‘Re­forms to Drive In­vest­ments in Realty’

Re­cent gov­ern­ment ini­tia­tives such as RERA, the im­ple­men­ta­tion of GST, REIT and de­mon­eti­sa­tion to have a pos­i­tive ‘trickle down’ ef­fect on the In­dian prop­erty sec­tor, says CBRE’s Calvin Frese, Jr.

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The gov­ern­ment’s re­cent pol­icy ini­tia­tives are ex­pected to drive higher foreign in­vest­ments in In­dia, and at­tract foreign as well as prom­i­nent na­tional play­ers across lead­ing sec­tors such as food man­u­fac­tur­ing, re­tail, high-tech and civil avi­a­tion. This may re­sult in a boost in de­mand for real es­tate across all seg­ments in­clud­ing of­fice, re­tail, hos­pi­tal­ity and lo­gis­tics, Calvin Frese, Jr, global group pres­i­dent, ge­ogra­phies and Steven Sw­erd­low, CEO-Asia Pa­cific, CBRE, told Kailash Babar, in an ex­clu­sive in­ter­ac­tion. Edited ex­cerpts:

In­dian real es­tate is go­ing through a lot of reg­u­la­tory de­vel­op­ments such as the Real Es­tate Reg­u­la­tory Act. How do you per­ceive this from foreign in­vestors’ con­text? Calvin Frese, Jr.: Over the past year, the In­dian gov­ern­ment has launched a num­ber of pol­icy ini­tia­tives in­clud­ing the im­ple­men­ta­tion of the Real Es­tate Reg­u­la­tor Act (RERA), the pro­posed im­ple­men­ta­tion of the Goods and Ser­vices Tax (GST), REIT (Real Es­tate In­vest­ment Trust) and the re­cent de­mon­eti­sa­tion drive. All of th­ese are to­wards cre­at­ing a con­ducive and trans­par­ent en­vi­ron­ment for at­tract­ing both con­sumers and in­vestors back to the real es­tate seg­ment.

Last year, the gov­ern­ment also re­laxed foreign di­rect in­vest­ment (FDI) norms across var­i­ous sec­tors, thereby pro­nounc­ing In­dia as the ‘most open econ­omy’. In our view, all th­ese steps taken by the gov­ern­ment to fa­cil­i­tate in­vest­ment are likely to have a pos­i­tive ‘trickle down’ ef­fect on the coun­try’s prop­erty sec­tor. We are al­ready see­ing the pos­i­tive ef­fects of this on the of­fice, re­tail and lo­gis­tics mar­ket. Last year, the of­fice mar­ket con­tin­ued its pos­i­tive growth mo­men­tum record­ing a record ab­sorp­tion of 43 mil­lion sq ft across key cities.

Be­fore at­tain­ing ma­tu­rity, what sort of trans­for­ma­tion In­dian prop­erty mar­ket will have to go through in the next few years? What are the changes that you would like to see? Steven Sw­erd­low: In­dia’s real es­tate mar­ket is ex­tremely dy­namic and there’s a lot of po­ten­tial for fur­ther growth and de­vel­op­ment. While a lot has al­ready been done to pro­vide the nec­es­sary thrust to the sec­tor, im­ple­men­ta­tion of th­ese var­i­ous ini­tia­tives is key to the fu­ture growth of the sec­tor. The var­i­ous pol­icy an­nounce­ments, key in­fra­struc­ture de­vel­op­ment plans across cities, smart cities mis­sion, ‘Hous­ing for All’ by 2022, GST and REITs are paving the way for In­dia to have a more open and in­vestor­friendly econ­omy. This is the first step to­wards be­com­ing a ma­ture mar­ket.

With REITs get­ting ap­proval, would In­dia emerge as a hot prop­erty mar­ket for global in­vestors? Steven Sw­erd­low: The most re­cent amend­ments to the REITs’ guide­lines cover var­i­ous as­pects and are likely to en­cour­age a more REIT-friendly en­vi­ron­ment. The main fo­cus is on min­imis­ing risk, in­creas­ing trans­parency, boost­ing RE in­vest­ment, rais­ing eq­ui­table au­ton­omy between var­i­ous stake­hold­ers, along with al­low­ing for higher REIT port­fo­lio di­ver­si­fi­ca­tion. At CBRE, what will be your fo­cus area go­ing for­ward? What are the fu­ture growth plans for In­dia? Calvin Frese, Jr.: We con­tinue to be fo­cused on build­ing brand CBRE, not just in In­dia but across the re­gion. Our pres­ence in the coun­try for over two decades, large client base has en­sured that we are the lead­ing real es­tate con­sul­tant here. Go­ing for­ward, we plan to ce­ment our lead­er­ship po­si­tion. In­dia’s or­gan­ised re­tail mar­ket presents a huge $75 bil­lion op­por­tu­nity for re­tail­ers, and there­fore, we have launched a com­pre­hen­sive strate­gic re­tail busi­ness ad­vi­sory ser­vice to cater to the ever-evolv­ing needs of or­gan­ised re­tail­ers.

With this new of­fer­ing, CBRE be­comes the only prop­erty con­sul­tancy to pro­vide busi­ness plan ad­vi­sory to re­tail­ers in In­dia. This is in ad­di­tion to the al­ready ex­ist­ing re­tail ad­vi­sory and trans­ac­tion ser­vices.

How is the In­dian prop­erty mar­ket placed in the cur­rent in­ter­na­tional sce­nario with re­spect to pric­ing and in­vest­ment trans­ac­tions? Calvin Frese, Jr.: Real es­tate con­tin­ues to be an at­trac­tive in­vest­ment op­tion for both do­mes­tic and in­ter­na­tional in­vestors. While there are some reg­u­la­tory gaps in cer­tain as­pects, over­all, real es­tate in In­dia is a seg­ment that still pro­vides the best long-term re­turn on in­vest­ment. In the of­fice seg­ment, com­pet­i­tive leas­ing or cap­i­tal prices, lower cost of op­er­a­tions and avail­abil­ity of skilled man­power make In­dia a pre­ferred out­sourc­ing hub. The same can be said of the re­tail seg­ment. The in­crease in the num­ber of global brands con­sid­er­ing In­dia for set­ting up of op­er­a­tions sig­ni­fies the pos­i­tive dy­nam­ics of the sec­tor. With the re­cent re­lax­ation in FDI norms, and REIT, In­dia’s in­vest­ment mar­ket is also be­com­ing pop­u­lar for foreign funds across real es­tate seg­ments.

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