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$11.5 billion NRI investment coming into realty, there is money to be made

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The concerns about the real estate sector are largely done with, and after the mega booster dose from the Union Budget, things are looking rosy again.

NEW DELHI: Three months back, if someone would have recommended real estate stocks, you would have thought he must be joking.

After the demonetisation drive in November, the real estate sector was left in the ruins as the worst casualty of the cash ban.

But you will be in for surprise if I tell you that the S&P BSE Realty index, the barometer of the real estate sector, has actually delivered 14 per cent return so far in 2017 and is up nearly 2 per cent since demonetisation.

What does it tell you? The concerns about the real estate sector are largely done with and after the mega booster dose from the Union Budget, things are looking not just rosy but attractive to make this sector a top investment bet for the year.

The Budget announcements clearly indicated that the government’s focus on improving affordability of homes will benefit end-users, which would result in significant increase in housing supply in the secondary market.

“We like the real estate sector and mortgage finance companies. We may start seeing some recovery in the sector over the next three to four quarters once the impact of the demonetisation drive fades away,” Sanjeev Prasad, Co-Head of Kotak Institutional Equities, said in an interview with ET.

Although concerns about a slowdown in demand and high debt levels of the real estate developers largely remain unaddressed, the Union Budget had enough stimulants to turn around the sector. Domestic investors apart, even non-residential Indians (NRI) are turning bullish on the sector.

Some projections have pegged total NRI investment in Indian real estate in 2017 at $11.5 billion. NRIs have been a crucial stakeholder of the real estate industry for some time now, and the trend has picked up further in 2014 when there was a change of government at the Centre.

“In 2017, total NRI investment in realty in top eight cities is expected to touch $11.5 billion. This will represent 20 per cent of total market share, currently estimated at $60 billion,” Kanika Gupta Shori, COO & Co- Founder, Square Yards, said in a report.

The election of the Modi government has been a significant confidence booster for the discerning NRI investors. Real estate is a capital-intensive business and shrinking demand and unsold inventories have added to the troubles of the developers.

But the Finance Minister offered hope to the sector as he announced infrastructure status to affordable housing in the recent Budget. Stocks of real estate developers, banks and housing finance companies moved higher from their previous lows on domestic bourses in the first week of February.

Infrastructure status to the sector will help affordable home developers to access cheaper funds from big institutions such as insurance companies and pension funds.

“This step is expected to improve margins and increase supply. Government initiatives towards “housing for all” will give immense booster to the companies from the housing finance space, such as GIC housing Finance, LIC Housing Finance, Dewan Housing finance,” D K Aggarwal, Chairman and MD, SMC Investments and Advisors, told ETMarkets.com

“At present, valuation of these companies are looking attractive and one may invest in these companies for the long term to earn decent returns,” he said.

The flow of funds from any source is always a welcome sign for companies reeling under high debt levels. Some companies that have been reeling under high debt levels include DLF, Prestige Real Estate, Indiabulls Real Estate, Godrej Properties, Sobha and HDIL, among others.

Where is this money coming from?

Over 20 per cent of NRI investment in Indian real estate comes from the UAE, said the Square Yards report.

That’s primarily because Indian developers and marketing agencies keep the Gulf nations high up on their agenda. The UAE is followed by other major NRI hubs such as the US and KSA.

Among others Canada, the UK, Singapore and Australia, too, are major sources of NRI capital flow to Indian realty, the report said.

Where can NRI invest?

NRIs have multiple avenues to invest in India, including bank fixed deposits, equities, mutual funds, real estate, government bonds and much more.

Out of the various opportunities, real estate holds its own unique place, as home ownership among the overseas Indian community is often associated with tremendous amount of emotion and prestige, the Square Yards report said.

Also, it is relatively easier for NRIs to invest in real estate compared with other asset classes, such as equities and mutual funds, which are sometimes subject to policy restrictions.

NRIs can invest only in a certain number of stocks and the value cannot exceed 10 per cent of the paid-up capital of the company. Similar restrictions are applicable in some mutual funds as well.

Contrary to this, investing in real estate is pretty simple. NRIs can invest in almost all kinds of real estate assets, excluding farmhouses and agricultural lands.

The curious case of rupee depreciation

When it comes to investing in Indian realty, NRIs take centrestage when the rupee depreciates. History suggests flow of foreign exchange into the sector increase significantly when the rupee slides.

In times of rupee volatility, banks and developers tend to announce various schemes aimed at attracting NRI money.

Source: economictimes.

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NTR Housing Scheme In Full Swing: Chief Minister N. Chandrababu Naidu

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NTR Housing Scheme In Full Swing: Chief Minister N. Chandrababu Naidu

On Thursday, Andhra Pradesh Chief Minister N. Chandrababu Naidu said with the estimated expense of Rs. 5,556.74 crore, the construction of more than 2,44,164 houses, out of the proposed 3,03,044, has been commenced under the NTR Housing Scheme 2017.

While addressing the second day of the Collectors’ Conference he also said the construction of the remaining houses will begin soon. He mentioned that Prakasam and the Kurnool districts are ahead of the schedule in the urban housing scheme. Also, the works are in full swing in the Nellore and the Guntur districts under the rural housing scheme.

According to Naidu, the government will complete 2.5 lakh houses by January next year and another lot of two lakh houses by June.

By October 2, 2018, the state government intends to finish the construction of all the houses and plans to celebrate with massive house warming ceremony with local public representatives. This will help them set an example for housing schemes in other states.

