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Indian Real Estate Market Headed For Revival: Report

 

 

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Mumbai: The Indian real estate market is heading for a steady revival in 2016, with over 70% of investors expecting improvement in sales in the next 12 months, said a research report by property consultant JLL India and Royal Institute of Chartered Surveyors (Rics), an accreditation body.

The report Peering Into 2016: Taking Pulse of Investor Preference says there is a spike in investor interest in the real estate market as around 43% of respondents saying that the number of successful exits will increase this year.

While Mumbai and Bengaluru will continue to be the most preferred destinations for investment, commercial office and mid-segment residential property will be the top two preferred asset classes by investors, the report said

“After relatively muted calendar years 2013 and 2014, private equity (PE) investors significantly increased their bets on the Indian real estate sector in 2015. This report examines the motivations and expectations of PE funds who are now actively ramping up their exposure to this sector,” said Ramesh Nair, chief operating officer, JLL India.

As per the report, a majority of exits over the last 12-18 months has been characterised by refinancing or buyback. A significant number of investors who participated in the survey believe that the refinancing theme is set to continue beyond the next 12 months, it added.

The report said proposed regulatory initiatives such as the relaxation of foreign direct investment rules in real estate and passage of real estate regulatory bill will enhance investment in smaller projects and positively impact sentiment by boosting buyer confidence.

“Today there are several financing options available. Driven by the need to increase returns and a desire to diversify, investors’ interest in international property markets is once again on the rise and India definitely seems to be leading that interest,” said Devina Ghildial, managing director (South Asia) Rics.

According to the report, newer sources of capital from Japan and China are expected to enter the Indian real estate market in 2016 while pure equity investments are likely to make a comeback this year.

For the report, JLL carried out a survey of seasoned investment professionals across a number of issues like market fundamentals, successful exits, distressed deals as well as top three asset classes and top three cities for investment over the next 12-month period.

“Few of the challenges in the market have bottomed out. So definitely the market is reviving but it is going to be a slow one. There is a going to be greater balance between demand and supply. Investor sentiments have improved,” said Venkatesh Gopalkrishnan, President (business development) and chief investment officer, Shapoorji Pallonji Real Estate.

“However, it is a cautious one where investors are now more focussed on good quality and locations.”

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Budget 2016: Impact of FDI in Real Estate Sector and Future Expectations

Real Estate sector has been stagnant and unregulated for years now. Rising prices of property, delayed construction, no clarity on Foreign Direct Investment and REITS, ghost buyers are some of problems crippling the growth of the sector. But with the various ambitious projects announced by the new Modi Government there’s a silver lining. As per recent government data, economic growth reached 7.4% in the second quarter of the current financial year, riding on a spike in manufacturing and a pickup in investment.

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Where it stands?
Globally positioning India as an investment destination and improving India’s diplomatic and trade relation, Narendra Modi’s foreign stints have helped India attract more FDI. From the nations he visited during the financial year 2014-15, India received FDI of USD 19.78 billion. Moreover, FDI in India increased by 27% in 2014-15 to USD 30.93 billion, said Anuj Puri, Chairman and country head at JLL India in his blog.

But a recent FICCI survey of the year 2015 (Impact of FDI reforms in the Indian real estate sector) shows how disoriented the sector still is. Though there has been overall growth in FDI in the sector, FDI in construction development sector has declined over the past few years. The following table shows that.