Tag Archives: Investment in Indian real estate

Property market yet not transparent

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Bottom Line: Some reports suggest India has improved in global rankings in terms of transparency in real estate sector in Asia Pacific. The homebuyers on the ground maintain that their experience has been no better. Track2Realty takes a look at the paradox.

Transparency in real estate, Disclosures in real estate, Best practices in property market, Cheating in property market, Frauds in real estate, Builder Buyer Agreements in real estate, Transparent deals in property market, India real estate news, Indian realty news, Real estate news India, Indian property market news, Track2RealtyA study titled ‘Global Real Estate Transparency Index (GRETI) 2016’, by property consultant Jones Lang LaSalle suggests India has improved in overall transparency scores across all markets and has achieved higher ranks for its Tier-I and Tier-II cities. Tier-I cities in India ranked 36th, vis-à-vis transparency levels, followed by Tier-II and Tier-III cities at 39th and 52nd positions, respectively. The index measures transparency by looking at factors including data availability, governance, transaction processes and the regulatory and legal environment.

According to JLL, the country’s rankings is likely to improve further in the GRETI 2018 index, owing to the implementation of the Real Estate (Regulation and Development) Act, 2016, which is likely to be fully functional in all states by then.

However, this overt optimism does not go well with the homebuyers on the ground. The buyers in the market maintain that it is the developer’s obligation to disclose all relevant issues, approvals etc, which they more often than not deny.

Transparency challenges in Indian real estate 

Reports suggest Indian realty catching up on transparency index; ground realities challenge

Disclosure norms missing in the property market and builders even don’t show Builder-Buyers Agreements before booking amount is paid

Courts have questioned the legality of Builder-Buyer Agreements, calling it not sacrosanct

Majority of developers don’t carry Builder-Buyer Agreements on their website

Developers continue to use misleading terms in marketing brochures

Subvention scheme invites speculators; buyers caught in lurch if the project is delayed

Selling on carpet area has the potential to reduce litigations to a greater extent

Buyers expect straight marketing discounts and not discounts & freebies

Disclosure missing

Disclosure statements, which can come in a variety of forms, are the buyer’s opportunity to learn as much as they can about the property and the builder’s experience, approvals & risk factors in it. Potential seller disclosures range from knowledge of not only the property but also infrastructure issues in the vicinity. Not only do disclosure documents serve to inform buyers, they can protect the sellers from future legal action. It is the developer’s chance to lay out anything that can negatively affect the value, usefulness or enjoyment of the property. 

It is the lack of proper disclosure that often results in litigations. Across the world, disclosure laws vary from state to state, even down to the city and local governance level. Though disclosure norms are very poor in India, the developers who conceal relevant information about the housing project can still be taken to courts for failure to disclose.

In some other matured markets the seller (both developer as well as reseller) can be sentenced for for up to ten years. In India the BBAs (Builder Buyer Agreements) are so one-sided in favour of the builders that, forget disclosure statements, even the legal validity of the BBAs have been challenged by the buyers and the developers could not defend their documents.

Some common disclosures that should ideally be there include the legal titles, approvals, delivery timelines, risk elements, financial liability of the developer with regard to the property, whether property already mortgaged, neighborhood nuisances, carpet area, loading percentage, any history of property line disputes, and amenities that would be part of the housing project.

A disclosure is something given to the buyer by the seller documenting their knowledge of the property. In most of the global markets, disclosure documents are provided to buyers once the developer has accepted their offer. In addition to their inspections or loan contingency, the buyer has an opportunity to review the seller’s disclosures.

If the buyer discovers something negative about the property through disclosure, he can usually back out of the offer without losing his deposit. In some matured markets, developers provide these disclosures to the buyers even before they receive an offer. Buyers are then required to sign off on disclosure documents and reports.

In some ways, providing full disclosure is not just a step towards best practices but also can actually help the developer. It shows that the developer is thoroughly transparent and upfront.

Even the National Consumer Disputes Redressal Commission (NCDRC) has rejected the arguments of a real estate company that provisions mutually agreed upon in a BBA are sacrosanct.

Developers continue to mislead

The developers continue to mislead the buyers with fancy jargons like project to be strategically located with 10 minutes distance to airport or 20 minutes distance to railway station. However, what the brochure does not tell you is that this distance is subject to your over-speeding drive with no traffic at all on the road. In the absence of this luxury, the distance of 20 minutes can also be one hour and 20 minutes.

Social infra is another area where the gullible buyers are duped with the promise of having very many good quality schools, hospitals and restaurants coming up near the project.

Façade of area that promises green zone around the project, that looks so very beautiful in the brochure, can also be drainage area with green bushes around. The artistically create project elevation or the sample flat pictures on the brochure are more often than not misleading to the homebuyers.

80 per cent green area with landscaping is what is an ideal answer to urban living. However, even with the permissible FAR of 2 that is allowed in most of the cities, this seems highly improbable. Moreover, the marketing brochure simultaneously also says that the developer will apply for more structures subject to permission. There have been cases of the developer later converting the green zone to raise another tower.

