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Here’s what makes Kotak Realty Fund one of India’s top five realty funds



India's top five realty funds

By 2005, Srini Sriniwasan had spent 15 years in Kotak Mahindra as an investment banker and, by his own admission, was getting a little bored. Luckily for him, a career change was just around the corner—one that would result in him entering the real estate industry. It was the time the government started opening up the sector to foreign investors and, overnight, Kotak decided to set up the Kotak Realty Fund to tap into the opportunity. “It was a sector crying out to get organised and when the opportunity came, I jumped into it,” says Sriniwasan. “The first thing I did was to hire people who knew something about real estate, i.e. people who knew more than me.”

In the twelve years that Sriniwasan, managing director, Kotak Mahindra Investment Advisors, has run the fund, it has managed to deliver returns that place it among the top five funds in India. This is significant as the vast majority of real estate funds launched in the country have gone belly up.

Along the way, Sriniwasan, 52, has also had a ringside view of how the industry has developed—how various segments like residential, commercial, IT parks, hotels and warehouses have performed. And while he agrees that the era of uniformly high returns in the sector is over, he argues that if you pick your investments well, it is still possible to make handsome returns.

We’re at Sriniwasan’s office at Mumbai’s Bandra Kurla Complex and he wistfully recounts his first few months at the fund. He was thrust into the business and the first thing he did was to get on the ground. His first investment, in 2005, was an 800,000 square feet office park bought from K Raheja Constructions in the Mumbai suburb of Goregaon. This was a time when the outsourcing industry was expanding rapidly and demand for office space was robust. But, unlike other funds that bought completed properties, Sriniwasan took a risk and decided to buy it when it was just a plot of land and a bundle of approvals. He ploughed in Rs 90 crore (plus Rs 120 crore raised from banks) out of the Rs 457 crore that Kotak Realty Fund’s first fund had raised. Over the next five years, the fund constructed the building and leased it.

For any fund manager, the proof of the pudding comes when a sale is made. In 2011, the real estate fund exited the investment for Rs 525 crore with 4.4x returns.

Soon after Sriniwasan made the office park investment, he realised he had to change course. Investing in offices would no longer work. “This was before the 2008 financial crisis and a lot of money was coming into India. Much of it went to office parks and there was to be a glut of supply,” says Sriniwasan. “After doing our first office deal, we did not do another one for seven years.”

It was during this period that Sriniwasan admits that he made an investing mistake, which, till today, is an “albatross around his neck”. In that period, money was flooding into large townships that consisted of apartments, parks, schools, shopping centres etc. These projects had long gestation periods and returns were hard to come by if they were not executed within a specified time frame. The fund made two township investments in Tamil Nadu and the returns were below expectations. This dragged down the returns of the first fund to an IRR (internal rate of return) of 14 percent.

The period post the financial crisis tested Sriniwasan as a fund manager. He’d closed his second and third funds, together totalling $560 million, and had no investible opportunities. “That was when my background as an investment banker came handy,” says Sriniwasan. He understood securities laws and the Foreign Exchange Management Act. By now, the government had allowed foreign money to buy up to $2 billion in debentures. This allowed him to do the first non-convertible debenture (NCD) transaction in Indian realty—he lent the money he’d raised overseas to real estate developers at a time no one was sure it could be done. 

According to Sriniwasan, a PG Wodehouse buff, the spirit of the law was that a developer could not take the foreign exchange risk. So, the fund bringing in foreign money, converting it into rupees, lending it and accepting the returns in rupees should be above board. He completed a deal, with a guaranteed 22 percent return, with Adarsh Developers in Bengaluru without facing any regulatory scrutiny. 

In doing debt deals, Sriniwasan came up with an inviolable principle. Given that contracts are hard to enforce through courts, he ensured that, in a debt deal, he was the only person lending so that if something went wrong he had the first right on assets.

Kotak Mahindra Investment Advisors has managed to raise $400 million from the Abu Dhabi Investment Authority and Qatar’s sovereign wealth fund by deploying this strategy. Kotak Realty Fund’s second and third funds have logged an IRR of 22 percent.

However, this opportunity has also ended. “There are a lot of copycats in the market now and as rates have come down, so have the potential returns,” says Sriniwasan. 

