Real estate FDI ease not to change much on ground

Source: Financial Express, Nov 24, 2015

Mumbai: The recent liberalisation of foreign direct investment (FDI) regulations will not result in immediate investments as fund managers remain bearish on the domestic residential real estate sector. A number of fund managers concurred that though the reforms do help as far as ease of doing business is concerned but is not sufficient to pull the sector out of slowdown. “I will say that both the entry and exit guidelines are a step in the right direction but I doubt if this will immediately lead to a flurry of FDI investments because of the lacklustre market conditions,” said Vikas Chimakurthy, director at Kotak Realty. For funds to actively scout for projects, core fundamentals have to improve, Chimakurthy added.

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Multiples PE To Launch Housing Finance Company

Source: Livemint, June 02, 2015

Multiples Alternate Asset Management Pvt. Ltd, promoted by former ICICI Venture chief Renuka Ramnath, is set to make its first investment from its second fund by launching a housing finance company, said a senior executive of the fund. “We are planning to set up a platform for housing finance lending and we will be investing around Rs.100 crore (in it) initially from our second fund,” said Prakash Nene, managing director and chief financial officer at Multiples.

Real EstateThe aim is to target lower income groups, he said. “People who are in the urban lower-middle-class category or people who work in the unorganized sector find it difficult to get loans and there is a huge opportunity in this segment, and we are looking to address that segment,” he added.

The housing company, which will cater to the needs of customers in the metros and smaller cities, is currently seeking approvals and hiring people. Multiples will invest in the company from the second fund it is currently raising.

Multiples has raised $376 million from offshore investors and has completed the first close of the fund in April. Last week, it received the approval from the markets regulator to raise capital from domestic investors and plans to do the first close next week by raising Rs.180 crore. It is aiming to raise $500 million from overseas investors and Rs.600 crore from domestic investors.

In total the fund will end up raising $600 million, which will be invested across consumer, financial services and pharmaceuticals sectors. Multiples has been focusing on exiting some investments from its first fund of $405 million raised in 2010. The fund recently invested in Luminous Water Technologies Pvt. Ltd. Its other investments include third-party logistics and technology service provider to e-commerce companies, SSN Logistics Pvt. Ltd, Arvind Ltd, Vikram Hospital, the Indian Energy Exchange and PVR Ltd.

The investment in the housing finance company will not be Multiples’ first in the finance space. Multiples’ first fund invested in two companies in the financial services industry. According to media reports from VCCircle, in 2012, the private equity (PE) fund picked up a 5.58% stake in South Indian Bank Ltd for nearly Rs.165 crore in an open-market transaction. It also invested in Cholamandalam Investment and Finance Co. Ltd, the non-banking financial company of the Murugappa Group, by buying shares worth nearly Rs.106 crore in 2012. The fund has exited both the investments.

Other funds, too, are eyeing the housing finance market. Last week, Fullerton India Credit Co. Ltd, the Indian non-banking financial company owned by the Singapore government’s investment firm Temasek Holdings Pte Ltd, said it plans to set up a new housing finance company, buoyed by its recent success in retail lending in India. Fullerton India has already applied to the National Housing Bank for a licence to set up a new subsidiary with an initial investment of Rs.100 crore.

The housing finance business in India is dominated by State Bank of India,Housing Development Finance Corp. Ltd, ICICI Bank Ltd, LIC Housing Finance Ltd, and Axis Bank Ltd.

Over the last six months, shares of several smaller housing finance companies have risen. Stocks of Dewan Housing Finance Ltd, GIC Housing Finance Ltd, Repco Home Finance Ltd, Can Fin Homes Ltd and Indiabulls Housing Finance Ltd have risen between 11.57% and 51.08%.

“In the past several years, the housing finance sector has seen very robust growth. The sector has seen a compounded growth of 19% over the last five years. However, even with this strong growth, overall mortgage penetration remains low at around 8% and thus the potential for growth is significant,” said Vibha Batra, senior vice-president and co-head, financial sector ratings, Icra Ltd.

According to a report by the rating agency, there has been an emergence of a number of new housing finance companies in niche segments such as affordable housing. The Indian housing finance market has crossed the Rs.10 trillion mark with a steady growth of 17% annualized for nine months ended December, the agency said.

“Despite the fact that bad debt has been rising, the one segment where non-performing assets (NPAs) have come down is the retail segment, especially housing loans. All the lenders have realised high profitability in this segment and there is unabated continued growth in this segment,” said Saurabh Tripathi, partner and director at the Boston Consulting Group.

By Icra’s estimates, housing finance companies will need external capital ofRs.18,000-28,000 crore to grow at 20-22% over the next five years, assuming an internal capital generation of 16% while maintaining the capitalization levels at current levels.

