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,” said Anshuman Magazine, chairman and managing director, CBRE South Asia.

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.

One of the first foreign pension funds to invest directly in an Indian company is the Canada pension plan investment board (CPPIB) and Caisse de depot et placement du Quebec (CDPQ) in partnership with Oman’s state general reserve fund (SGRF). The entity invested Rs 2,000 crore. Around Rs 1,000 crore was invested in phase I while the remaining amount will be funded within a period of 12–18 months in Larsen & Toubro’s infrastructure development arm, L&T Infrastructure Development Projects (L&T IDPL), during the first quarter of 2014.

More than 60 per cent of realty investments were sale of land parcels by corporate entities seeking to maximise returns, primarily in the Mumbai metropolitan region (MMR) 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 owned by Tata Steel at Borivali East, Mumbai, to the Oberoi Group for approximately $187 million for a luxury residential project.

Other similar land sales in the MMR included town planning agency, city and industrial development corporation of Maharashtra (CIDCO), selling off three of its land parcels in Navi Mumbai to local developers for residential as well as commercial development. While the CIDCO plot at Khargar was bought by the Bhagwati Group for about $24 million to be developed as a housing property, two more plots at Ulwe’s Sector 19 were sold to Shagun Enterprises and Varun Enterprises for nearly $7 million and $6 million, respectively.In another land deal, Ardent Properties, a 100 per cent subsidiary of realty firm, Tata Housing Development Company, bought a 7-acre plot at Thane for nearly $36 million from KEC International for developing a premium housing 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 monetising 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.

Source: Financial Chronicle, By Jharna Mazumdar

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