As Sriniwasan enters his twelfth year of managing Kotak’s real estate business, he’s among the few who have seen the market since it was opened up to foreign capital. He’s also traversed the entire route from a shortage of office space to oversupply. 

For now, though, Sriniwasan says the market has come full circle and the office space is showing signs of revival. It usually takes five to seven years to complete an office building; the last set of developments that started after the financial crisis are now complete and rented out. 

Developers have once again started putting money into new office parks and need capital. Sriniwasan, too, is scouting for good deals.
The residential market is a different ballgame. It is still plagued with excess supply and Sriniwasan believes it will take a few more years for it to strike a balance. He is hopeful that the recent reduction in interest rates will bring borrowers back. And this is likely to be a more stable demand as years of slow growth in real estate prices have pushed speculators out of the market. 

His advice for end users? Go and buy now. “You’ll never be able to time the bottom of the market,” he cautions.

Source: Forbes India

Special Reports

Magicbricks Ads Singing And Dancing To Housing




Magicbricks Ads Singing And Dancing To Housing

Magicbricks, the online real estate portal, launched India’s first musical real estate commercial. The platform offers over 14 lakh listed properties. With the dancing and the song ‘Property Ka Supermarket’ they hope to offer a shot of positivity.

The ad is about a young couple who are looking for their perfect home while sitting on their couch. Once the app fires up the couple is transported to a supermarket, where shelves are stocked with all sorts of homes. The song in the background goes like “One, two, three, four, saare BHK. Bungalow, villa, flats hatke. Ready-to-move-in any time, Possession mein ya hai time. Oonchi price, neechi price, sasta-sundar-sabse right.” It has also got a catchy tune for anyone to voluntarily start humming it.

The idea behind the ad was to communicate all that Magicbricks, a Times Group company, has to offer at every stage of the buyer’s expedition. Right from their range of properties to home-search related services like experts backing and buyer reviews.

Prasun Kumar, Magicbricks marketing head, points out, “There was genuine consumer interest that came back in the industry, believing that there’s a clean-up act happening and as a buyer, you’ll probably get better value for money now. However, due of multiple policy interventions, interest was not converting to deals.”

This obviously left the builders in anguish. According to the experts, consumers were desperately seeking reassurance. He added, “With this backdrop, we realized this festive season would be a window of opportunity to go to consumers with a different narrative. We realized the external factors are not conducive to a very emotional, melodramatic approach. We needed a mood refresher.” Thus the answer was Bollywood song and dance. Thus, stressing on the point of quality, trust, choice and best deals.

Another myth that it bursts is that buying a home is a man’s job. Kumar said, “The image is that real estate is a masculine category. This is also part of the challenge because all of a sudden 50% of your TG is out of your purview.” However, the fact remains that it is a joint decision of both man and woman.”

Nevertheless, not everyone seems convinced with the ‘property ka supermarket’ idea. Karthik Srinivasan, national lead, Social@Ogilvy points out that supermarket is generally where you get a lot of cheap things. Moreover, he isn’t very happy with the execution, as according to him it doesn’t do justice to the idea well enough. He adds, “I read the material that was released with the ad (Every agency does this.) It went ‘property ka supermarket’, first musical real estate ad, etc. It’s a tall claim. There is an interesting germ of an idea that is the property market is gloomy because of RERA and everything, and they wanted to make it light, musical, positive and buoyant. But the execution wasn’t as interesting as the idea itself.”

He concluded by saying, “What remains to be seen is if the houses do the real estate equivalent of flying off the shelves.”

Also Read: INIT Mumbai Wins The Prestigious Realty Plus Excellence Awards 2017

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Special Reports

Tanvi Group Fail To Deliver Homes And Declare Bankruptcy




Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

Another case of delay in project completion and possession has surfaced, once again escalating investment fears for home buyers. Tanvi Group is under scrutiny at present. The group has declared bankruptcy.

They have taken 1000 crore as 50 percent advance for almost 500 flats in their Dahisar project. They have now filed for insolvency and all their project construction have stopped leaving the buyers in a lurch.

Almost 200 families have invested in their Kashimira project – Tanvi Eminence. The project started in 2010 with possession committed in 2013 however even after 7 years the construction remains incomplete and no sign of possession. More than 100 home buyers gathered at Kashimira in Mumbai to protest against the delay in completion of their housing project.