State-of-the-art amenities are probably the most over-used and abused claim in the marketing brochure of respective developers. Yes, there would be a gym, a swimming pool and a tennis court etc. But the question that is not answered is that will it be sufficient to serve the entire housing project. In most cases it is not.

Amidst all the misleading claims and marketing exaggerations, location mapping is the most glaring one. Generally maps are not to scale and give the wrong perception of the location of the project. For example, the brochure will say 10 minutes from the airport or commercial district; it does not state distance in kilometers.

Straight marketing package needed

When Archana Dalmiya bought her first apartment in the year 2011 she was quite tempted with the various marketing offers that were available in the market. She had then booked her apartment that was packaged with loads of discounts & freebies, though the developer had refused to give any straight discount. A novice in the housing market she was also rather looking for the maximum freebies. As a matter of fact, the freebies became one of the major differentiator in making her a final decision between the identical projects.

Not anymore! This year when she is planning to buy her second apartment it seems she has matured a lot. She understands the dynamics of housing market and difference between freebies and straight discounts. As a result, her negotiation is more on the lines of price point and straight jacket marketing offers that could lower the price burden.

“I think I have learnt some valuable lessons with my first home purchase. There is absolutely no gain in getting tempted for free air conditioners or free holidays. What I am interested in is the price point and to what extent the developer can offer me the price discount. It works much better for a home buyer than fancy symbolic offerings,” says Archana.

Requesting anonymity, the marketing head of a leading Mumbai-based developer admits that their research has made them understand that today’s buyer is very value conscious across the segment. Moreover, he can evaluate the cost & benefit of any marketing offer. He is not the one who would be tempted with the freebies anymore.

“It is no more home furnishing, holidays or gold coins that can translate a prospective client to book the deal. It used to be popular marketing tool for good number of years. Today, most of the developers also understand this change in buyers’ outlook and hence housing market is now very realistic in terms of its marketing offerings. Price cut is what seals the deal in most of the cases,” says the person above mentioned.

The housing market of major Indian cities have also changed over the years. No one is interested in offers like free air conditioner, holidays or other fancy attractions. Price point and usable carpet area is the focus of all the buyers today.

The game in the housing market has turned out to be on the price point and hence most of the developers and home buyers are evaluating what could be termed as substantive negotiation on price point than symbolic gesture of freebies.

Embassy wins British Safety Council’s Sword of Honour

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News Point: Three of Embassy’s Office Parks receive this prestigious honour in 2017 for the highest award for excellence in Health and Safety management standards

Embassy Sword of Honour Award, British Safety Council, Best practices in real estate, Best practices in health & safety, Embassy Group, Jitu Virwani, India real estate news, Indian realty news, Real estate news India, Indian property market, Investment in real estate, Track2RealtyEmbassy Group has been conferred the prestigious ‘Sword of Honour’ by the British Safety Council for three of its business parks – Embassy Manyata Business Park, Embassy TechVillage in Bangalore and Embassy TechZone in Pune.

Embassy is the only Real estate developer in India to receive this prestigious honour this year.  The award was presented to the company at the Drapers’ Hall, London on 24th November 2017.

The ‘Sword of Honour Award’ is widely recognized as the pinnacle of achievement in safety across the world, and is instituted to reward best practices in this field.

To achieve the Sword of Honour Award, organizations should be fully committed to both excellent standards and continuous improvement. Earlier this year, the above-mentioned Embassy Office Parks received the 5-star rating from the British Safety Council for Occupational Health and Safety, which was a prerequisite for receiving the Sword of Honour accolade.

An external adjudication panel of chartered professionals awarded 57 Swords, to commendable organizations from across the globe. Among the other companies from India that received this prestigious award were Mumbai International Airport Pvt Ltd, Reliance Industries Ltd, Larsen & Tubro Ltd, raising the bar for Health & Safety management standards in the country.

On receiving the Sword of Honour Award at the Awards ceremony in London, Jitu Virwani, Chairman and Managing Director, Embassy expressed “It was a wonderful experience participating in the Awards ceremony and receiving this prestigious Award. The certifications are a validation of our unwavering commitment to our clients, ensuring that our workplaces are not only the most efficient, but also the greenest and safest anywhere in the country. Embassy is committed towards creating world class Grade A real estate projects, for the rising India. We are honored that our dedication and commitment across all our spheres of operation is being recognized”

Mike Robinson, Chief Executive of the British Safety Council, said: “On behalf of the trustees and staff of the British Safety Council, I would like to congratulate Embassy Office Parks for their huge commitment to keeping their workplaces safe and healthy and minimising risks to the environment from their organisations’ day-to-day activities. All of the Sword winning organisations share a commitment and resolve to achieve the highest standards of health and safety management. We are delighted that they are partners in helping achieve our vision that no one should be injured or made ill at work.”

The 2017 awards mark the 38th consecutive year that the British Safety Council has awarded the Sword of Honour for health and safety management excellence and the seventh year of awarding the Gobe of Honour for excellence in environmental management. The winners achieved the maximum five stars in the British Safety Council’s independent Five Star helth and safety and/or environmental management audits in the period 1 August 2016 – 31 July 2017.

