In 2017 so far, global economic growth is strengthening, reflecting improving international trade, investment and manufacturing. As per Colliers International’s views on Asian markets, China, Hong Kong, Singapore, and probably Japan and India will achieve stronger economic growth in 2017 than most observers predicted six to nine months ago. Additionally, we noticed that the industrial and logistics sector witnessed increased activity in 2017 across the Asia-Pacific region. Manufacturers, logistics companies and industrial office developers are continuously looking for good long-term investment opportunities, particularly in countries such as India, Taiwan, Indonesia, Thailand and Philippines.
“The introduction of RERA is expected to be a game changer for the real estate industry, thus leading to the professionalisation and corporatisation of the industry- launch with all approvals, sanctioned building plans, last mile funding in place, etc. It will support players who are focused and committed to the business and paying attention to their processes and cost structures. It is now a discipline that is going to allow them to be successful. Further, logistics, warehousing and affordable housing is drawing the attention of both foreign and domestic investors who believe that these sectors can ensure healthy returns on investments”, says Gagan Randev, National Director, Capital Markets and Investment Services at Colliers International India.
As per Colliers Research, RERA and GST compliance will continue to remain a challenge for several developers towards the end of 2017. In H1 2017, there was a 17% decline in the number of new launches in comparison to H2 2016 with 40,600 new units introduced in the in prime cities. Mumbai and Bengaluru were at the forefront with 35% and 33% of total launches, respectively, while Chennai, Pune and NCR accounted for the remaining 13%, 10% and 9% share. Commercial leasing remained firm with about 29 million sq ft of gross office absorption YTD.
Indian residential real estate market was riddled by the implementation of long-awaited policies; however, commercial market looks firm. The number of residential launches does not seem to be improving in H2 2017 as most of the developers are engaged in adjusting their business processes in post-GST and RERA scenario. However, these policies will bring the much-needed transparency and corporate governance in the sector and have a long-term positive impact. “While the Real Estate developers are gearing up to adapt and thrive in this new economic environment, transparent pricing, timely completion of projects and certified real estate professionals should help in attracting much more investment and likely to transform the Real Estate market”, says Surabhi Arora, Senior Associate Director, Research, Colliers International India.
The demand for commercial office space and retail properties continues to drive fund flows with a significant contribution from institutional players focusing on Real Estate Investment Trust (REIT)-compliant portfolios and key commercial and business hubs. As a notable deal sealed in 2017, Xander Group Inc. and APG Asset Management NV purchased IT-SEZ in South Chennai for approximately USD350 million from a joint venture of Shriram Properties’ and Infrastructure Pvt. Ltd. and PE fund SUN-AREA Property Partners in May 2017. Considering the augmented FDI participation, significant investment announcements by various global players and REITs to become a reality shortly, the commercial sector in India should become more organised and transparent in coming years.
A few of the major deals concluded recently are:
• Investment of a combined sum of USD132 million by L&T Financial in project development by top developers, such as Ajnara India, Prateek Group and Paramount Group
• Virtuous Retail South Asia Pte. Ltd, a joint venture between alternative investments firm- Xander Group Inc. and Dutch pension fund APG, purchase of a retail property in Mohali (North Country Mall), Punjab for USD109 million from SUN-Apollo Real Estate Fund and Gumberg Retail
• ASK Property Investment Advisors’ investment of about USD31 million in ATS Infrastructures’ premium mixed-use project, Knights Bridge, located at Sector 124, Noida
• Kohlberg Kravis Roberts & Co Ltd (KKR) investment of USD31 million across a portfolio of affordable housing projects from Signature Global, a Gurgaon-based developer
For the rest of the year and in 2018, we expect the warehousing sector to emerge as the dark horse as increasing number of players, such as Warburg Pincus, Canadian Pension Plan Investment Board and Ascendas-Singbridge, are looking to disrupt the largely disorganised logistics market in the country. For instance, in April 2017, Singapore’s Ascendas-Singbridge Group acquired six warehouses for USD83 million from Mumbai-based logistics and supply chain company Arshiya Ltd.