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Property
India
REIFBS 2011 conference key takeaways. This year’s REIFBS conference invited
eminent personalities representing various stakeholders to give their views on key issues
pertaining to the sector. Key takeaways include (1) robust sales continue in Tier 2 and
Tier 3 cities, (2) importance of ticket size along with per sq. ft rate in purchase
decisions, (3) investors’ view policy and regulation as short-term and inconsistent and
(4) regulatory risk increases real estate costs and developers risks leading them to
demand a higher share of returns versus financial investors.
Home buyer’s perspective – Tier 2 and 3 cities continue to witness robust demand
Panel discussions indicated that the slowdown in sales is a metro city phenomenon and Tier 2 and
Tier 3 cities are seeing robust demand primarily because prices are perceived to be in an affordable
range. Customers in metros are probably deferring purchases due to media reports of an imminent
price correction. Credibility of developers and total ticket size versus only per sq. ft. rate are
gaining importance as purchase criteria.
Developer’s perspective – cost of a project is way above its explicit land and construction cost
A few developers still treat customer advances as capital and even divert it from one project to
other in some cases to buy land. Developers believe that as they spend a lot of time and effort in
getting project approvals and also face significant uncertainty, the real costs are higher and believe
they deserve a higher share of the returns versus financial investors. Developers were also of the
view that reducing prices in existing projects is difficult as existing investors / buyers will not like
that and hence reduce prices in new projects or negotiate one-to-one.
Investor’s perspective – policy is short term and inconsistent
Foreign investors feel that policy and regulation is both short term and inconsistent which makes it
difficult to evaluate all risks while investing. India lacks a market for REITs and RMFs which can
both attract capital and make it easier for investors to exit projects. Many people in Tier 2/3 cities
want to invest in metros and some funds have been able to pool their capital. A lot of investor
money came in during 2007, which is still locked in several projects due to inadequate exit routes.
Investors are also seeking “equity-like” returns with “debt-like” risks, a clear sign that balance of
power has shifted to capital providers versus developers.
Retail properties – revenue share is becoming the norm but success still to be determined
More and more mall owners are pushing for revenue sharing arrangements but some articulated a
fear of lack of honesty among retailers while disclosing their revenues. Though some owners
constantly monitor all transactions, some retailers feel that this is unnecessary interference since no
retailer will put their brand and reputation at risk in order to save a bit of money.
Remain selective – Sobha, Oberoi and Phoenix Mills are our top picks
We continue to recommend a selective approach as (1) funding is still constrained and our
discussion with companies and other sector participants leads us to believe that raising
equity at the entity level remains a near-impossible task while raising debt has also
become more difficult and effective borrowing costs have increased, (2) impact on
developers and consequently prices could be felt with a lag (coming festive season in
3QFY12E could be critical) and (3) company specific risks continue to remain high. Oberoi,
Phoenix and Sobha are our top picks as we believe they are relatively insulated (Oberoi –
net cash, Phoenix – retail, Sobha – Bengaluru residential) and have potential upside
(Oberoi – NAV accretive land purchases, Phoenix – three mall openings in FY2012E and
Sobha – launch of large projects in Bengaluru and Gurgaon)
Session1: Indian real estate market – a peek beyond the next turn
Panelists: Pradeep Jain (Parsvnath Developers), Jai Mawani (Price Waterhouse Coopers),
Rahul Anand (Portman Holdings), Dharmesh Jain (Nirmal Lifestyle), D. R. Dogra (CARE
Ratings), Anita Arjundas (Mahindra Lifespace Developers), Firdose Vandrevala (Hirco
Developments), JC Sharma (Shobha Developers), Ramesh Jogani (INDIAREIT Fund Advisors),
Ashutosh Limaye (Jones Lang LaSalle).
India has seen 12 interest rate hikes in this cycle to date but real estate prices are largely
resilient. Main concern of foreign investors include (1) a perceived or real lack of
transparency and (2) need to partner with local players as they cannot aggregate land
themselves. Demand exists at particular price points and we need to wait and see who
blinks first on prices - the developer or consumers.
