1. Mumbai realty sheds inertia with Rs 6,200 cr in Jan-Sept

Mumbai realty sheds inertia with Rs 6,200 cr in Jan-Sept

The Mumbai realty market is hotting up with the city regaining the confidence of institutional investors.

By: | Mumbai | Published: December 5, 2014 3:11 AM

The Mumbai realty market is hotting up with the city regaining the confidence of institutional investors.

Mumbai attracted the highest investment of $1 billion, or Rs 6,200 crore, among the country’s key investment destinations in the January-September period of 2014. This was more than 20% of the total investment seen by the domestic realty market.

According to findings by global property consultant CBRE in its latest report “APAC Capital Markets MarketView Q3 2014”, institutional investments and capital market transactions in the domestic realty market stood at nearly $4.5 billion, or close to Rs 27,900 crore,  in the first nine months of 2014.

The financial capital of the country tipped Delhi and Bangalore to gain this position, with Delhi being the second-most sought-after investment location followed by Bangalore.

Of the amounts invested in Mumbai, land and development stage transactions made up nearly 70% and over 60% of total realty investments, respectively. In case of Bangalore, more than 50% of total investments during the period were attracted by the commercial office segment.

Of the Rs 27,900 crore invested in Indian realty, land and development stage transactions attracted nearly 60% (Rs 16,740 crore), which came in from domestic as well as foreign entities. The CBRE report said this was an indicator that a significant amount was being invested in greenfield and brownfield developments.

Among key transactions, Kotak Realty Fund invested Rs 300 crore in Nirmal Lifestyle’s US Open residential project in Mumbai and Blackstone invested Rs 175 crore in Ozone Group’s housing project in Chennai.

In office developments, Blackstone, Standard Chartered and Embassy India together invested Rs 1,150 crore in Vrindavan Tech Village in Bengaluru. The GIC has also announced the formation of a joint venture with Bengaluru-based Brigade Enterprises to invest around $250 million in residential and mixed-use development in cities across southern India.

Commercial office segment, on the other hand, has started to see signs of revival in investor sentiment. This space attracted 20% of total investments, or roughly Rs 5,600 crore, in the Indian realty market in the January-September 2014 period. Commercial office segment has been the worst hit in the last two years as leasing activity slowed down and companies refrained from committing bigger office spaces amidst a slowing economy.

In the July-September period of last year, absorption of overall office space declined almost 15% year-on-year in the top six cities of India. However, in July-September 2014, absorption picked up and was up a sharp 31% at 8 million square feet.

Anshuman Magazine, chairman and managing director, CBRE South Asia, said: “Office space transactions, in fact, increased about 20% year-on-year in the first nine months, with more large-scale space leases and higher lease volumes on an average over the previous year across leading cities in India. The period saw significant investor interest in completed and well-leased core commercial office assets and IT parks across key cities.”

According to Cushman and Wakefield’s November report, a number of sovereign and pension funds are committing funds to Indian real estate. These include the All Pensions Group (APG Group), Abu Dhabi Investment Authority (ADIA), Qatar Investment Authority (QIA), Canada Pension Plan Investment Board (CPPIB), State General Reserve Fund of Oman (SGRF) and GIC of Singapore. Piramal Fund Managers (IndiaREIT), Xander Advisors, Kotak Realty Fund, JP Morgan, ASK Advisors, etc have raised funds recently, the consultant noted.

Sanjay Dutt, executive managing director (South Asia), Cushman & Wakefield, said: “Clarity in the governance process and the advent of a stable government at the Centre will be critical to the stability of the investment market. Added to this, the recent announcements strengthening real estate will further the cause of the
sector.”

According to market estimates, Indian real estate-focused private equity (PE) funds are expected to raise around $1 billion from overseas by
March 2015.

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