Dubai Property Show 2016

Dubai International Property Show, which is being supported by Dubai Land Department (DLD), has kicked off with a bang on April 11, 2016 at the Dubai International Convention and Exhibition Centre.

“A number of new concepts have been introduced this year along with attractive rates on certain properties as exclusive deals at the event,” said Dawood Al Shezawi, the chief executive of Strategic Marketing & Exhibitions, the event organiser. “A huge chunk of visitors will comprise investors with limited budget as the show has allowed direct sales on site for end users,” he added.

“The show is adding value to trade and consumer visitors alike. The presence of leading local and international developers is clear demonstration of its reach and position in the region,” explained Shezawi, adding that they expect to see increased corporate and retail deals during the event.

Besides major residential projects which will be on sale, Exhibitors will also launch various offers on a vast range of commercial real estate, leasing, consulting, relocation and expansion assistance services.

Piramal to launch realty equity fund worth $250 million

According to a report, the financial services arm of Piramal Enterprises, Piramal Fund Management has entered into a partnership with a pension fund to undertake equity investments in residential projects by means of PE worth $250 million. The report however did not mention the name of the partner in the deal.

In 2014, Piramal Enterprises had got into a strategic alliance with Canada Pension Plan Investment Board to set up a $500 million finance company to offer rupee debt financing to residential realty projects in major cities like Mumbai, Delhi NCR, Chennai, Pune and Bangalore.

In the first phase of its new programme, Piramal Fund Management plans to consign Rs 15,000 crore where it aims to pre-sanction funding limits for its selected existing tier I developer partners to pursue acquisitions.

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.

Real Estate Market in India

In past few years, real estate market of India has evolved from residential units at great location to luxury and vibrant concept of branded homes. These branded residential units or houses have make up this emerging luxury housing projects where the price of luxury houses are about $ 300,000 for 2000 square feet for the starter size for apartments and into bigger and larger sizes depending on the category of the residential projects. In last 10 years, our country has under gone rapid globalization and urbanization which paved the way for employment opportunities with high income trends. However; these high earning individuals are looking for the world-class amenities to reflect their lifestyle on how they want their homes to look like.

According to real estate experts, currently it is one of the fastest growing clusters in residential housing segment as it would take 1.5 million luxury residential units to cater the demand in the next 10 to 12 years, as per the reports of Business World. In present, most of the real estate developers are taking the advantage from the opportunity which needs to cater the housing needs while also getting high incentives. Now most of the real estate developers are targeting the uber rich of the city, who are willing to pay for property which is luxurious enough to reflect their social as well as financial place in the hierarchy. Apart from that there is also sudden influx for investments on bespoke properties because of the emerging trend of owning luxury as well as more than one property in same or different city in the upper segment of the society.

While making an investment in the premium properties, there are few uber rich individuals who prefer to diversify their assets that can be fueled by several reasons ranging from passionate and practicality inclination to investment opportunities. In present, the fastest growing real estate market of India, its common trend to own more than one property and it’s also the  aspiration for the higher class as more than 80 percent of them are investing in at least two properties while the balance 55 percent stake on three or even more. In Indian real estate market there are also few international developers who are ready to invest in the customized possessions to cater the luxury housing demand for the wealthy who want to be at par with their peers’ or surpass their luxury lifestyle.

Rising aspirations of the wealthy professionals are also in the target market of real estate developers for their premium constructions. Luxury residential units are definitely looking for promising trend in Indian real estate market to gain the momentum, which could even surpass the traditions of real estate market.

Image Credits : DNA

The Smart City initiative of the Central Government aims at improving the quality of urbanization in 100 cities of India. Smart cities will receive funding to enhance their core infrastructure like water, power, sanitation, transport, housing and digital connectivity. Each Smart city is proposed central funds of Rs. 500 crore, state funding of about Rs. 250 crore and a similar amount from the local civic body.

Senior officials from The BrihanMumbai Municipal Corporation said Lower Parel in South Mumbai is a strong contender among other areas like Nariman Point, Andheri (W) and Fort for area-based development under the Smart City project. The BMC is in its final stages of preparing the SmartCity detailed report which is likely to be released in two months. Many rounds of stakeholder consultations are in process and feedback is also being elicited from citizens through social media like Facebook and Twitter.