Apart from cyclical factors, the next growth triggers could potentially be – (1) FDI in retail
which will benefit other real estate too, (2) investment in Tier 2/3 cities where market
continues to be vibrant, (3) investment in building social infrastructure (schools, colleges
and hospitals) and (4) development along the Delhi-Mumbai corridor.
Session 2: What will trigger the next wave of demand in real estate?
Panelists: Sandeep Kotak (Kotak Mahindra Bank), Jonathan Yap (Ascendas Property Fund
Trustee), Boman Irani (Rustomjee), Santosh Naik (Disha Direct), Pranay Vakil (Knight Frank
India), Sandeep Runwal (Runwal Group), Mayur Shah (Marathon Group), Getambar Anand
(ATS Infrastructure), Jaxay Shah (Savvy Infra).
There is no slowdown in sales across India as a whole where average prices are in the
range of Rs3,500-5,500/sq. ft. The next wave in real estate will be in Tier 2 and Tier 3
cities but the key challenge is that mortgage financiers are unwilling to finance purchases
given the lack of proper income documentation. Nevertheless, people borrow from
money lenders and buy property; the panel was of the view that banks could rethink on
this policy as default rates are very low.
In Tier 1 cities, demand is subdued as (1) interest rate hikes have raised monthly
installments and also lowered purchasing power, (2) there is skepticism on the ability of
developers to deliver, (3) with the media highlighting an imminent price correction,
buyers continue to wait, (4) rupee depreciation has also made it expensive for NRIs to buy
property in India and (5) a falling stock market has potentially negatively impacted
demand.
Session 3: Social Infrastructure in India
Panelists: Rajgopal Nogja (Lavasa Corporation), Anandjit Sunderaj (KARVY Realty), Pankaj
Kapoor (Liases Foras Real Estate Rating and Research), Parkash Challa (SSPDL), Saumyajit Roy
(Jones Lang Lasalle).
Developers are willing to give land free to people who want to setup social infrastructure
in their townships as this increases value of their residential and commercial properties.
Session 4: Will the industry become organized with best financial practices or
will it remain rocky and unpredictable for investors?
Panelists: Ashok Kumar (Cresa Partners), Anil Kumar Pandit (Mumbai International Airport),
Punit Saxena (UTI Technology and Infrastructure Services), Akash Deep Jyoti (CRISIL), Amit
Bhagat (ASK Property Investment Advisors), Thirumal Govindraj (CB Richard Ellis).
Developers treat customer advances as capital and divert it from one project to other and
in even to purchase land. In some countries, these advances are put in escrow accounts
to avoid such diversions. Diversion for land purchases creates an asset liability mismatch
as advances are short term in nature and land is a long term investment..
During boom time, developers were not worried about customer satisfaction and
accountability but with the current slowdown these things are becoming increasingly
important.
One key dynamic in funding real estate is a tussle between the developer and the fund
over who brings more to the table. Though the fund provides capital, the developer has
to juggle so many loopholes in order to sanction a project he often feels that he deserves
a bigger share in the profits.
Session 5: Slowdown in sales and poor financing environment – What is keeping
developers ticking?
Panelists: Sunny Bijlani (Supreme Universal), Kaustuv Roy (Cushman and Wakefield), Vijay
Mirchandani (Mirchandani Group), Kruti Jain (Kumar Urban Development), Dipesh Bhagtani
(Jaycee Homes).
Though sales have slowed down in metros, Tier 2/3 cities continue to be robust.
Demand remains healthy for almost-complete and ready to move in properties.
Quoted prices are theoretical and a 10-15% discount while negotiating is often seen to
move sales.
Session 6: Is there a case for total overhaul of the regulatory framework?
Panelists: Paras Gundecha (Gundecha Group), Deepak Garodia (Dosti Group), Pankaj Bajaj
(Eldeco Infrastructure and Properties), Brijesh Bhanote (The 3C company), Shrikant P.
Paranjape (Paranjape Schemes), Rohit Gera (Gera Developers).
In Pune, the government has allowed small developments without any approvals given
that the architect does his proper checks.
