The Hindu Business Line : More money in realty

Investors’ interest in the real estate sector has signalled the initial signs of revival with significant inflow from FIIs, according to Mr Neelabh Sanyal, Enam Securities.

Addressing Estate South 2009, a real estate conference organised by the Confederation of Indian Industry, Mr Sanyal said that since early this year there have been signs of recapitalisation in the sector.

Globally, too, this trend has been seen with real estate holding its own in fund raising as compared to other sectors.

Since the beginning of the current fiscal, real estate companies, particularly the top players, have raised over Rs 17,200 crore. Even at the peak periods earlier, the sector attracted Rs 10,000 crore through QIPs.

FIIs’ holding in the top four real estate companies such as DLF, Unitech, HDIL and India Bulls is over Rs 26,529 crore, Mr Sanyal said.

It was only after April this year the market had anticipated the revival as developers dropped prices. Earlier, they had been looking to fiscal support from the Government to rejuvenate the market.

A private equity player, Mr Ramesh T. Jogani, Managing Director and CEO, Indiareit Fund Advisors, said private equity funds have become circumspect after initially burning their fingers. A couple of years back they had invested enthusiastically in a wide range of segments and taken a hit on their investments in Tier II towns, hospitality and the entertainment sector. “They prematurely looked at large malls, tall buildings” and other grand projects even before the markets had matured.

This has led to private equity players acting more like moneylenders and demanding ‘preferred returns’ rather than partnering in projects.

Following the slowdown and the drop in sales, the markets in all the major cities are stabilising, particularly the residential market is seeing a revival, he said.

Mr Rahul Mallick, Managing Director, ICICI Home Finance Company, said that despite concerns over the credit flow to the sector, data show that there has been a ‘fair amount of money flow into the system.’

Retail mortgage finance has increased by 10 per cent over the last one year and as far as funding developers is concerned, the RBI data show that credit flow has increased by 50 per cent in the last one year, he said.

Orissa’s PPP in housing

The Orissa State Housing Board has called for bids from developers to participate in developing housing projects in PPP mode.

It has identified locations in 4.65 acres in Ranasinghpur Village and about 18 acres at Patrapada and Ranasinghpur to develop integrated residential township with 85 per cent devoted to residential space and 15 per cent to commercial space.

In the residential area, 20 per cent is to be earmarked for the economically weaker and low-income categories. It has floated separate bids for the two projects. The developer will handle the planning, designing, financing, construction, marketing, operation and maintenance.

The reserve price for the 4.65 acre property is set at Rs 39.11 crore and Rs 153 crore for the larger property.

The Request for Proposal documents can be obtained from the office of the Orissa State Housing Board from November 16. To qualify for the project applicants must have developed not less than 1.4 million sq.ft of residential space and 0.5 million sq.ft of commercial space in the last five years.

They must also have a tangible net worth of not less than Rs 100 crore in the last financial year. The last date for submitting the RFP bid document is January 5, 2010.

Workshop on sustainability reporting

The concern for sustainability is changing the way the construction and real estate sector conducts business. Access to capital, cost of capital and demand are all being influenced by the sustainability quotient of the project.

The Global Reporting Initiative (GRI), the United Nations Environment Programme Finance Initiative (UNEP-FI) Property Working Group and Cognito, a sustainability propagation advisory, are hosting a workshop on sustainability principles and reporting for the construction and real estate sector. The programme is being held on November 18 at Mumbai.

The workshop will share with the developers and asset owners how institutional investors are linking sustainability and investment, the areas of sustainability that asset developers should focus and the sustainability reporting trends.

Also, it will help participants sensitise GRI and the UNEP-FI to the factors prevalent in the Indian construction and real estate environment. The core idea is to assist formulation of a more relevant framework which is fair to the Indian construction industry.

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