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TOP REASONS TO INVEST IN EMERGING REAL ESTATE MARKETS

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TOP REASONS TO INVEST IN EMERGING REAL ESTATE MARKETS

Real Estate is constantly emerging as preferable investment choice for both Private Equity (PE) investors as well as individual entities. Investors have shown keen interest in real estate sector with the motive to increase their wealth, while keeping the risks in check.

During a study conducted by International Property Consultant (IPC) Colliers in 2016, over a sample investor base of 600, it was observed that around 52% of the investors have shown a desire to increase their asset allocation in real estate. Emerging economies like India, China, Myanmar, Kenya etc. are the new favorite destination for Global Investors, in terms of real estate. The current Bear market situation in some of the major economies around the globe along with certain unexpected geopolitical events has emphasised the importance of real estate in emerging economies. It is considered to be a safe haven in terms of investment. The rising GDP growth, expansion of the middle class and rapid urbanization are constantly driving the housing markets of the emerging economies. The emerging economies have also encouraged further capital investment in their property markets by offering various subsidies, tax rebates, policy changes etc. to global investors.

Let’s take a look at some of the factors that will drive investment in the emerging real estate markets.

The Bull Market Economy Encourage High Demand for Investment

We are almost towards the end of the first quarter of 2017, but many major economies are yet to recover from the effects of recent economic crisis. On the contrary, a lot of emerging economies have displayed much higher growth than their developed counterparts. Countries like China, India, Kenya, Vietnam, Myanmar and many more are great examples of emerging economies. They continue to showcase balanced economic scenario and higher growth figures. Higher GDP growth implies higher demand in the housing sector.

India has demonstrated a tremendous growth rate over the recent years. Currently it has growth rate of around 7%, which is much higher than the global average rate of 2-3%. The Chinese economy has slowed down a bit, when we compare to the double digit growth rate that the country has shown over the last decade. Still, it is expected that the country will grow at around 6.5% in 2017 and 6% in 2018 which is again pretty higher than other counterparts. Association of Southeast Asian Nations (ASEAN) is an emerging economic block which has made significant contribution to the global growth phenomenon.

The bull market situation will boost the housing market in emerging economies. The housing market will exhibit a sharp growth in the near future, driven by rising employment opportunities and income growth. Take the example of India, as cited by a report published by Morgan Stanley. If India continues to grow at GDP rate of 6.5% -7.5% annually in upcoming years, Indian real estate market will reach USD 462 billion in 2025, from USD 105 billion in 2015.

Expansion in the Credit Market

The significant expansion of credit markets will accelerate the growth of real estate in emerging economies. As per IMF report on credit growth, that captures the annual credit growth in 45 influential economies in Q3, 2016; the emerging economies showcase dominant status. This opens the window for more investments.

High Capital Appreciation and Rental Revenue

The increased demand for real estate market in emerging economies ensures better capital appreciation and rental revenue for investors. For instance, China despite a cooling economy continues to flourish in the real estate sector. The prices indicate a rise over 12%, Year on Year(Y-o-Y) in Jan 2017. Post demonetization, the price reduction in India is limited to only 3 out 14 cities during the last quarter of 2016. With the rise in growth rate and reduction in home loan rates, markets are soon expected to gain momentum in India.

Similar hike in price trends have also been observed in Turkey and Kenya. According to reports, published by Central Bank of the Republic of Turkey, prices have appreciated by 13.98% in the first half of 2016. In Kenya, property rates continue to rise with most of the cities displaying double digit growth figures in 2016.

The rental revenue ranges between 5-7% annually in emerging economies encouraging further investments.

Growing Middle Class Population

The rising middle class population is a driving factor for exponential growth in the real estate sector. Along with firm economic growth and expansion in credit market, the expanding middle class is constantly increasing the demand for housing in emerging economies. The growth enhances further scope in the real estate sector, as the wealthy class will search for better living standards. In India the current volume of middle class stands at around 5% of the overall population. But it is increasing at a steady pace and is expected to reach 200 million by 2020. Likewise, the middle class population in China is expected to reach 1 billion by 2030.

New Reforms and Regulations

In emerging economies, the real estate industry has earned a bad reputation over the years due to its lack of transparency. The global investors were hesitant to invest in such markets due to high risk factors, until recently. However, new reforms and favourable polices have been introduced by the government to encourage transparency and fair practices. Various steps have been taken by the government to minimize the role of speculators and safeguard the interest of the investors. These initiatives will act as a major game changer in the real estate sector in emerging economies.

In India, establishment of Real Estate Regulatory Act (RERA) to safeguard the interest of investors, 100% FDI in infrastructure and township projects are some of the initiatives taken by the government to attract more investment. Demonetization also played a key role is curbing the presence of black money in Indian real estate sector. These steps will play a key role to invite more global investors who are looking for a safe and secured market to invest.

Commercial

RMZ Corp To Invest $1 Billion To Develop 10 Million Sq Ft Of Office Space In Hyderabad

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RMZ Corp To Invest $1 Billion To Develop 10 Million Sq Ft Of Office Space In Hyderabad

On Friday, Thirumal Govindraj, RMZ managing director, said Bengaluru-based offices space developer RMZ Corp has made plans to pump in $1 billion in developing around 10 million sq ft of Grade A office space in the `City of Pearls’ over the next 3-4 years. They are looking at Hyderabad due to its unrelenting demand for Grade A office space.

This is along with company’s plans to build an additional 40 million sft of commercial space across the country by 2020. They intend to do this by developing its own projects or by buying ready assets. This will place a total of 60 million sft of asset management under RMZ. At present, the company has a portfolio of around 20 million sft of commercial space across cities like Mumbai, Bengaluru, Pune, NCR, Chennai, and Hyderabad.