Regulation has to be brought in to streamline the approval process and to bring in
continuity of policy. People should be accountable to the builders’ community as well
who invest in projects and are exposed to policy changes such as what happened with
SEZ tax exemptions.
Session 7: Exit avenues in commercial real estate
Panelists: Anurag Mehrotra (Beekman Helix India Consulting), Ruchir Sinha (Nishith Desai
Associates), Apurva Muthalia (IL&FS), Ranjit Naiknavare (Naiknavare Developers), Mitesh
Agarwal (NV India Real Estate Fund), Sunil Rokale (ASK Property Investment Advisors).
LRD is one way to exit commercial projects but India lacks other vehicles such as REITs
(Real Estate Investment Trusts) and RMFs (Real Estate Mutual Funds).
Commercial assets have a 5-10 year investment cycle and in the long term can give better
returns than residential properties but they lock up capital for a long time. So commercial
projects need constant source of organized capital.
Session 1: Have real estate funds moved to the other extreme?
Panelists: Peter Mitchell (APREA), Ritesh Vohra (IIML Asset Advisors), N. Sridhar (DB Realty),
Sandeep Menon (SARE Group), Vikas Chimakurthy (Kotak Realty Fund).
Contrary to the boom period in 2007, the power balance has shifted from the developer
to the fund managers. Funds are now looking at equity type of investment with debt type
returns where both upside as well as downside are capped. Funds are securing returns
through coupon payments and minimum return guarantees.
This is tough market to raise funds and investors who had invested in the boom time still
have their capital locked in projects. Issues with corporate governance, regulatory
uncertainty, scams and graft are making potential investors skeptical.
Many international funds have emerging market allocations which mean that the sector
will still get some capital though not as much as it can potentially attract. Real estate in
many other countries is considered an asset class in itself along with equities and fixed
income instruments.
Session 2: Alternate asset classes that can weather the current slowdown
Panelists: Uttam Dave (Interglobe Hotels), Navneet Bali (Duet India Hotels), Rajiv Sharma
(Intercontinental Hotels), Sanjay Sethi (Berggruen Hotels), Keshav Baljee (Royal Orchid
Hotels), Param Kannampilly (Concept Hospitality), Amit Nagpal (Hyatt).
Within real estate, hotels, hospitals, schools and hostels can be considered as alternate
asset classes. They often weather recession better than the residential and commercial
segment.
Hotels are very capital intensive which crease huge entry barriers. These are very long
term investments as theoretically the life of a hotel could be as much as 100 years.
Though India is undersupplied, micro markets in metros are oversupplied.
Hotels are inflation-proof investments. India is oversupplied in luxury segment while a
shortage exits in the budget and mid income hotel segments. Due to this skew in supply,
Indian hotels are considered to be among the costliest in the world on a per capita
income basis.
Schools can also give high returns but it is difficult for people to attract investments in
this. Demand for hostels are also going up as more and more people come to cities to
study.
Session 3: Managing project risks
Panelists: Dr. P. S. Rana (IIUDC), Rajesh Muthreja (HUL), Mahesh Mudda (NCCL), Prakash
Ingle (J. P. Morgan Asset Management Global Real Estate), Priyakant Amin (Convention
Hotels), Bimal Desai (DSP Design Associates), Ajay Malhan (Jones Lang LaSalle).
Real estate is not a perfect market as the there is disproportionate risk distribution among
different stakeholders. Biggest risk is discretionary powers with government agencies.
Session 4: Catching the pulse of retail real estate
Panelists: Amit Jatia (Hard Castle Restaurants), Timothy Eynon (Omesa Universal), Pattabhi
Rama Rao (Cookie Man), J. P. Biswas (Sheth Developers), Rahul Vira (Gili India).
Many malls are now insisting on revenue sharing versus a fixed lease rate though a mall
owner often is not sure of whether the retailer is being totally upfront about his
collections.
Session 5: Sustainable green buildings
Panelists: Gurmit Singh Arora (Rajco Metal Industries), Priya Vakil (Educated Environments),
Syed Mohammad Beary (Beary’s Group), Karan Grover (Karan Grover and Associates), M.
