Disappointed with the returns in brick-and-mortar real estate, investors are switching to safer instruments like debentures or units of asset management companies (AMCs) investing in real estate, reports fe Bureau in Mumbai. The investors are giving up the lure of capital appreciation and internal rate of returns in favour of investing in relatively safer investment options, according to a HSBC Global Research report. The sales in residential real estate continue to slide downwards, says the report. Absorption in the top eight cities in the country declined 11% year-on-year between January and June 2016, while registering a steeper slide of 15% y-o-y in the month of June itself. Meanwhile, the launch of new residential units fell 49% y-o-y in the first six months of 2016, and 58% y-o-y for the month of June.
The report says that most of the cities continue to witness muted sales offtake and the year 2016 has turned out to be disappointing so far, fading away hopes of a better full year. During January-June 2016, demand in Mumbai declined 22% and fell by 19% in Gurgaon. Barring Hyderabad, where the absorption rate increased by 10%, all other southern markets continued to face pressure. Bengaluru saw absorption fall by 11% y-o-y, while the decline in Chennai came in much steep at 24%.
“With risks of execution and completion looming large on under construction residential projects, investors prefer to focus either on the commercial segment or subscribe to debentures/preference shares, or units of asset management companies (AMCs) investing in real estate. Though it makes the investment much safer, there is a compromise on the capital appreciation and IRRs,” it says.
According to Bloomberg data, in the first eight months of January-August, the BSE Realty Index has outperformed BSE Sensex.
It increased 17.51%, against the Sensex which has been up 7.4% during the same period.