They also demonstrated to an independent adjudication panel that they had a proven track record and culture of best practice for excellence in health and safety or environmental management that runs throughout the business, from the shopfloor to the boardroom.

Demonetization dust yet to settle over real estate

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Bottom Line: It has been one year that the Indian real estate has been reeling under the after-effects of demonetization. The debate on the eve of 8th November is hence centered on whether the demonetization has helped or hurt the sector.

Rupee, Rupees, Indian currency, Indian money, Cash, Indian real estate news, Indian realty news, India property market, Finance, Track2Realty, Track2Media ResearchThe answer to whether demonetization led to cashless real estate deals or less cash in the sector is not that easy as the response of the sector post the demonetization is as much economic as political. In its cost & benefit analysis, the stakeholders are confused over glass half full or half empty.

To understand the after-effects of demonetization one has to first look at the following queries: 

Q. Has demonetization restored the faith of the consumers in the property market?

Q. Has demonetization pushed the sales velocity or led to lower absorption of real estate?

Q. Can the business of Indian real estate survive without the cash component when the financial modeling itself demands cash?

Q. Can legal channels of banks & financial institutions drive the housing market? 

Grim statistics

Beyond views & counter-views some statistics indicate what the stakeholders would be careful to spell out. As per a PropEquity report, the new home launches dipped 83% across top 8 cities in the third quarter of 2017 from 24,900 units to 4,313 units.

There is certainly cash crunch in the market, more so with the developers in launching new projects. And despite the fact that there are fewer new launches, the unsold inventory dipped by just 4% to 4,46,730 units from 4,65,116 units. 

The PropEquity report says, “Housing demand (absorption) across key cities dropped by 35% to 22,699 units from 34,809 units due to fewer new projects in the market and the lag effect in the revival of the end user driven demand, which is expected to pick up from the Q4, which is seasonally the best time to launch new projects.”

Stakeholders’ caveat

Surendra Hiranandani, CMD of House of Hiranandani has a caveat here when he says that the primary residential market and projects undertaken by credible and reputed builders were not affected significantly by demonetization. “Transactions in these markets are broadly financed through legal channels of banks and housing finance institutions providing home loans to buyers. Only in projects where cash component was involved and those in the secondary market have been affected.” 

Admitting that the economy experienced a tiny speed breaker with the demonetization, Ashish R Puravankara, Managing Director Puravankara Limited maintains the after effect of the same was felt in the real estate sector as well. In its opening phase, demonetization disrupted the overall real estate business across the country impacting (new) launches, sales, and enquiries.  

“Post the initial jolt, the southern real estate sector and especially the Bengaluru market observed a steady rise in customer enquiries out of which many turned out to be positive leads,” says Ashish. 

A number of property consultants have also pointed out that the market is back on course after the immediate after-effects of demonetization. For example, a Colliers Research suggests the demonetization wave seems to have settled down and the prospect for the real estate sector looks promising.

Demonetization hurt

The statistics nevertheless tells a different story altogether. For instance, a recent report by PropTiger confirms that the home launches across the top nine cities in India tanked 53% to 22,115 units in the July to September period this year, against 47,032 units launched in the same period last year.

Of course, it is not just demonetization but the market slowdown has also been due to the implementation of the Goods and Services Tax (GST) and delay in implementation of the Real Estate Regulatory Act (RERA).

No one would like to admit or put on record but privately most of the developers maintain that their major investors have pulled out of market, both for land finance as well as for investment in the under-construction inventory.

Requesting anonymity a leading Bangalore-based developer shares his experience as to how one of his trusted investors after having paid INR 100 crore cheque a week before demonetization has requested to hold on to his commitment for the luxury villa. “He had promised another INR 100 crore in cash to have the transaction for four luxury villas near the airport,” shares the developer.

Secondary market hit

Moreover, the analysts are evaluating just the statistics of the primary market transactions which are reported. The demonetization has hurt the secondary market even more. A conservative estimate suggests that the transactions in the secondary market are nearly close to 50% down.

Does lower transaction in the secondary market have any co-relation with the fortune of the primary residential market? “Yes, it has,” says Gaurav Bhargava, a real estate analyst. “Secondary market transactions also reflect someone selling his smaller house to buy a large house in the secondary or primary market. It is about incremental housing purchase and lower transactions in the secondary market will have its bearing over the primary residential market.”

It would always be debatable whether demonetization could achieve its objectives of curbing black money, but what could be vouchsafed is the fact that the cash crunch it caused contributed significantly to the slowdown of real estate where the default financial modeling of the business demands cash transactions. One year is just too short time for the cash driven business of real estate to recover from an unexpected financial surgical strike.    

By: Ravi Sinha

End-user property markets not struggling: Ashish R Puravankara

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View Point: Ashish R Puravankara, Managing Director of Puravankara Limited feels the new regulatory changes and the changing market dynamics are not that challenging for the end user driven markets. 