“Lower Parel has both residential and commercial uses. It has a very different connotation as far as traffic is concerned; people can walk to work. Walkability is an important factor for development of a Smart City,” said a senior civic official working on the report. “Lower Parel is the only area in Mumbai with five suburban railway stations nearby; Lower Parel, Elphinstone, Currey Road, Chinchpokli and Mahalaxmi. A monorail station is also likely to come up in the vicinity, thus providing good connectivity to citizens via the mass transit system,” the official added.

“If Lower Parel is selected, many civic services can be improved in the area. Currently the BMC provides only four hours of water supply, but has proposed to increase it to twenty hours by next year. World-class roads will be built to ease heavy pedestrian traffic,” said another BMC official. The BMC, which is working on a city mobility plan, will take up Lower Parel as a priority area for implementation. The civic body has identified missing links in the area where bridges will be proposed connecting two areas, like Lower Parel to Saat Rasta. Planning on better waste management is also on the cards for this suburb.

However, S V R Srinivas, the Additional municipal commissioner said that the report is still in its draft stage and Lower Parel is only being considered among other areas. Due to the infrastructural advantages, this area has an edge over other nominees.

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.

Tata Housing plans to develop 20-mn sq/ft land in 8 cities

Tata Housing, the realty arm of Tata Sons plans to develop 20 million sq/ft land in eight cities in India which include Bengaluru, Delhi-NCR and Mumbai over the next few years. The company already has 29 projects and 70 million sq/ft land under various stages of planning and execution across 13 cities.

The managing director and chief executive Brotin Banerjee of Tata Housing told reporters,   “we have additional 20 million sq/ft land for development in the pipeline . We are in talks with the land owners in this connection.”

Speaking on the sidelines of a social cell initiative by Tata Housing where homes will be sold through Facebook in Goa ranging from Rs. 29 lakh to Rs. 50 lakh between October 26 – 28, he added that the additional 20 million sq ft land parcels throughout India will be developed in the course of next few years.

The company has already delivered 5,000 homes during the last 3-4 years and it plans to deliver another 4,000 homes in the remaining part of the current fiscal. “We will be launching four residential projects during October-December,” he added.

‘B’ + for Indiabulls real estate by Fitch

Fitch Ratings have affirmed Indiabulls Real Estate’s Long-Term Foreign-Currency Issuer aDefault Rating (IDR) of ‘B+’ with stable outlook. The agency attributed this rating to the company’s debt reduction measures, diversified land bank and improvement in credit metrics.

Fitch is anticipating Indiabulls Real Estate’s net debt to reduce to around Rs 4,800 crore by end-FY16 from Rs 5,540 crore a year earlier. It also expects that the developer’s net leverage (net debt/ adjusted inventory) to improve gradually to around 55%, and contracted sales/gross debt to rise to around 0.8 times by FY17.

Sameer Gehlaut, founder & Controlling share holder of Indiabulls had infused equity of Rs 240 crore through a preferential share issue at the beginning of FY-16. Gehlaut also subscribed to Rs 80 crore of convertible warrants, which if converted will result in further equity infusion of Rs 230 crore in first half of FY-17.

Fitch foresees Indiabulls Real Estate’s cash collection to nearly double during 2015-16, which will be driven by payments from projects that are nearing completion. The company’s EBITDA margin also improved to 32% in first quarter of FY-16 from 23.5% last year.

Indiabulls has projects across the country, with considerable presence in the metropolitan areas of Mumbai, Delhi (NCR) and Chennai. IBREL has a significant land bank of about 7 million square metres, which is adequate to support project development over the next six to seven years. Moreover, the residential projects cover various categories be it middle-income or luxury. This diversity alleviates risks arising from volatility in a particular category or location, the Fitch release noted.

Unsold Apartments in Mumbai

In present, there are more than two third unsold real estate inventory related to housing sector is priced above Rs 1 crore, which is much beyond the reach of normal potential home buyers. There are about more than 33,500 residential apartments in this particular category out of total 44,032 units. More than 80 per cent residential units were launched in the second quarter of June 2015 and they all fall in this price range, as per the latest reports and data statics of JLL India, which study covers all residential projects in Mumbai municipal limits. However; this proportion has come down from 90 percent which was in first quarter of 2015 at the end of April it was just because of the launch of new residential project in the suburban locations, but it is still overwhelmingly high for a Mumbai, where the number of buyers are limited which can afford ticket sizes of over Rs 1 crore in property deal.