In Hyderabad’s IT hub, RMZ is already building India’s largest office space project – Skyview. It is a 50:50 JV with Hyderabad-based MyHome Group.

Govindraj said, “We are very bullish on the Hyderabad market which has low vacancies and robust demand for Grade A office space. We plan to invest $1billion in Hyderabad over the next 3-4 years with a target size of 10-11million sft of assets. This includes 3.73 million sft of Skyview and another 6.3 m illion sft of space.”

Govindraj further added that by the first quarter of 2018, they expect 50-60% space commitment for Skyview. They are also looking at land parcels in the IT hub of Hyderabad. He said they are also open to acquiring ready assets as well. He explained, “This is part of our two-pronged strategy to build assets as well as acquire ready assets. We are looking at 70-80% our own developments and about 20-30% acquisitions”.

He also mentioned that the company is in talks with Canadian Pension Plan Investment Board (CPPIB) and existing investors like Qatar Investment Authority RMZ to raise around $1billion to fund its asset portfolio expansion.

Simultaneously, the company is also looking at opportunities in the co-working spaces arena for its venture CoWrks with two projects planned in the city. Already the plans are to open a 1,00,000 sft co-working space in the upcoming Skyview project. RMZ is also looking for options in the Banjara Hills area for a co-working facility.

Elaborating Govindraj said, “We have a target of 1 million sft for co-working spaces across India over the next three years. We already have 2,20,000 sft in Bengaluru and another 3,00,000 sft is slated to come up over the next 6-8 months in cities such as Hyderabad, Bengaluru, Pune, Mumbai, Chennai and Delhi where we are in the process of signing up space”.

Also Read: 373 Maharashtra Cities To Fall Under PMAY Scheme

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Square Capital Becomes The Largest Organized Distributor Of Secured Mortgages In India

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Square Capital Becomes The Largest Organized Distributor Of Secured Mortgages In India

Square Capital, the digital lending arm of India’s largest real estate transaction platform Square Yards has underlined its market dominance by becoming the largest organized distributor of secured mortgages in the country. It is currently facilitating USD 30- 40Mn (INR 200cr – INR 260cr) of loan disbursals every month, contributed majorly by secured mortgages spread across 50+ banking partners for their different products in home loan, home against property and business loan. Its impressive growth is attributed to the rise in availability of affordable housing in India as well as the increasing consumer propensity to rely on fintech platforms for a full spectrum of financial needs.

Speaking on the recent numbers, Amit Prakash Singh, Principal Partner, Square Capital said Real estate and fintech aggregation are a synergistic match to a vast degree and Square Capital, was able to build on the established best practices of Square Yards to become one of the largest mortgage distributors in India today. We are betting big on affordable housing to drive future growth, particularly with the Pradhan Mantri Awas Yojana offering interest subsidies and of course, the huge number of untapped first-time home buyers that can be catered to in the home loan segment up to Rs. 30 lakh.

Government schemes such as the Pradhan Mantri Awas Yojna which offers interest subsidy between 3-6.5% for loans between Rs.6-12 lakh for EWS and LIG categories and subsidy of 4% and 3% for loans of Rs.9 lakh (for those with income up to Rs.12 lakh annually) and Rs.12 lakh (for those with income up to Rs.18 lakh annually) respectively, are driving consumers to opt for home loans that they can repay easily and fulfill their dream of real estate ownership. In fact, several studies have shown that loans have gone up by more than 20% over the last few years for affordable housing purchases. Square Capital is optimizing this opportunity to the hilt by enabling easier access to credit for potential home owners.

In the absence of any national-level mortgage distributor that has managed to scale up over the last decade, Square Capital has not only been able to generate massive digital leads but is also enabling fulfilment, either digitally or through its hybrid online to offline (O2O) approach.

About Square Capital

Square Capital is a marketplace lending platform that aggregates offers from financial institutions on a single platform and provides end to end fulfilment support in the lending process that includes assessing the credit worthiness/risk of clients, helping them choose the right product from the appropriate lending organization, managing their documentation, advising on professional issues pertaining to taxation & insurance and assisting the client till the entire lifecycle of loan disbursement.

Also Read: Under The First MahaRERA Verdict, Builder To Return Rs.26 Lakhs To Buyer

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Commercial

ASK Group and TVS Emerald Join Hands To Setup Rs 400 Crore Real Estate Investment Platform

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ASK Group and TVS Emerald Join Hands To Setup Rs 400 Crore Real Estate Investment Platform

ASK Group’s Property Investment Advisors, the real estate equity arm, and TVS Motor Company’s real estate wing Emerald Haven Realty Limited (TVS Emerald) have decided to set up Rs 400 crore real estate investment platform.

The raised capital will be spent on several affordable mid-segment projects.

“We strongly believe that affordable and mid- segment market offers huge growth potential and this is in sync with the TVS Emerald’s core purpose of providing better living space to the urban middle class,” said Amit Bhagat, MD & CEO ASK PIA.

“Our endeavour is always to delight customer by fulfilling the aspiration of the urban middle class in their quest for a better living space,” said R. Chandramouli, President, and CEO, TVS Emerald.

The first investment under their partnership will be of developing a 10-acre land parcel having 5,48,000 sq ft of saleable area. It will have an equity investment of Rs 83 crore in Porur, Chennai.

Sunil Rohokale, MD & CEO, ASK Group said, “This platform is poised to get benefited in the heightened regulatory regime of RERA through focus execution and satisfying customer needs.”

Also Read: Chandigarh Brokers Yet To Register Under RERA

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