Ashish R Puravankara, Puravankara Ltd, Puravankara Projects, Bangalore real estate market, Provident Housing, India real estate news, Indian realty news, Indian property market news, Real estate news India, Track2RealtyVisualising an industry consolidation soon, Ashish Puravankara feels it is time to invest in technology and make affordable housing the growth driver. Excerpts of an exclusive interview with Ravi Sinha: 

Ravi Sinha: How are you coping up with the challenges of market slowdown?

Ashish Puravankara: Beginning with demonetization to Real Estate Regulation Act (RERA) and Goods and Services Tax (GST), all come with their own implications to the real estate industry. The announcement of demonetisation created a sort of disruption in the market that largely impacted buyers’ sentiments. In preceding months, the rollout of RERA and GST followed, which made the buyers tread cautiously with their investments and spending. We believe these initiatives from the government will pave the way in transparency, accountability and efficiency in the ecosystem.

Ravi Sinha: To what extent has it affected your top line and bottom line?

Ashish Puravankara: The same has not impacted us much. Though in the initial phase there was a slight stagnation in the sales due to the overall slowdown and uncertainty among the buyers. But once things started settling down, there was a spike in the customers’ enquiries for our projects. Out of these queries, many were converted to sales deals. A large credit for this performance goes to our focused fiscal planning and preparedness for the structural economic reforms.

Ravi Sinha: What has been the learning of the last 5 years of market uncertainties?

Ashish Puravankara: The transition of the real estate market has changed the dynamics of the sector completely. After the advent, multiple policies and regulation of the real estate industry has seen a paradigm shift with systemic checks and streamlined process.

Post the IT and its revolution, there is a significant rise in the job opportunities which is further fuelled by the emergence of e-commerce and start up culture. This has led to a significant increase in the white-collar migratory population especially in the metros. These demographic transitions have also pushed demand for homes in these cities. But post the initial rush the residential sector witnessed a slight stagnation in the last two years.  Realising the undercurrent, several developers have seen the value in   diversification of their offerings by venturing into affordable housing segments.

Ravi Sinha: What has been your experience in the affordable housing?

Ashish Puravankara: Realizing the burgeoning need of high-quality, affordable homes in the country, we launched Provident Housing Ltd., (a wholly-owned subsidiary of Puravankara) in 2008 to meet the aspirations of mid-income and first-time homeowners. We have the distinct advantage of being the first organized player to move into the affordable housing sector. Till date over 16.28 million sq. ft. of projects have been launched across 4 Southern cities with over 5000 happy and satisfied homeowners. Additionally, about 6000 units have been planned for new launches.

Ravi Sinha: Has the after effects of demonetization been a real challenge for the sector?

Ashish Puravankara: Demonetization has an impact on the residential market sentiment, especially regarding new launches, sales and enquiries, which dipped a little during the initial phase (of demonetization). The impact was a little hard in those markets which were dominated by investors.

But in the South, specifically the Bangalore market which is primarily driven by end-users, coupled with steady economic activity and powered by a high percentage of the white collar migratory population, remains stable in comparison to other key markets. In fact, post the initial lull, Bengaluru’s real estate market, witnessed renewed consumer confidence in the quarter of January –March 2017. 

Ravi Sinha: How about RERA and GST affecting the business cycle?

Ashish Puravankara: As with the implementation of any new policy there will be some teething issues but the long-term views will be positive. Market buoyancy can be envisaged post RERA implementation. The same will not only bring back confidence in the end users but will give the customers better clarity to make an educated decision to buy a home they desire. For the developers in the initial phases, we adapt to the new environment. I believe that RERA will be a game changer for the overall industry which eventually will transform into growing customer and investor confidence.

The role of GST for the Indian real estate sector will be of an enabler as it will create a level playing field for all organised developers in the country. There are multiple benefits for both developers and homebuyers with the GST implementation. A single consolidated tax system brings more clarity, transparency and avoids double taxation which is relevant in the sector where developers and end users end up paying multiple taxes and duties.

Ravi Sinha: How is GST affecting the supply chain of real estate?

Ashish Puravankara: Inefficiencies in the supply chain will slowly decline, resulting in prudent working capital management and better pricing power for all stakeholders in the value chain. Specifically, the impact of taxes on construction materials, cement and steel will come down considerably for developers which ranges between 12-18%. With the rates in place now, the implementation of GST to our business is expected to bring down the project cost for developers, thereby leading to lower acquisition cost for under-constructed apartments.

Ravi Sinha: What has been your understanding about consumer psychograph with these policy changes? 

Ashish Puravankara: RERA has now put the buyer in the driver’s seat as exhaustive data is available at the click of a button and is ratified by the regulatory body. The confusion and any allied fears that a potential customer could have are now abated and there is certainty of project completion and most importantly peace of mind. With enhanced transparency the customer confidence will only see an upward trend. 

Ravi Sinha: To what extent the slow moving market in the metro cities is tempting you to go for Tier II and III cities? 