According to the statement of Ramesh Nair, COO & International Director of JLL India, “IT is the need of hour to reduce the size of apartments to reduce the ticket price of apartments and undertake value engineering of construction cost to make sure that potential home buyers can afford the houses in Mumbai”. We all know that from past few years developers are steadily reducing the size of residential units to make it fit in the budget of potential buyers, who are in majority in Mumbai city. According to recent survey, the reduction in average unit sizes is highest in Mumbai which is about 26.4 per cent in the past three to five years and Mumbai have been the lowest average unit sizes among other Indian cities. Apart from reducing the size of residential units, real estate developers are also tweaking their strategies to cater the demand of affordable housing in the city like Mumbai.

As per the statement of Sunny Bijlani, Director of Supreme Universal, “We all are aware that below Rs 1 crore is price which majority of home buyers can afford and we would like to capture it because it is attractive segment, but it’s not an easy task because only few real estate developers in Mumbai which can do it within city limits as per current land prices and development premiums that need to be paid up-front. And this is the main reason why developers are looking for the locations beyond Navi Mumbai and Thane as there they can develop apartments for the affordable category”. The more he added that, project development charges and premiums can be paid to the civic authorities from 30 to 35 per cent as per the cost of project and these premiums have increased by more than 300 percent in past two to three years. However; Supreme Universal is also in process for the land parcels in Ambarnath and Badlapur region with an aim to develop homes for affordable segment.

With higher land price the development premiums will continue to move higher because major proportion of units priced above than this price range and it is expected that it will go up marginally in the near term launches. However; according to the experts now it’s time when government needs to review the scenario to ease the pressure in real estate market on Mumbai. The more they added that in present we need a strong foundation which can boost the housing stock for affordable segment because Rent Control Act. is discouraging renting out of dwelling units. According to Nair, after reducing taxes government should to improve the connectivity as well as infrastructure of the city for better life standard. And they should also create more economic activity, which will encourage the people to buy apartment in suburban regions.

Luxury housing segment, Nahur

Nahur which is situated in the north-eastern part of Mumbai is a suburban hotspot located at the end of the Greater Mumbai region.  In line with the real estate activity across Mumbai, the western counterpart mainly along the LBS Marg is witnessing far greater activity in comparison to the eastern side.

In Nahur, the central railway line divides the micro-market into the eastern and western side. The area along LBS road is home to erstwhile large-scale industries, most of which are shut since long, yet they occupy hundreds of acres of strategic plots. Over the past few years, the area has witnessed significant development with prominent developers launching their residential projects in the micro-markets.

The LBS road in Nahur is witnessing the change in skyline, led primarily by the development of some premium projects that are promoting the concept of affordable luxury, coupled with availability of large develop able land parcels allowing developers to take significant land positions in the area. A few prominent retail malls have also mushroomed in the region to cater to the residential areas. Connectivity remains one of the strongest features of this project. An in-house provision for general stores ensures that an individual needn’t move out of the premises for day-to-day needs.

The transformation in the area is led by none other than HDIL which has been a pioneer when it comes to addressing the needs of affordable luxury housing segment. One of their projects Majestic Towers, which is a 36-storey mega project at Nahur (w), offers optimally, priced affordable luxury housing options in 2, 2.5 and 3-BHK. Some of the projects developed by the company are setting new benchmark in construction. The kind of facilities, specifications are provided in their affordable luxury homes are a complete game-changer. For instance, elegantly designed, with stylish fittings, and amenities like a clubhouse, pool, gym and landscaped gardens with reflexology, cricket pitch, squash court an apartment in Majestic Tower, is truly life’s best within reach. Yet, when it comes to pricing, it remains well within the budget. With almost 55-60 per cent of construction completed and work in full swing; the projects are set to meet the completion and handover deadline in 2016. This remains an opportunistic moment to invest to avail of benefits with least financial burden. The fact that 15 leading institutions are providing financial assistance for these projects bear testimony to the quality of the project.