Selvaraju (LEAD Consultancy and Engineering Services), Prashant Khandelwal (Mayuresh
Group).
Green buildings are cost effective over its lifecycle though initial cost is higher compared
with conventional buildings. They have lower operational expenses through consuming
lesser electricity and saving water. Some studies put the payback period of the extra
investment at less than three years depending on the type of building constructed (type
of LEAD certification).
The key to drive this is to focus on the potential savings as many still think green buildings
as costly and take more time to construct.
About 29% of electricity consumption in India is by buildings and so, from a policy level,
it makes sense to give a boost to this segment to reduce energy costs. Boost can be give
through tax incentive or through giving higher FSI. A lot of energy can be saved through
passive strategies such as proper orientation of building, location of courtyard etc.
Session 6: Capital flows: Deciphering the real market sentiment
Panelists: Sorabh Jain (Sun-Apollo Real Estate Advisors), Shashi Kumar (Birla Sunlife AMC),
Bobby Parikh (BMR Advisors), Pankaj Jaju (Enam Securities), Harvesp Mehta (Motilal Oswal
Private Equity), Darshan Gangolly (Sunteck Realty), Nikunj Sanghvi (Veena Developers).
Huge pent up demand exists in the market and people are now concerned more about
the credibility of the developer ticket size and less about per-square-feet rate and.
Customer aspirations are changing and they want better quality, access to amenities and
proper infrastructure.
People in Tier 2 cities such as Lucknow and Kanpur also want to invest in Mumbai market
to benefit from potential appreciation here but they don’t have enough capital
individually to buy high-end apartments. Some funds have been able to raise money there
at smaller investment sizes to invest in metro cities. General consensus is that there are
huge potential gains in real estate investments.
Customers should do proper due diligence before buying a house. Some easy ways are (1)
check for all banks are willing to lend since the quality of the banks can give confidence
in the projects and (2) check if any PE has invested as the PE will ensure that the project
gets completed without funding issues. Also, often, some banks give better lending rates
for buying houses in certain projects and this can be considered as a proxy for projects
quality.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Property
India
REIFBS 2011 conference key takeaways. This year’s REIFBS conference invited
eminent personalities representing various stakeholders to give their views on key issues
pertaining to the sector. Key takeaways include (1) robust sales continue in Tier 2 and
Tier 3 cities, (2) importance of ticket size along with per sq. ft rate in purchase
decisions, (3) investors’ view policy and regulation as short-term and inconsistent and
(4) regulatory risk increases real estate costs and developers risks leading them to
demand a higher share of returns versus financial investors.
Home buyer’s perspective – Tier 2 and 3 cities continue to witness robust demand
Panel discussions indicated that the slowdown in sales is a metro city phenomenon and Tier 2 and
Tier 3 cities are seeing robust demand primarily because prices are perceived to be in an affordable
range. Customers in metros are probably deferring purchases due to media reports of an imminent
price correction. Credibility of developers and total ticket size versus only per sq. ft. rate are
gaining importance as purchase criteria.
Developer’s perspective – cost of a project is way above its explicit land and construction cost
A few developers still treat customer advances as capital and even divert it from one project to
other in some cases to buy land. Developers believe that as they spend a lot of time and effort in
getting project approvals and also face significant uncertainty, the real costs are higher and believe
they deserve a higher share of the returns versus financial investors. Developers were also of the
view that reducing prices in existing projects is difficult as existing investors / buyers will not like
that and hence reduce prices in new projects or negotiate one-to-one.
Investor’s perspective – policy is short term and inconsistent
Foreign investors feel that policy and regulation is both short term and inconsistent which makes it
difficult to evaluate all risks while investing. India lacks a market for REITs and RMFs which can
both attract capital and make it easier for investors to exit projects. Many people in Tier 2/3 cities
want to invest in metros and some funds have been able to pool their capital. A lot of investor
money came in during 2007, which is still locked in several projects due to inadequate exit routes.
Investors are also seeking “equity-like” returns with “debt-like” risks, a clear sign that balance of
power has shifted to capital providers versus developers.
