June 13, 2014
Investment in the real estate sector in January-March, 2014, has more than doubled to $800 from the previous quarter of only $317 million, mainly driven by corporate land sales.
Around $597 million was invested in the sector a year ago. More platform deals and equity stake acquisitions can be expected. “Although India is not yet a significant player in the regional real estate investment market, going forward, we expect the entry of real estate investment trusts (REITs) to provide alternative funding channels to the sector and trigger strong growth in its investment volumes.
For the quarter ended March 2014, nearly $800 million was invested into India’s real estate sector. This translates to almost Rs 4,800 crore having been injected into the sector through the private equity route over the past few months, the CBRE report said.
“This couldn’t have happened at a more opportune time for a sector faced with liquidity crunch, high land acquisition costs and stringent due diligence from the banking sector—which continues to perceive real estate as a high-risk domain in India. It is this selective attitude towards lending to particular assets and markets which has provided opportunities to non-bank lenders such as pension funds and insurance companies to begin to consider funding India’s realty industry,” said Magazine.
More than 60 per cent of realty investments were sale of land parcels by corporate entities seeking to maximize returns and realty developers for housing development projects. Some of the most significant deals in this category involved the sale of a 25-acre land parcel for a luxury residential project.
It is interesting to note that these are all corporate deals which goes to show that an increasing number of firms are now open to monetizing their defunct real estate assets for the right valuation,” Magazine said. Industrial assets remained sought after. Q1 of 2014 saw quite a few investments in built-up commercial assets.