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.

The Sunday Guardian - - & Comment Analysis -

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)


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.

H.S. Puri, Min­is­ter of State (IC), Min­istry of Hous­ing and Ur­ban Af­fairs, talks about the ini­tia­tives taken by the Cen­tre since May 2014 in the hous­ing and ur­ban sec­tors, dur­ing the launch of the Ut­tar Pradesh In­ter­na­tional Foun­da­tion, a new think tank, at the ITC Mau­rya in New Delhi on Tues­day.

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