Realty biz looks up again, investments pouring in
Major consolidation by way of mergers and acquisitions has become a prominent trend in the sector. Top deals include Blackstone, Canada and Pension Plan.
policies of the Centre like the Real Estate (Regulation and Development) Act (RERA), Goods and Services Tax (GST), Real Estate Investment Trusts (REITs), Benami Transactions (Prohibition) Amendment Act and the PM Awas Yojana.
These policies, he said, are bringing in higher levels of transparency, accountability, financial discipline, focus and efficiency into the sector which could only be dreamt of in the past. “Moreover, these reforms have opened up new avenues for growth. These are more than sufficient indicators to ensure country’s growth story and its positive repercussions on the sector,” he added.
According to Indian Brand Equity Foundation (IBEF)
REALTY REALITY
1. Blackstone report, the market size of the Indian real estate sector is expected to touch $180 billion by 2020 and is poised to grow at the rate of 30% over the next decade. The report says the number of Indians living in urban areas is slated to increase from 434 million in 2015 to 600 million by 2031. The housing sector alone is expected to contribute around 11% to India’s GDP by 2020.
“The increasing share of real estate in the country’s GDP will be supported by increased industrial activities, improving income levels and rapid urbanisation across cities. In terms of FDI equity inflows, real estate is the fourth largest sector in the country. The total FDI inflows in the sector were $24.67 billion between April 2000 and December 2017, which is 7% of the total FDI equity coming into the country during this period,” the report says.
“The sector witnessing most institutional investments at present is the commercial office real estate. Driven by rapid employment generation and the near possibility of the first REIT listings, Grade A office projects, IT parks and even logistics centres are currently yielding the levels of returns on investment which previously made the residen- tial asset class so attractive to investors,” said Anarock chairman Anuj Puri.
India needs investments to the tune of $4 trillion over next 5-6 years to implement various government schemes. The “Housing for all by 2022” initiative alone is likely to bring in $1.3 trillion investments into the residential sector by 2025. In this environment, institutional financing is gaining prominence.
Figures suggest that average investment per deal, particularly in commercial real estate, has increased by almost 3-4 times compared to 6-7 years ago. The rise of institutional investors will significantly improve levels the real estate sector and make it more structured and transparent, said a company official. Despite a rout in Wall Street, the Indian stock markets shrugged off any concerns by posting a 732-point rally on Friday to post the biggest one-day gain in 29 months and close the week at 34,733. The markets had gone loco during the week by trading on huge volatility in both directions. Surging crude oil prices are throwing the Indian economy out of gear as energy is an important factor for us. With crude oil prices at four-year highs, the global oil market is currently termed as “emotionally imbalanced”. With the Donald Trump administration determined to push down Iranian exports, the oil sanctions in November will be crucial for India and its economy. Currently, there is no oil supply shortage in the global markets but supply chains are being disrupted by oil producing countries due to the impending Iran sanctions. Our stock market view remains cautious in the short-term due to the rupee volatility, surging crude oil prices, stretched valuations and rising current account deficit. Equity investors should brace for more downgrades in the September 2018 quarterly earnings’ season, starting this week. We feel that the Nifty may decline and touch the 10,000-mark by mid-November. On a fundamental basis, we feel that Tata Elxsi is a good stock to invest in for portfolio investment in the tech space. India is one of the top destinations for IT companies delivering both on shore and offshore services to global clients. An entire gamut of new technologies has emerged in the social, mobility, analytics and cloud (SMAC) space, offering a whopping US$1 trillion opportunity for Indian IT companies. Cloud represents the largest opportunity followed by social media as one of the most lucrative segments witnessing extremely strong growth. The engineering research and development sector continues to be the fastest growing segment, driven by demand from global original equipment manufacturers. India has a rich digital ecosystem of start-ups, technology and service providers. Leading names like Flipkart, SnapDeal, MakemyTrip, Ola etc., have expanded the Indian ecosystem and this has thrown the door wide open for employees of these companies to start their own enterprises. IT spending by security and banking companies is also one of the segments expected to grow by over 9% in the next few years. Tata Elxsi is one of the leading providers of design and technology services for engineering products and solutions across the world. The company provides technology consulting, new product designs and solutions for emerging technologies such as cloud, big data analytics, mobility, virtual reality and artificial intelligence. Despite challenges, Tata Elxsi reported year on year growth of 15% in overall revenue and improvement in margins. Most analysts and fund managers expect the company to post over 20% revenue and 17% PAT over the next few years. The Tata Elxsi stock, currently quoting at Rs 972, is an attractive investment buy for an 18-month timeframe for a 50% price appreciation. Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.