MNCs are looking towards more business in India and for that they are looking for more space to set up new office space. In our country existing large business organizations are ramping up their business and operation with solid pace, but the supply of grade A office space is not able to match up to this demand, leading to healthy appreciation. As per the records of property price cycle of commercial segment, a large group of segment (about 38.3 per cent) feeling that its in establishment phase. Apart from that percentage who believed that it is in early uptrend phases, is about 27.2 per cent. And almost equal percentage, which is about 24.7 per cent, felt that commercial property segment was in mid-downturn stage, but only 6.2 per cent felt that it is in mid-upturn phase, whereas; 1.2 per cent felt it had peak stage.

According to recent reports, there was a spurt in the demand in Indian real estate sector and when it comes to commercial property because auto, IT and e-commerce start-ups, telecom, banking financial services and insurance (BFSI), consumer durables, fast moving consumer goods (FMCG) sectors are looking for more space to enhance their business and operation in premium cities such as; Bangalore, Mumbai, Delhi and National Capital Region (NCR) and these cities have witnessed several large-sized transactions during the quarter.

According to Ashutosh Limaye, Head of Research & Real estate intelligence service, JLL India stated that “In India commercial properties are more affordable in comparison of other countries and apart from that rentals in our country have bottomed out and making its way up. The more he added that rise in rental was gentle, but the direction was definitely up and rentals in real estate’s commercial segment is fair and competitive, but it’s still below the previous peak of 2008. Metro cities like; Bangalore was one of the few market which has reached its peak in the year 2008 while real estate sector in other cities remained more than 10 per cent below it, whereas; Chennai was 2 per cent below its peak and Pune was at 10 per cent while rest were over 10 per cent lower than their peak. In 2008, the price was high as Rs400 per square feet (sq ft) in the cities Mumbai and Delhi. In present, Nariman Point is 30 per cent lower than commercial property rental values of 2008 while other suburbs areas such as; Kurla and Andheri is 20 per cent lower.

According to J C Sharma, MD of Sobha Developers, India offered arbitrage in two things; one office rentals and second salaries or wages. The more he added that MNCs came to India because of these two arbitrages, which is competitive in comparison of global market. The more he added that if you will include the market of the Bandra Kurla Complex (BKC), Mumbai and Delhi, so its 90 to 95 per cent of the totals transactions in the India’s commercial property segment and it is very affordable in comparison of emerging global market such as; Southeast Asian countries such as; Jakarta, Bangkok and Malaysia.

Motilal Oswal Real Estate

MORE, (Motilal Oswal Real Estate) the real estate arm of Motilal Oswal Group plans to raise about Rs. 1000 crore through its third real estate fund. The funds will be utilized for development of residential projects by reputable developers in the Mumbai Metropolitan Region (MMR), National Capital Region (NCR), cities like Bengaluru, Pune, Chennai and Hyderabad. The money will primarily be raised in about a dozen transactions of Rs 80-120 crore each from high net worth individuals and family offices.

Explaining the move, Sharad Mittal, director and head of the fund said, “the realty market is consolidating right now and prices are expected to remain stagnant for some time. This therefore, is the correct time for investors to invest through indirect investing since we would participate in the project profits rather than relying entirely on the future price rise.”

The fund has been set up as an alternative investment fund or AIF category II, registered with stock market regulator SEBI. “We expect to achieve first close by mid-January 2016 and conclude fundraising in the next six-nine months depending on the market conditions. Given the current scenario, direct investments may not fetch superior returns,” he added.

Motilal Oswal has in its two earlier funds invested capital under a mezzanine structure in top five property markets with developers such as ATS, Shriram Properties, Godrej Properties, Rajesh Lifespaces, Ahuja and Casa Grande. The new fund will also focus on top six property markets in the country. The first fund worth Rs 200 crore, raised in 2009, has been fully deployed and is currently in exit mode. The fund has exited its four out of total seven investments and given returns of about 82% of the capital. In March this year, MORE had raised Rs 500 crore through its second fund which is presently in investment mode wherein around 80% of the capital has already been deployed.

The third & the new fund, with a tenure of five years from final close looks to target a gross internal rate of return of about 23 – 25%. “We shall continue to undertake mezzanine investments with established developers for their mid-income housing projects across top cities. We shall also undertake structured equity investments depending on the market scenario,” said Mittal.

Home sales are down by 8 per cent

As per the latest reports of firm Liases Foras, the sales of Home are down by 8 per cent in top six cities of the country over the year-ago quarter, but India rose 2 per cent sequentially in the last quarter.

After the recent reports it’s clear that year-on year basis the sales of home are fell by 37 per cent in the NCR region while the sales of home was up by 8 per cent in the Mumbai. Whereas; Hyderabad was emerged as the best performing real estate market with more than 46 per cent year-on–year jump in the sales of home and it was followed by the Pune where sales was up by 22 per cent, in Bengaluru the home sales was increased by more than 5 per cent and in Chennai the home sales was up by 40 per cent.

In the report of quarter-on-quarter basis it is recorded that the sales in Chennai and Mumbai were up by 24 per cent and 25 per cent respectively and the sales was up by 31 per cent in Bengaluru whereas; the sales were down by 27 per cent in NCR region. The price of properties in Hyderabad, the Mumbai Metropolitan Area, NCR, Pune, Bengaluru and Chennai remained stable in the last two years on the year-on-year and quarter-on-quarter basis.

After analyzing the latest property trends it’s clear that unsold housing inventory level is so much up in the top six cities and it’s of about 853.09 million sq ft or about 650,000 apartments between the period of January to March quarter however; in the previous quarter it was about 832.09 million sq ft. Among all the real estate market, NCR had the highest unsold inventory with the 321.68 million sq ft area and it is expected it will take more than 71 months to sell these unsold inventories. However; Mumbai Metropolitan Region has the 192.27 million sq. ft as the inventory which will take about 46 months to be sold these spaces. And Bengaluru is among the best performing real estate market among the larger ones which have more than 152.43 million sq ft area and it is expected that it will take more than 27 months to sell them.

As per the reports of Liases Foras, the new supply in the current quarter rose about 21 per cent over the previous quarter which was about 36 per cent because the new supply came in the range of Rs 50 lakh to Rs 1 crore followed by 29 per cent in the range Rs 25 lakh to Rs 50 lakh. Reports stated that the units of two bedrooms constituted 36 per cent in the new supply which was followed by three bedroom units at 35 per cent. MMR and Bengaluru have 28 per cent and 31 per cent of the new supply respectively.