Retail properties – revenue share is becoming the norm but success still to be determined
More and more mall owners are pushing for revenue sharing arrangements but some articulated a
fear of lack of honesty among retailers while disclosing their revenues. Though some owners
constantly monitor all transactions, some retailers feel that this is unnecessary interference since no
retailer will put their brand and reputation at risk in order to save a bit of money.
Remain selective – Sobha, Oberoi and Phoenix Mills are our top picks
We continue to recommend a selective approach as (1) funding is still constrained and our
discussion with companies and other sector participants leads us to believe that raising
equity at the entity level remains a near-impossible task while raising debt has also
become more difficult and effective borrowing costs have increased, (2) impact on
developers and consequently prices could be felt with a lag (coming festive season in
3QFY12E could be critical) and (3) company specific risks continue to remain high. Oberoi,
Phoenix and Sobha are our top picks as we believe they are relatively insulated (Oberoi –
net cash, Phoenix – retail, Sobha – Bengaluru residential) and have potential upside
(Oberoi – NAV accretive land purchases, Phoenix – three mall openings in FY2012E and
Sobha – launch of large projects in Bengaluru and Gurgaon)
Session1: Indian real estate market – a peek beyond the next turn
Panelists: Pradeep Jain (Parsvnath Developers), Jai Mawani (Price Waterhouse Coopers),
Rahul Anand (Portman Holdings), Dharmesh Jain (Nirmal Lifestyle), D. R. Dogra (CARE
Ratings), Anita Arjundas (Mahindra Lifespace Developers), Firdose Vandrevala (Hirco
Developments), JC Sharma (Shobha Developers), Ramesh Jogani (INDIAREIT Fund Advisors),
Ashutosh Limaye (Jones Lang LaSalle).
India has seen 12 interest rate hikes in this cycle to date but real estate prices are largely
resilient. Main concern of foreign investors include (1) a perceived or real lack of
transparency and (2) need to partner with local players as they cannot aggregate land
themselves. Demand exists at particular price points and we need to wait and see who
blinks first on prices - the developer or consumers.
Apart from cyclical factors, the next growth triggers could potentially be – (1) FDI in retail
which will benefit other real estate too, (2) investment in Tier 2/3 cities where market
continues to be vibrant, (3) investment in building social infrastructure (schools, colleges
and hospitals) and (4) development along the Delhi-Mumbai corridor.
Session 2: What will trigger the next wave of demand in real estate?
Panelists: Sandeep Kotak (Kotak Mahindra Bank), Jonathan Yap (Ascendas Property Fund
Trustee), Boman Irani (Rustomjee), Santosh Naik (Disha Direct), Pranay Vakil (Knight Frank
India), Sandeep Runwal (Runwal Group), Mayur Shah (Marathon Group), Getambar Anand
(ATS Infrastructure), Jaxay Shah (Savvy Infra).
There is no slowdown in sales across India as a whole where average prices are in the
range of Rs3,500-5,500/sq. ft. The next wave in real estate will be in Tier 2 and Tier 3
cities but the key challenge is that mortgage financiers are unwilling to finance purchases
given the lack of proper income documentation. Nevertheless, people borrow from
money lenders and buy property; the panel was of the view that banks could rethink on
this policy as default rates are very low.
In Tier 1 cities, demand is subdued as (1) interest rate hikes have raised monthly
installments and also lowered purchasing power, (2) there is skepticism on the ability of
developers to deliver, (3) with the media highlighting an imminent price correction,
buyers continue to wait, (4) rupee depreciation has also made it expensive for NRIs to buy
property in India and (5) a falling stock market has potentially negatively impacted
demand.
Session 3: Social Infrastructure in India
Panelists: Rajgopal Nogja (Lavasa Corporation), Anandjit Sunderaj (KARVY Realty), Pankaj
Kapoor (Liases Foras Real Estate Rating and Research), Parkash Challa (SSPDL), Saumyajit Roy
(Jones Lang Lasalle).
Developers are willing to give land free to people who want to setup social infrastructure
in their townships as this increases value of their residential and commercial properties.
Session 4: Will the industry become organized with best financial practices or
will it remain rocky and unpredictable for investors?