Ashish Puravankara: While there are immense opportunities in Tier II and III markets, we are not planning to enter any new markets in the immediate future. Currently, our core focus is to strengthen our operations in markets where we exist. The appetite is big in markets like Pune, Hyderabad, Kochi and Coimbatore where we already exist. We are identifying land parcels in these locations to scale up our presence. Having said that, we are also keeping our options open. We regularly conduct feasibility studies, research and identify demographic trends in the secondary market. If we come across any feasible business potential, we intend to pursue the same.

Ravi Sinha: Which are the segments that you find safe bet today?

Ashish Puravankara: Affordable Housing is a segment that will gain momentum in time to come. We are investing significantly in our premium affordable housing arm – Provident. In the next couple of quarters, you will witness Provident launching new properties in existing markets. With the government giving ‘infrastructure’ status to affordable housing projects, this has given the needed impetus to the real estate industry. 

Ravi Sinha: What would be the next growth driver in real estate?

Ashish Puravankara: With the RERA-rollout, the real estate market will witness consolidation in the next two to three years. Only serious and focused real estate players will survive. With new launches slowing down, this is a great opportunity for us to invest in technology which will be the next growth driver in real estate.

Ravi Sinha: Moving forward, what is your outlook of the business in the medium to long-term perspective?

Ashish Puravankara: We aspire to evolve into a lean and strong organization, by leveraging on our expertise in the areas of land acquisition, design and innovation, sanctions and marketing.  We have set aggressive growth targets for the next five years which we are confident of achieving by implementing concrete measures focused on human capital management, project management and advances in construction technology.

Our vision for the next few quarters is 8-10 million sq. ft. of launches between both our brands, Provident Housing and Puravankara Ltd., with Provident having a larger share of the pie in terms of volume. We could leverage our existing land bank or sign up new deals especially JDs & JVs in the upcoming years.

Measures to make REIT a game changer

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Opinion: What needs to be done to ensure that Real Estate Investment Trusts (REITs) get to be the game changer? Niranjan Hiranandani, CMD, Hiranandani Group, shares his opinion.

Niranjan Hiranandani, Mumbai real estate, Powai, Hiranandani Group, India real estate news, Indian realty news, India property market, Track2Media Research, Track2RealtyIn India, we have seen ‘pious thought’ and ‘positive thinking’ not always being supplemented by positive action on part of the ‘powers that be’; be they regulatory authorities or the taxation authorities. Challenges which need to be addressed include different rates at which stamp duties are levied, for purchase and sale of assets across various states in India. Potential exists; making it a reality is the challenge.

How relevant is the introduction of REITs when it comes to providing a new opportunity to get funds for the Indian real estate industry? Consider first, that India’s real estate has struggled to reduce debt, given that interest rates are among the highest in Asia. And, also consider that REITs will provide investors an opportunity to buy into India’s real estate market – these two aspects are just the basics.

Now, let us talk numbers: assets that may qualify to be included in REITs may reach $ 20 billion by 2020, according to recent media report which quoted a global property consultant as also saying that in the first three to five years, as much as $ 12 billion could be raised. This does sound good. Doesn’t it?

Let us now focus on what makes REITs relevant to present market scenario: REITs started off in the U.S.A. in the 1960s. These are publicly traded, and are an option to pool investor money and buy real estate, including shopping malls, office buildings and rental housing. So, when we talk about India’s real estate and REITs, experts say it has the potential to grow so as to rank among the top five markets in Asia by market capitalization.

Logically speaking, in theory, India is ready for REITs. The moot question that we need to address is: what measures can make REITs a game changer in Indian real estate? Let us begin with the first serious attempt to get REITs into India.

The Securities & Exchange Board of India (SEBI) released the first draft of guidelines for REITs in 2008. The reason it never got final approval was because of a lack of clarity on taxes as also the global financial crisis which hurt the investment climate.

This brings us to the second question we must seek answers to: how can India avoid the ‘grey zones’ of policies? I think the answers are self-evident: India needs to ensure that the delay – from 2008 to 2014 – does not get repeated; and we try to make up for the lost time.

What to my mind will make this happen is the presence of ‘political will’ to create the right environment for REITs to become a successful part of Indian real estate. The new Indian Government has given REITs due importance; it is reflected not just in statements made, but also in form of positive action. Consider that SEBI has released a new set of guidelines this October, which outlines the eligibility criteria for setting up REITs. This is surely a step in the right direction.

If India can focus on the positives when it comes to REITs, and ensure that the implementation is ‘smooth’ – no potholed roads and no speed-breakers – it will definitely be a ‘smooth drive’.

My concern is whether the Indian regulatory set-up and taxation framework will ensure a smooth path for REITs in India. I have witnessed the collective enthusiasm of real estate players, regulators and investment advisors when it comes to bringing REITs to India. I hope this will also translate into actual implementation and speedy implementation. REITs represent an inherent potential that can revolutionize India’s real estate development and overall liquidity framework – that is the ‘easy to understand’ part; ensuring that it works to potential. That is the challenge.

The potential that REITs have will benefit Indian real estate to the tune of USD 10-15 billion over the long term. Whoever I have met in the international investment market, all are ‘very excited’ to see how the ‘potential’ can be converted into a ‘reality’. To my mind, this is the second challenge.

