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TOP REASONS TO INVEST IN EMERGING REAL ESTATE MARKETS

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INVEST IN EMERGING REAL ESTATE

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

Blackstone In Process To Buy L&T’s Commercial Property Portfolio For Rs. 2300 Crores

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Blackstone In Process To Buy L&T’s Commercial Property

Being one of the world’s leading investment firms, Blackstone has emerged as the most aggressive institutional investor in India’s real estate sector. Now this US-based private equity player is in advanced talks with L&T Realty, to acquire two commercial properties covering a total of 1.7 million sq ft., in a deal valued at Rs. 2,300 crores. Blackstone leads the market with its highest

Blackstone has been picking up properties across major cities in deals that are turning out to be benchmarks in the sector. Owning the India’s biggest portfolio of income producing office assets, this company holds a total of over 31 million sq ft. across key property markets of Noida, Mumbai, Pune and Bengaluru.

This portfolio of the real estate arm of engineering major Larsen & Toubro includes a 9 lakh sq ft. office block at the company’s commercial project at Seawoods, in Navi Mumbai. And there is another 8 lakh sq ft. of fully-leased commercial tower at the L&T premise in Powai suburb. This Seawoods office tower will be acquired in phases as the leasing process is yet to complete.

L&T Realty will assist in further leasing at Seawoods commercial block, as the deal is expected to be inked by late February as the process is currently in its final stages. Earlier in 2016, Blackstone made a deal in Navi Mumbai, a 1-million sq ft. retail mall was bought adjacent to the office tower in Seawoods, from L&T Realty for over Rs. 1,400 crores.

Being the part of the India’s largest Transit Oriented Development, Seawoods Grand Central, is L&T Realty’s office block in Navi Mumbai. This project is a mixed-use development area across 40 acres that includes the mall and other commercial spaces.

Blackstone is said to be directly acquiring these assets, without including its existing joint ventures with Bengaluru-based Embassy Group and Pune’s Panchshil Realty. This is not the first time that the New York based institutional investor has acquired assets and stake in portfolios independently.

With Colgate-Palmolive, JP Morgan Chase and L&T Infotech as the prime tenants, the commercial tower in Powai is completely leased out. This leasing factor together with all the long-term contracts, makes the Powai asset valued at Rs. 1,500 crores with a capitalization rate of about 8.5%.

Establishing its first Indian office in 2005, the leading private equity player has committed over $6 billion to the Indian companies till date. Total 19 companies owning 31 million sq ft. across 18 operating office parks, with an investment of $2.7 billion, comes under Blackstone.

An additional 11 million sq ft. of commercial space under development across the country, adds to this large portfolio. Over the past few years, the Indian real estate assets have been seeing aggressive pattern of investments, by the major global institutional investors such as Blackstone Group, GIC, Goldman Sachs, Qatar Investment Authority, Canada Pension Plan Investment Board and Brookfield Asset Management.

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Indiabulls Real Estate Acquires A Commercial Building With Leasable Area Of 2.5 Lakh Sq Ft. In Gurgaon

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Indiabulls Real Estate

Indiabulls Real Estate has earned a distinct reputation for building projects that turn spaces into inspiring places, since its inception. Indiabulls Real Estate went on to expand its projects portfolio, with its prime focus on construction and development of residential, commercial & SEZ projects, across major Indian Metro cities. Today Indiabulls Real Estate is ranked amongst the top Real Estate companies with a total Gross Development value of INR 32,189 crores and net worth of INR 5,480 crores as of 2017.

Indiabulls Real Estate has commercial development with a leasable area of 3.15 million sq.ft. under construction. Further, it has a land bank of 1,046 acres and also possesses 2,588 acres of SEZ land at Nasik, Maharashtra. In 2014, the company acquired the prime property, 22 Hanover Square in Central London for Rs.1630 Cr. The group has also been conferred the status of a Business Super brand by the brand council Superbrands, India. Indiabulls Real Estate is known for its successful delivering of superior products, services to its customers, partners and shareholders.

Indiabulls Real Estate is planning to acquire a large commercial building with a leasable area of 2.5 lakh sq ft in Gurgaon.

To acquire this large area of prime and newly constructed commercial building, Indiabulls Real Estate’s wholly-owned subsidiary has entered into a definitive and a binding agreement. A BSE filing by the Indiabulls reveals that, the deal has an expectancy period of four months, mainly after receiving the Occupation Certificate of the building. Although the name of the seller and deal value was not disclosed.

With many leading multi-nationals operating in the vicinity, makes it a developed prime commercial location. Equipped with an additional leasable area, the company expects to enhance its annuity revenue to Rs 1,450 crore in FY 20-21 from the rental properties portfolio of Indiabulls Real Estate.

With its expansion spree, Indiabulls Real Estate, is counting on the revival in the real estate market in Gurgaon for making its project a success. The commercial realty market is witnessing a strong demand in Gurgaon. So Indiabulls Real Estate is looking forward to set up a state of the art business park in Gurgaon, which would be able to draw reputed corporates and MNCs. As some big-ticket commercial space rentals and deals are expected to be finalized in this space.

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Adani’s Bandra-Kurla Complex Project To Be Taken Over By Shapoorji Arm For Rs 2,000 Crore

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Adani’s Bandra-Kurla Complex Project To Be Taken Over By Shapoorji Arm

Shapoorji Pallonji Investment Advisors which is an investment arm of conglomerate Shapoorji Pallonji Group is set to acquire a commercial project Inspire BKC from Adani Realty in a nearly Rs. 2,000-crore transaction. The project is located in Mumbai’s business district Bandra-Kurla Complex (BKC), informed two persons familiar with the development.

Shapoorji Pallonji Investment Advisors has emerged as the frontrunner from a total seven shortlisted interested entities including US-based private equity major Blackstone Group and an alliance between Qatar Investment Advisors (QIA) and Bengaluru based realty developer RMZ.  For this over 8 lakh sq ft project Shapoorji Pallonji Investment Advisors has already completed the due diligence process.

One of the people mentioned above said, “The due diligence process for the asset has been concluded recently, and currently the final documentation is going on. The deal is expected to be concluded soon as both the parties have frozen the structure of the transaction.”

The project has recently been completed and the developer is in the process of receiving few civic approvals, following which it will be concluded. Adani Realty is also one of the companies that is working on closing few leasing transactions here.

In one such lease deals, Swiss multinational pharmaceutical major Novartis’ India arm has entered into an agreement to pick up over 1lakh sq ft office space in this commercial project. This was one of the largest front office commercial transactions in terms of space in the Mumbai in 2017.

Shapoorji Pallonji Investment Advisor is also kept in the loop on the progress of space leasing transactions in this commercial project.

In its first-ever real estate related engagement in India in October the global insurance and asset management major Allianz Group teamed up with Shapoorji Pallonji Group to create an investment platform for office properties.

The platform, SPREF II, will be a Singapore-domiciled, rupee-denominated and close-ended fund planning to raise $500 million in equity.

After partnering with the Canada Pension Plan Investment Board (CPPIB) in 2013 for a platform with an initial target corpus of $200 million this is Shapoorji Pallonji Investment Advisors’ second such tie-up.

The commercial real estate has been registering a healthy growth across prime office markets in past three years.

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