Panelists: Ashok Kumar (Cresa Partners), Anil Kumar Pandit (Mumbai International Airport),
Punit Saxena (UTI Technology and Infrastructure Services), Akash Deep Jyoti (CRISIL), Amit
Bhagat (ASK Property Investment Advisors), Thirumal Govindraj (CB Richard Ellis).
Developers treat customer advances as capital and divert it from one project to other and
in even to purchase land. In some countries, these advances are put in escrow accounts
to avoid such diversions. Diversion for land purchases creates an asset liability mismatch
as advances are short term in nature and land is a long term investment..
During boom time, developers were not worried about customer satisfaction and
accountability but with the current slowdown these things are becoming increasingly
important.
One key dynamic in funding real estate is a tussle between the developer and the fund
over who brings more to the table. Though the fund provides capital, the developer has
to juggle so many loopholes in order to sanction a project he often feels that he deserves
a bigger share in the profits.
Session 5: Slowdown in sales and poor financing environment – What is keeping
developers ticking?
Panelists: Sunny Bijlani (Supreme Universal), Kaustuv Roy (Cushman and Wakefield), Vijay
Mirchandani (Mirchandani Group), Kruti Jain (Kumar Urban Development), Dipesh Bhagtani
(Jaycee Homes).
Though sales have slowed down in metros, Tier 2/3 cities continue to be robust.
Demand remains healthy for almost-complete and ready to move in properties.
Quoted prices are theoretical and a 10-15% discount while negotiating is often seen to
move sales.
Session 6: Is there a case for total overhaul of the regulatory framework?
Panelists: Paras Gundecha (Gundecha Group), Deepak Garodia (Dosti Group), Pankaj Bajaj
(Eldeco Infrastructure and Properties), Brijesh Bhanote (The 3C company), Shrikant P.
Paranjape (Paranjape Schemes), Rohit Gera (Gera Developers).
In Pune, the government has allowed small developments without any approvals given
that the architect does his proper checks.
Regulation has to be brought in to streamline the approval process and to bring in
continuity of policy. People should be accountable to the builders’ community as well
who invest in projects and are exposed to policy changes such as what happened with
SEZ tax exemptions.
Session 7: Exit avenues in commercial real estate
Panelists: Anurag Mehrotra (Beekman Helix India Consulting), Ruchir Sinha (Nishith Desai
Associates), Apurva Muthalia (IL&FS), Ranjit Naiknavare (Naiknavare Developers), Mitesh
Agarwal (NV India Real Estate Fund), Sunil Rokale (ASK Property Investment Advisors).
LRD is one way to exit commercial projects but India lacks other vehicles such as REITs
(Real Estate Investment Trusts) and RMFs (Real Estate Mutual Funds).
Commercial assets have a 5-10 year investment cycle and in the long term can give better
returns than residential properties but they lock up capital for a long time. So commercial
projects need constant source of organized capital.
Session 1: Have real estate funds moved to the other extreme?
Panelists: Peter Mitchell (APREA), Ritesh Vohra (IIML Asset Advisors), N. Sridhar (DB Realty),
Sandeep Menon (SARE Group), Vikas Chimakurthy (Kotak Realty Fund).
Contrary to the boom period in 2007, the power balance has shifted from the developer
to the fund managers. Funds are now looking at equity type of investment with debt type
returns where both upside as well as downside are capped. Funds are securing returns
through coupon payments and minimum return guarantees.
This is tough market to raise funds and investors who had invested in the boom time still
have their capital locked in projects. Issues with corporate governance, regulatory
uncertainty, scams and graft are making potential investors skeptical.
Many international funds have emerging market allocations which mean that the sector
will still get some capital though not as much as it can potentially attract. Real estate in
many other countries is considered an asset class in itself along with equities and fixed
income instruments.
Session 2: Alternate asset classes that can weather the current slowdown
Panelists: Uttam Dave (Interglobe Hotels), Navneet Bali (Duet India Hotels), Rajiv Sharma
(Intercontinental Hotels), Sanjay Sethi (Berggruen Hotels), Keshav Baljee (Royal Orchid
Hotels), Param Kannampilly (Concept Hospitality), Amit Nagpal (Hyatt).