“There is a huge opportunity to lend to people who do not have a permanent dwelling and low-cost housing is emerging as a key segment,” Tripathi added. Housing finance companies have been able to maintain their asset quality (gross NPAs of 0.74% as on 31 December 2014). Going forward, Icra expects gross NPAs to remain between 0.7% and 1.1%.

Government relaxes FDI norms for construction, real estate sector

Source: The Economic Times, Oct 30, 2014

NEW DELHI: The government eased overseas investment rules in construction to attract money into the funds-starved sector and serve its twin objectives of faster job creation and housing for all. The Union Cabinet on Wednesday approved a comprehensive proposal by the Department of Industrial Policy & Promotion (DIPP), dropping the minimum 10-hectare rule for serviced housing plots and slashing the minimum floor area for construction development projects to 20,000 sq m from 50,000 sq m to be eligible for overseas investment.

FDI in Real EstateIt also halved the minimum foreign direct investment (FDI) amount to $5 million from $10 million and substantially eased the exit norms, raising an across-the board cheer from an industry that now hopes for bigger foreign fund flows into a sector that desperately needs money. “The government is bang on (target). We are very glad about the trunk infrastructure completion part as it will bring in asset-based FDI. This will ensure that project developers who have taken FDI are not left with more debt,” said Rajeev Talwar, executive director of DLF, India’s biggest listed developer. Trunk infrastructure refers to essential amenities such as roads, water supply, street lighting, drainage and sewerage.

The new rules will also give a boost to the 100 smart cities being planned by the government. Home buyers will also cheer the relaxation as fresh inflows raise the possibility of projects that are stuck getting completed and cheaper housing becoming available going ahead. Most housing projects are running one to two years or even more behind schedule because of the slowdown and the shortage of funds on account of elevated debt levels.
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Real estate mkt shows revival signs, grows 20%

Mumbai: Acouple of major real estate deals in April has raised expectations of a revival in the real estate market, estimated at Rs 10,000 crore. According to Confederation of Real Estate Developer’s Associations of India (CREDAI), the market is growing by 15% to 20% compared to last year, but less sanguine estimates also pitch a dip in growth rate of sales of major real estate companies by 82% and net profit by 89% during the fourth quarter of the financial year 2008-09, over the previous corresponding quarter, as per the BSE Realty Index.

Cement major Lafarge India has recently set up its new aggregates and concrete (A&C) office division in Bandra East, Mumbai, which is an additional space to the company’s existing office which is also based in Nariman Point, according to Lafarge India spokesperson. Recently, the National Stock Exchange (NSE) has chosen Kohinoor City in Kurla for office space, which is strategically located from its main office tower at BKC. According to Atul Modak, head – Kohinoor City Project, “NSE, along with its group companies has purchased about 80,000 sq ft at Rs 15,000 per sq ft for a total Rs 80 crore.” According to sources at JLLM, commercial leasing in Delhi, Gurgaon, Noida, Hyderabad, Chennai, Kolkata, Pune and Bangalore too have started witnessing about 5% to 10% increase in volumes.

According to Rajeev Piramal, executive vice-chairman, Peninsula Land Ltd (PLL), “There are signs of revival in the real estate market, especially Mumbai, which is our core market. We hope to see demand pick up further in the second half of the year. Along with the real estate prices, land prices are also getting aligned.”

Commercial leasing has picked up by 5% in volume terms in the first quarter of 2009-10, according to real estate consultant Jones Lang LaSalle Meghraj (JLLM). Driving this growth are corporates who are now seeking to set up additional offices that offer them better space at lower costs. However, this is much lower than the 10% to 15% growth the leasing market saw during Q1 of 2008-09 , according to Abhishek Kiran Gupta, head – research, JLLM.

According to a recent report from JLLM, “The cost arbitrage for those shifting from Nariman Point to BKC and Bandra is more in terms of quality of buildings than in rentals. For those shifting to Goregaon, the cost saving is more than 50%. Currently, the commercial leasing in BKC is an average of between Rs 225 to Rs 350, Bandra East is between Rs 150 to Rs 175 per sq ft and Goregaon is between Rs 70 to Rs 125 per sq ft.”

Residential demand too has picked up by 30% to 40% in the affordable segment since March 2009, according to CREDAI. Lalit Kumar Jain, chairman, Kumar Builders and vice-president, CREDAI, told FE, “Residential demand is up 30% to 40% in the mid-to-low income segment since March 2009, for residential apartments priced below Rs 30 lakh. This is due to dip in real estate prices by about 30% in certain pockets of the metros, apart from better sense of job security.” However, according to Gupta, there is only 5% demand increase in the luxury home segment.

Gupta said, “Capital values in many micro-markets have corrected sufficiently to bring homes within the purview of affordability.”…

Source : Financiale Express  21/05/09