If directing flow of large-scale real estate investment from global and local markets to India is the goal, and doing it in the shortest possible time is inherent in that goal; REITs is the answer. This is an answer where some key issues need to be ‘handled right’, including the process of transferring an asset to a REIT or issues relating to levy of stamp duty at the State Government level. These are aspects where we hope we have the Government’s attention.

In theory, it looks easy to showcase the potential of REITs; in reality there are key areas that need fine-tuning before this new capital market instrument can ‘take off’. I will not repeat aspects which experts have been speaking about since the past few months. The top one, to my mind, includes tax breaks, as per the present set-up not being perceived by market players to be ‘enough’.

Then, there is the aspect of RoI. Experts have estimated that as per the present set-up, Indian REITs would have post-tax yields of 7 per cent to 8 per cent, which is lower than the Indian Government Bonds, which offer yields of between 8 per cent and 9 per cent. This is another challenge that needs to be faced.

Still on the aspect of RoI, there is the concern from experts by what percentage will rents for assets included in the REIT need to appreciate – most seem to suggest the annual appreciation will need to range from 4 per cent to 5 per cent. This again, will have to be ‘in sync’ with an increase in capital values, if one considers the aspect of how attractive REITs would be.

So, the road map is clear: India needs to work at taking REITs from the stage where it ‘shows promise’ to a scenario where it actually gets implemented and takes its rightful place as a new avenue for raising funds to meet Indian real estate investment requirements. REITs can expedite existing projects, but more important, address three perceived inefficiencies: first, increasing debt finance costs; second, locked up equity of private investors; and third, lack of international finance in Indian real estate.

We need to keep in mind that while many countries have implemented the REIT framework, not all have results that include boosting of investor confidence. It has not been the case that in all countries where these have been introduced, they have grown consistently over time. While India has the right set of parameters to fuel the growth of real estate through REITs, India will also need to work towards ensuring that the potential is fully realized.

Assetz property joins LOGOS Group India expansion

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News Point: LOGOS Group has expanded its operations to India through a partnership with the India-based real estate developer Assetz Property Group. The partnership has established a new standalone platform named “LOGOS India”.

Logos India, Assetz Property Group, India real estate news, Real estate news India, Indian property market, MNCs in Indian real estate, JVs in Indian real estate, Indian real estate joint ventures, Foreign funds in Indian real estate, Track2Media Research, Track2RealtyLOGOS is a vertically integrated logistics real estate specialist, with operations in Australia, China, South East Asia and now India. The partnership will combine the institutional management and development expertise of LOGOS with the local development expertise of Assetz to create a leading developer and manager of logistics warehouses and light industrial real estate in India.

LOGOS India is headquartered in Mumbai and is led by Chief Executive Officer, Mehul Shah, a supply chain and logistics specialist with over two decades of experience. The LOGOS India team has specialists dedicated to investment, development, and asset management, and will initially focus on the key logistics hubs of Mumbai, Pune, Chennai, NCR, Bangalore, Hyderabad and Ahmedabad.

Commenting on the partnership, Trent Iliffe, Joint Managing Director LOGOS said, “LOGOS is pleased to announce this key strategic move to expand our operations into India. We are seeing extensive demand from our existing and new customers for institutional grade logistics facilities in the region. Our expansion into India continues to show LOGOS’ commitment to establishing itself in growth markets alongside our important customer relationships.”

John Marsh, Joint Managing Director LOGOS said, “LOGOS has significant experience delivering institutional quality logistics assets in the Asia-Pacific region. We are excited to bring that experience to India through LOGOS India and look forward to working with an established Indian operator of the quality of Assetz during what is an exciting stage in LOGOS’ growth.”

Ben Salmon, Co-founder and CEO of Assetz Property Group, said, “Assetz has a long history of partnering to enhance the growth of our business. I am confident that this association with LOGOS will deliver a market leading warehousing and logistics business in India. This is the coming together of two companies with complementary values. We look forward to lending our local development expertise to LOGOS India.”

LOGOS India is working on closing its first Indian logistics venture with an expected US$400 million of equity commitments. This venture is targeting the existing institutional capital partner relationships of LOGOS and will invest in the development of high quality, modern logistics assets across LOGOS India’s initial target markets.

Together with management, Ivanhoé Cambridge and Macquarie Corporate Holdings are shareholders in LOGOS. Macquarie Capital acted as financial adviser to LOGOS on the formation of LOGOS India.

Is this time for crowdfunding in Indian real estate?

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Bottom Line: While crowdfunding is a recognised model for real estate finance in many parts of the world, there are several practices in the Indian market which loosely resemble the same. Ravi Sinha takes a look.

Crowdfunding, Crowdfunding in India, Crowdfunding in Indian real estate, Debt Crowdfunding, Equity Crowdfunding, Crowdfunding laws, Regulations for crowdfunding, India real estate news, Indian property market news, Investment in Indian property, NRI investment in Indian propertyCrowdfunding in the property market, the world over, is mostly associated with the commercial real estate segment. The most common forms of crowdfunding in the developed property markets are debt and equity.

