The availability of debt capital in 2013 is likely to increase and the flow of equity capital will remain more or less stable, according to real estate consultancy Jones Lang Lasalle.

According to a statement from Ramesh Nair, Managing Director (West) Jones Lang LaSalle India, there is possibility of increase in overall transaction volume in the real estate segment.

With additional cuts in cash reserve ratio (CRR) and repo rates, these moves will infuse more liquidity into the system.

Cross-border capital will begin to make a gradual comeback in the coming year and cap rates for office and retail properties are likely to descend.

Investors will focus more on transparency, governance and liquidity before investing.

Given the on-going challenges that the Indian real estate sector faces on these fronts, even fewer development companies will be successful on the public equity markets.

Private equity deal volumes are likely to increase and there will be more merger and acquisition activity within the PE industry.

Insurance firms will start investing directly in low-risk, income producing office real estate. Investment bidders per property will increase, this time around with lower return expectations. Investment periods of funds will reduce from 5 years to 4 years.

After a lull of two years, next year banks are likely to start offering construction finance to residential projects with approvals.

The trend points towards most PE deals being structured to give the investor the first preference to cash flows. Most real estate PE investments will be focused on Tier I cities.

Regulatory authorities will increase their scrutiny of private fund raising offerings and closely monitor if the funds raised are being used for stated objectives.

rishikumar.vundi@thehindu.co.in

(This article was published on November 15, 2012)
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