Tanvi Group is also accused of building 20 floors at Tanvi Eminence while they only have the permission to build 11 floors. Buyers have also registered a complaint at the Kashimira police station. According to sources, there are four partners namely Vijay Kumar Hegde, Sangeeta Hegde, Bhupat Lukhi, Dayabhai Sutaria in this project but due to their internal disputes, the projects have been left hanging.

A disgruntled buyer said, “Last seven years we all have been waiting for our houses. We have invested our hard earned money here. All we ever get is new promises and new dates of delivery. Due to builder’s internal conflict, they are playing with our emotions and money and this has been happening for the past 7 years. We even tried to cooperate with them but now all we want is our houses.”

One of the partners at Tanvi Eminence, Dayabhai Sutaria said, “I have filed lawsuits against my two partners Bhupat Lukhi and Vijay Kumar, for not cooperating with me and taking this project forward. My sentiments are there for the home buyers who have invested their money.”

While Vijay Kumar, Partner at Tanvi Eminence said, “Mr. Dayabhai is holding payment of more than 20 crores and Bhupat approximately 7 crore which is sufficient to buy the TDR and start construction. They are misleading all the buyers.”

There is no doubt that MahaRERA Act is tightening the noose around the developer community. However, according to legal experts, some of them may have found liquidation proceedings or the bankruptcy law as an avenue to escape the ambit of the state regulator.

Experts have predicted incidences of insolvency to go up going forward as builders may be able to transfer the losses to property owners.

As for the home buyers, it is in their best interest to check if the project they want to invest in is RERA compliant and all permissions are in place. Instead of delaying your decision to buy a property, it is better to make informed decisions to stay above any traps.

Also Read: 50% Growth For Nashik Realty Sector Since Ganeshotsav

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Insomniacs Bags The Digital Marketing Campaign Of The Year At The Realty Plus Excellence Awards 2017




Insomniacs bags the Social Media Campaign of the Year at the Realty Plus Excellence Awards 2017

It is a big moment for the Mumbai-based digital media agency Insomniacs. They won the prestigious Realty Plus Excellence Award for the Raunak Group’s ‘Darr Ke Agae Ghar Hai’ campaign.

Raunak Group, an established realty brand in Mumbai, was going through the aftermath of the demonetization. They recognized the problem as clarity – consumers had no clarity and nor did they have a trusted source that they could turn to. The developers were sitting with folded hands waiting for buyers to knock their doors while the unsold inventory had become a huge cause of worry.

This is when team Insomniacs believed was the opportune moment to send out a strong message. Pranav Patadia, director, said “When an opportunity knocks at your door, you need to recognize it and make the most of it. We were given a challenge and we wanted to tackle it in a unique way; in the process offering a solution which has never been attempted before. The result of that effort is in front of us.”

The idea was to emerge out of the rumours and make people believe in the offers instead of just rotating advertisements in the market. When the market hit rock bottom, getting people to visit the project sites was a herculean task in itself. Thus the “Darr Ke Aage Ghar Hai” campaign was created.

The campaign was supposed to bring to light the many fears that home-buyers face today. “Darr Ke Aage Ghar Hai” engaged the masses on social media and dispel these fears, systematically and ultimately. One of the major fear-inducing problems the customers faced during demonetization was the prolonged delay in possession. Raunak Group with the team’s assistance aimed to successfully resolving this and many other issues.

Shyamal Mody, Marketing Director Raunak Group stated, “I congratulate the team for the award and the campaign that they introduced. It is a pleasure to work with such a dedicated team. Raunak Group sold inventory worth 50 crore for 1.23% marketing cost. The best part was that people could actually find solutions to their property problems and most of them ended by up a house for themselves.”

There was a lengthy ground research involved along with an impactful campaign on social media channels and on-ground activities. Even a micro site was created ‘A2Z of Darr’ which highlighted various home buying fears of a customer, providing detailed solutions for each and every problem.

The team managed a highly successful campaign with highest ever sales recorded by any real estate group. Govind Rai, Director, Insomniacs added, “The idea was to create a campaign for a larger impact. We were fully aware how the campaign could be advantageous on other media platforms. The fact that other ad agencies carried out our campaign talks lengths about its success.

It was indeed a well-deserved win. We congratulate the team at Insomniacs.

Also Read: Realty NXT Does a Survey On Why People Feel Scared to Buy Homes

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