In debt crowdfunding, developers pre-sell a project, to launch a business concept, without incurring debt or sacrificing equity/shares. In equity crowdfunding, a group of lenders receive shares of a company, usually in its early stages, in exchange for pledged money. The company’s success is determined by how it demonstrates its viability.

Debt crowdfunding may sound similar to pre-launches in India’s housing market. After all, the risk elements are pretty much the same. Investors can take a hit, if their project goes into default, or if the value of the property decreases. There are no guarantees and investments are not insured by any regulating agency.

If we look at the matured property markets, like the United States for example, what we find is that even there regulators at the Securities and Exchange Commission find it very hard to strike a balance that could ensure that while the developers could raise funds from investors but the investors are not left unprotected.

However, in India, crowdfunding is neither officially allowed, nor will any developer go on record, admitting that pre-launches are their way of attracting crowdfunding.

Investing in start-up projects and early stage businesses, whether one calls it crowdfunding or pre-launches, involves considerable risk, such as illiquidity, lack of dividends, loss of investment and dilution. Diversion of funds have also been reported, with many pre-launch schemes, thus hurting the execution of the project.

The developers, on their part, maintain that pre-launches are not crowdfunding. Sandeep Ahuja, CEO of Richa Realty, believes that in a pre-launch, an investor or a buyer puts money on apartment, which may come at a discounted price and has the option to exit the project at any time thereafter, by selling the apartment.

“In case of crowdfunding, the investor is typically investing a very small amount and does not get any specific apartment earmarked/allotted to him. The investor makes money, once the project is completed and the profits are declared, or the property is leased out,” Ahuja explains.

Abhay Kumar, CMD of Grih Pravesh Buildteck, makes a strong pitch for crowdfunding in the housing market. The concept already exists in the Indian market, in the form of loose alliances, he says. “In the commercial segment, crowdfunding can provide assured returns, while in the housing market, pre-launches serve the purpose to some extent. The moot question, is whether we can institutionalise it, to address the liquidity concerns of developers and also safeguard the interest of investors,” wonders Kumar.

 

Crowdfunding different from organised REIT

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News Point: Crowdfunding in real estate is different from the organised model of REIT and it is yet to gain ground in Indian realty due to lack of trust & transparency.

Crowdfunding, Real estate crowdfunding, Organised funding in real estate, REIT, Indian real estate investment, India real estate news, Indian property market, Track2Realty, Track2MediaAt a recent seminar in Delhi on financial planning and investment in Indian real estate, someone from the audience asked a pertinent question as to how is crowdfunding different from other organised and institutionalised form of investment in the sector. Another investor was curious to know as to how is crowdfunding different from Real Estate Investment Trust (REIT).

With real estate giving better ROI than any other investment vehicle in the country the investors in the India are today exposed to what is happening in the global market. The investors are hence curious to explore what has been tried and tested format in other matured markets – crowdfunding.

However, though crowdfunding the world over has been about peer to peer funding, there are many challenges in the Indian real estate market in absence of any organised trust/agency that make crowdfunding a non-starter.

So, what makes crowdfunding different from REIT. Rattan Hawelia, Chairman of Hawelia Group tries to explain it in simple terms. According to him, REIT is an investment option where the investors can put their money in large-scale properties which is open to everyone by buying stocks. But with REIT the investors only know the portfolio and not the properties. However, in crowdfunding, individuals can single out a particular building or builder to invest in.

“Crowdfunding has more flexible underwriting norms than probably what REIT can offer. That makes it a high risk and high return game. After all, REITable properties are established income producing assets while crowdfunded projects are mostly newly launched and start-ups that need early stages of funding,” says Hawelia.

David Walker, MD, SARE Homes finds another difference between the two when he says REIT has already gained official sanction, while crowdfunding is still not officially recognised in India, unlike in the emerged economies. “Once approved and regulated, crowdfunding has the potential to become more popular than REIT and other organised investments. The latter are cumbersome for retail investors, who prefer customer-friendly investment avenues, as crowdfunding happens to be in the West.”

Sandeep Ahuja, CEO, Richa Realty says in REIT usually many properties are pooled together and the investment is listed and can be transacted. Crowd funding, is mostly done on a single project. It is also not traded on any exchanges and thus not as liquid as a REIT investment.

Requesting anonymity, a developer who has successfully formed a loose alliance of initial investors to get the crowdfunding tries to explain a method in the madness. He asserts that in a market like India where all the legitimate funding options are increasingly drying up there is absolutely no harm in getting crowdfunding as long it is not violating the law of the land.

“Any investor at any given stage of investment through any means knows his consumer rights. So, there may not be a regulating agency like the REIT for crowdfunding in India, yet it is a legitimate business transaction between the willing parties concerned. Many private deals, both debt and equity, happen without the regulator coming into the picture” says the developer.

There is no denying that the ROI would be higher than the REIT for the parties interested to lend to the developers through crowdfunding. Yet, the risks are also much higher in a market like India where access to right information is challenging and transparency is lacking.