Also Read: Raunak Group Presents Apna Pehla Ghar Campaign

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A Mumbai Suburbs’ Swift Transformation From Industrial To A Residential Zone: Wadala

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A Mumbai Suburbs’ swift transformation from industrial to a residential zone: Wadala

An industrial zone primarily, Wadala has undergone a drastic transformation in the past decade. Now an upcoming residential area, this Mumbai suburb is one of the seven islands to form the modern Mumbai. It is located on the Harbour line of Mumbai’s railway network.

Due to its proximity to BKC, large scale land development was inevitable, thus fueling the real estate market. Wadala is bordered by Dadar on the West, Matunga on the Northwest and Sewri on the South. Nestled between south Mumbai and the suburbs, Wadala enjoys strong connectivity by road and rail to most parts of Mumbai.

It has a number of flyovers like the Anik Panjrapol Link Road, Elevated road and Santacruz flyover. Thane, CST and Chembur are connected via the Eastern Highway while the Western Highway connects the locality to Bandra and Borivali. Wadala has the biggest bus depot in Mumbai. Furthermore, the multiple infrastructure initiatives like the monorail, Truck Terminal and the expansion of Highway are in various stages of development.

All this has given rise to residential demand and pushed the property value over the last few years. One of the most populated areas in Mumbai, Wadala has a large number of old temples, churches and dargahs, university campuses, schools, reputed hospitals and is also home to a former world’s largest IMAX dome theater. There are many stores, showrooms and malls around Wadala like the R Mall, High Street Phoenix and Palladium Mall.

Ramesh Nair, COO – business and international director, JLL India says, “A decade ago, property prices at Wadala were as low as Rs 2,800 per sq. ft. and it rose to Rs 14,000 a few years ago.”  As the infrastructure plans are on their way, so are the renowned developers like Ajmera, Dosti Group and Lodha Group among others.

Wadala at present offers one of the highest returns on real estate investments in the region. All the above-mentioned developers have their luxury projects in the area.

Ajmera I-Land introduces Aeon, Zeon and Treon towers with 2, 3 and 4 BHK plush homes. Conceptualized by renowned Singapore based Architects Space Matrix, these spaces with top-of-the-line lifestyle amenities exude exemplary class and finesse. The first residential floor begins at 110 feet from the ground level and offers several modern lifestyle amenities like kid’s pool, swimming pool, gymnasium, club house, open space and landscaped gardens, yoga room, kid’s play area and senior citizen corner.

Dosti Ambrosia is a 36-storey tower nestled in the 18 Acre Township of Dosti Acres. The architecture of the project was undertaken by renowned Hafeez Contractor in the 2 and 3 BHK apartments. It offers an exclusive rooftop swimming pool with 40,000 sq. ft. of landscaped gardens. You will find all modern conveniences like Gymnasium, Tennis Court, Indoor Badminton Court, Yoga and Meditation Room, Elderly Corner, Banquet Hall, Indoor Games, Indoor Badminton Court, Guest Rooms, Restaurant, Grand Entrance Lobby, Kids Play Area, 2 Club Houses and an Amphitheatre.

New Cuffe Parade by Lodha Group offers its residents all the comforts of a world-class lifestyle. The 2 and 3 BHK homes are spread in over 23 acres of land with 15 acres of stunning landscape and 75,000 sq. ft. of the club house. It includes 11 swimming pools, an organic farm, cricket pitch and multiple themed gardens. The buildings are designed by the world renowned WOHA in Singapore and the landscape was planned by Sitetectonix in Singapore.

Also Read: Mumbai to get Building Taller than Burj Khalifa, Road Bigger than Marine Drive

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Rajasthan Government May Hike The Affordable Housing Prices

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Rajasthan Government May Hike The Affordable Housing Prices

The prices of homes under the ambitious Mukhyamantri Jan Awas Yojana are expected to be increased by the state government.

According to the sources in the empowered committee meeting to be held on Monday, a proposal to increase the cost of a low-income group (LIG) and economic weaker section (EWS) houses will be proposed. Urban development and housing (UDH) minister Srichand Kriplani will chair the meeting. The LIG and EWS houses, presently are being constructed on government lands by private builders. These homes are sold at a fixed rate of Rs 1,250 per sq feet; out of which 1000 rupees per sq ft is given by Urban Improvement Trust (UIT), development authorities and local bodies to the builders.

According to provision 4(A) and 4(B), the developers are supposed to build EWS and LIG houses on government land. Seventy-five percent of such government land can be used in building EWS and LIG houses, while the remaining 25% can be sold by the developers. However, since the rates provided by the government are less the developers are not showing interest to construct houses under these categories. Sources said, “In Jaipur, not a single developer has shown interest in constructing houses under this model. The JDA has invited expression of interest (EOI) several times.”

The UDH is leaving no stone unturned to attract the builders in order to achieve the target of constructing 10 lakh houses by 2019. The sources mentioned, “As per the new proposal, the department has proposed to provide Rs 1,600 per sq feet rate to the developers. The land rates have increased subsequently over the period of time; this is why increasing rates has become a need of the hour.”

Sources further added, “The developers are constructing G+3 buildings at present. However, it is not cost-effective. It has been proposed to construct G+2 buildings for LIG and EWS category.”

Also Read: The Impact Of Regulations On The Real Estate Market

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