India's real estate sector is again emerging as key hub for investment

India's real estate is back on the radar of global investors and institutions with the country emerging as the other significant investment option in the wake of China slowing down, said Henry Chin, head of research for Asia Pacific at property advisory firm CBRE.

"The Modi government has played the role of a very good catalyst and in the last 18 months, interest in India has been growing among occupiers and investors alike," said Chin. He cited the example of large institutional investors such as Blackstone, Brookfield and JP Morgan who have a presence in India now and are investing large sums of money in the Indian real estate. Recently, Chinese developer Wanda group also evinced interest in developing large projects in the country, Chin said. While the residential real estate market in India has seen slow growth over the last many quarters, the last one year was particularly good for the office leasing segment in the country.

Chin said leasing activity has been good so far this year and will continue to be strong in the second half of 2016. "Last year, Bengaluru was the strongest among all Asia Pacific markets in terms of office space leasing, and demand for the city is continuing to grow," he said.

The demand for office space, he said, is coming from the IT and BPO sectors as well as from banking, financial services and insurance (BFSI), pharma, engineering and automotive segments. There has been some contraction in office demand from the ecommerce of late but companies in that segment have taken up more logistics and warehousing space as businesses grow. "We are also noticing that a lot of projects in the industrial parks space that were shelved by builders for sometime now are coming back on track," said Chin. According to him, global investors and institutions are also taking note of the changing regulations in India, especially those relating to real estate investment trusts (REITs).

"Most people are talking about Indian REITs. We think there are multiple factors for the success of REITs in any market. I think India is 50% there at the moment," said Chin. "There are still a few things on the tax efficiency front and on the regulatory framework that need some work."

India has around 200 million sq ft of REIT-able space available. Earlier this week, the Securities and Exchange Board of India (Sebi) proposed further relaxed norms for REITs, specifically on related party transactions, and also suggested allowing REITs to invest more money in under construction projects. If the proposal is accepted, REITs will be able to invest up to 20% in under-construction projects compared with 10% currently allowed.

Chin said the other piece of regulation that people are talking about is the Real Estate Regulatory Act (RERA), which, when implemented fully, is likely to help augment foreign capital flow into the Indian residential real estate segment.

Source: PropertyatNeoDevelopers.Wordpress.Com

Developer's Credibility Matters in Uncertain Times

In the present times, when several projects get delayed, it is quintessential to double-check the reputation of the developer.

We are currently witnessing a market scenario wherein, inflation and interest rates will taper down even as the GDP growth rate picks up, and selective asset classes are becoming increasingly attractive for investment. Given that the highest ROI is typically gained from early investment in under-construction projects, an equally important variable is the reliability of the involved developers.

Credibility Matters:

Despite the faith that leading brands inspire, consumers in the market will verify multiple details in terms of features, durability and service. While investing in a real estate project, the developer's credibility is a very important concern.

A Real Opportunity?

Buyers are constantly falling prey to misleading promotions and schemes that are actually attractive only on paper. However, they manage to circumvent the alarm bells that should ring in any buyer's mind when confronted with a case of zero background and credibility, by using glossy advertisements and the hard-sell tactics of unscrupulous property agents.

Market Credentials:

Over how many years has the developer been active in the real estate space, specifically, in the development domain. This is an important yardstick to measure a player's overall experience, and is normally displayed on a developer's website.

Financial Strength:

Investors must always gain a proper understanding of the true financial status: If a developer is a listed entity, the group's financials are in the public domain and should be checked for profitability and dividend pay outs to stakeholders. If a developer is not listed, the group's sister companies (which may or may not be actively related to the real estate business) should be listed. Buyers and investors can and must also verify whether a developer has defaulted for loan payments to banks or other financial institutions, both, in a corporate and individual capacity.

Past Delivery Track Record:

Buyers and investors should necessarily extend their fact-finding and also go through various blogs and sites such as India Real Estate Forum, where home-buyers discuss various topics including developers' record of project delivery in the past. These blogs and sites often capture multiple issues, and many are cluttered with conflicting information and opinions, which can lead to further confusion. A few key aspects to be validated are: l Does the developer have a record of chronic project delivery delays?

Has the developer obtained occupancy certificates for his projects? Failure to do this is a completely unacceptable norm, and can be detected on relevant blogs and websites.l What has the overall customer experience been with regards to a developer's delivery of project?

Do you find recurring com plaints about the developer not providing specifications which he assured buyers of at the time of booking during actual delivery?

Capacity to Manage Multiple Projects:

The ability to launch and complete multiple projects as per scheduled timelines, is the hallmark of seasoned professionalism, adequate capitalization and sharp customer orientation. Regardless of external contractors, reputed and credible developers always have strong internal supervisory and execution teams which ensure that outsourced construction happens as per schedule.

Project Approvals and Home Loan Availability:

It is the responsibility of buyer to ask for copies of project approvals such as the commencement certificate. Even if the buyer does not need a home loan, availing one is a smart move.

Involvement of Credible Partners or Private Equity:

FIRMS A good way for home-buyers and investors to safeguard their interests while buying into a project, is to ensure that the developer has a credible partner such as a real estate fund or private equity player. This effectively means that the partner has done full due diligence on the project.

Corporate Governance and Family Disputes:

A developer involved in family disputes, legal battles and corporate governance issues, is a bad investment risk. Any court verdicts delivered against a developer, can impact his functioning and borrowing capability.

Alert: Buyback Guarantees and Assured Returns Offers:

When a developer offers a buyback deal or assured returns to home-buyers, it is a clear indication of financial stress driving a desperate marketing strategy.

Alert: Multiple Soft Pre-launches:

When developers soft launch or pre-launch a project, they are basically raising money for the project before all the required approvals are obtained. They are raising capital against the project that is legally not supposed to be sold.

Source: PropertyatNeoDevelopers.Wordpress.Com