Moreover, crowdfunding is definitely very different from REIT – be it with the operational methodology, nature of investable properties, legal framework or the alliance between the concerned parties. And hence, in the absence of any prescribed guidelines the few and far between crowdfunding (if at all they can be called crowdfunding in the conventional sense of the term) is always covert than overt in the Indian real estate.

By: Ravi Sinha

Cushman & Wakefield Appoints Kaustuv Roy as MD-New Business Acquisition

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Bottom Line: Appointment marks Kaustuv Roy’s return to Cushman & Wakefield.

C&W Logo, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2RealtyCushman & Wakefield has appointed Kaustuv Roy as its Managing Director for New Business Acquisition in India. Kaustuv will be responsible for driving the firm’s business by tapping into the emerging real estate business opportunities from across key regions, especially focused on the India-US corridor.

He will also look at expansion opportunities for Indian conglomerate in foreign markets. He will be engaging with various stakeholders in identifying the opportunities for global companies to augment their real estate portfolio.

India’s potential as a global business destination remains positive. The GDP outlook is pegged at 7.7% in 2018 -19, highest growth rate in the world. It has remained resilient despite disruptive events of 2016 Brexit and election of Donald Trump as President of the USA and currency demonetization in India.

This was demonstrated by the steady net absorption of office space (31 msf), while private equity investment saw its best year (US$ 6 Bn approx.). With the global GDP also looking up at an estimate of 4% by 2018, India’s role in this growth remains crucial. It will continue to be a big destination for cross border business and will be an attractive market for investment for global businesses.

Cushman & Wakefield’s is perfectly poised for this growth phase. The company has the depth of experience and leadership strength in India to provide best in class solutions to our clients. From entry to growth strategies, to investment advisory and transactions, Cushman & Wakefield provides for seamless integration of its services to create value for our clients.

Anshul Jain, Managing Director, India said, “Kaustuv’s appointment is an important step for our India operations that is moving forward at an aggressive pace. His experience as a real estate professional is a significant addition to our formidable leadership team. His role in creating business opportunity from overseas markets will give us a competitive advantage to further solidify our position in the Indian real estate industry. Kaustuv is a very well respected professional within the real estate fraternity, which complements the company’s brand.”

Speaking about his appointment Kaustuv Roy, Managing Director, New Business Acquisition said, “Cushman & Wakefield is globally known for innovation, commitment, integrity and partnership aimed at creating value for our clients’ real estate. Our brand equity and India’s global economic position will be a key catalyst for global companies to look at Indian market. Similarly Indian companies too are looking at globalisation. Our team and experience puts us in a unique position to partner with such companies. I look forward to working with a group of very talented and dedicated professionals to further fuel the growth of India business.”

Kaustuv has held multiple leadership roles during his 18-year tenure with Cushman & Wakefield from 1998 to 2016. Most significantly as the firm’s Head of International Desk, Asia Pacific based in New York from 2012 until 2015.

Under his leadership, Cushman & Wakefield built a successful cross-border business between the US and India, a legacy he will now build on to usher in accelerated growth. He also served as the firm’s Country Manager for Philippines.

An industry leader, Kaustuv brings over two decades of real estate industry experience. Kaustuv’s appointment as Managing Director for New Business growth in India marks his return to Cushman & Wakefield.

L&T Construction wins orders valued Rs. 2416 Crores

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News Point: The construction arm of has won orders worth Rs. 2416 crores across various business segments in the month of June 2016.

L&T, Track2Realty, India real estate news, Indian realty news, Property news, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Larsen & Turbo, Investment in Indian real estateBuilding & factories business:

The Business has won orders worth Rs. 1165 crores.

A prestigious high rise has been secured from a leading developer in Mumbai. The scope of work involves civil and structural works for the construction of two residential towers, each having 3 basements, 7 podiums, 66 floors and other ancillary buildings.

Another order has been bagged for the construction of a mixed use development (MUD) from a renowned customer in Kolkata. The scope involves civil and structural works for the construction of two towers of G+15 and G+7 floors respectively with 2 levels of common basement.

The business also secured add-on orders from various ongoing jobs.

Power transmission & distribution business:

The Business has bagged orders worth Rs. 1120 crores in the domestic and international markets.

In the international market, a major engineering, procurement and construction order has been bagged from a reputed customer in the Middle East. The scope includes construction of a medium voltage overhead line which will enhance the reliability of the existing network.

On the domestic front, orders have been received from Paschimanchal Vidyut Vitaran Nigam Limited (PVVNL) in Uttar Pradesh.

The first order involves the construction of 33kV substations and associated lines in Ghaziabad, which falls under the Integrated Power Development Scheme (IPDS) while the second order involves rural electrification including feeder separation works in Meerut under the Deen Dayal Upadhyaya Gram Jyoti Yojana scheme (DDUGJY).

Additional orders have been also received as part of the contract variances. 

Smart world & communication business:

The Business has won orders worth Rs. 131 crores which includes a new order from RajCOMP Info Services Limited, a government of Rajasthan undertaking, for establishing and commissioning command & control centres at Bikaner, Bharatpur and Jodhpur cities under the Surveillance and Incident Response Project. 

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