Within real estate, hotels, hospitals, schools and hostels can be considered as alternate
asset classes. They often weather recession better than the residential and commercial
segment.
Hotels are very capital intensive which crease huge entry barriers. These are very long
term investments as theoretically the life of a hotel could be as much as 100 years.
Though India is undersupplied, micro markets in metros are oversupplied.
Hotels are inflation-proof investments. India is oversupplied in luxury segment while a
shortage exits in the budget and mid income hotel segments. Due to this skew in supply,
Indian hotels are considered to be among the costliest in the world on a per capita
income basis.
Schools can also give high returns but it is difficult for people to attract investments in
this. Demand for hostels are also going up as more and more people come to cities to
study.
Session 3: Managing project risks
Panelists: Dr. P. S. Rana (IIUDC), Rajesh Muthreja (HUL), Mahesh Mudda (NCCL), Prakash
Ingle (J. P. Morgan Asset Management Global Real Estate), Priyakant Amin (Convention
Hotels), Bimal Desai (DSP Design Associates), Ajay Malhan (Jones Lang LaSalle).
Real estate is not a perfect market as the there is disproportionate risk distribution among
different stakeholders. Biggest risk is discretionary powers with government agencies.
Session 4: Catching the pulse of retail real estate
Panelists: Amit Jatia (Hard Castle Restaurants), Timothy Eynon (Omesa Universal), Pattabhi
Rama Rao (Cookie Man), J. P. Biswas (Sheth Developers), Rahul Vira (Gili India).
Many malls are now insisting on revenue sharing versus a fixed lease rate though a mall
owner often is not sure of whether the retailer is being totally upfront about his
collections.
Session 5: Sustainable green buildings
Panelists: Gurmit Singh Arora (Rajco Metal Industries), Priya Vakil (Educated Environments),
Syed Mohammad Beary (Beary’s Group), Karan Grover (Karan Grover and Associates), M.
Selvaraju (LEAD Consultancy and Engineering Services), Prashant Khandelwal (Mayuresh
Group).
Green buildings are cost effective over its lifecycle though initial cost is higher compared
with conventional buildings. They have lower operational expenses through consuming
lesser electricity and saving water. Some studies put the payback period of the extra
investment at less than three years depending on the type of building constructed (type
of LEAD certification).
The key to drive this is to focus on the potential savings as many still think green buildings
as costly and take more time to construct.
About 29% of electricity consumption in India is by buildings and so, from a policy level,
it makes sense to give a boost to this segment to reduce energy costs. Boost can be give
through tax incentive or through giving higher FSI. A lot of energy can be saved through
passive strategies such as proper orientation of building, location of courtyard etc.
Session 6: Capital flows: Deciphering the real market sentiment
Panelists: Sorabh Jain (Sun-Apollo Real Estate Advisors), Shashi Kumar (Birla Sunlife AMC),
Bobby Parikh (BMR Advisors), Pankaj Jaju (Enam Securities), Harvesp Mehta (Motilal Oswal
Private Equity), Darshan Gangolly (Sunteck Realty), Nikunj Sanghvi (Veena Developers).
Huge pent up demand exists in the market and people are now concerned more about
the credibility of the developer ticket size and less about per-square-feet rate and.
Customer aspirations are changing and they want better quality, access to amenities and
proper infrastructure.
People in Tier 2 cities such as Lucknow and Kanpur also want to invest in Mumbai market
to benefit from potential appreciation here but they don’t have enough capital
individually to buy high-end apartments. Some funds have been able to raise money there
at smaller investment sizes to invest in metro cities. General consensus is that there are
huge potential gains in real estate investments.
Customers should do proper due diligence before buying a house. Some easy ways are (1)
check for all banks are willing to lend since the quality of the banks can give confidence
in the projects and (2) check if any PE has invested as the PE will ensure that the project
gets completed without funding issues. Also, often, some banks give better lending rates
for buying houses in certain projects and this can be considered as a proxy for projects
quality.
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