FINANCE STRATEGIES RETHINKING LAST MILE FUNDING

BY Realty+

Despite the pandemic, the residential real estate market in Gujarat has remained steady with minimal number of stalled projects. The commercial segment as well has gained momentum over the last year with companies looking to expand in tier 2 cities such as Ahmedabad.

Piyush Gupta, Managing Director - Capital Markets and Investment Services India, Colliers remarked that Gujarat realty is drawing large investments for both commercial and residential sectors in the state. “Real estate sector has undergone positive structural changes and performance indicators reflect strong come back across the residential, office, industrial and logistics sector.”

Amit Bhagat, CEO & MD, ASK Property Investment Advisors Pvt. Ltd. expressed that real estate players are creating opportunities from capital. Explaining further he added, “With stricter regulations, banks are now primarily focused on lending working capital or construction finance. Capital allocation in this sector is the biggest challenge today especially when sales are slow. However, Gujarat has seen minimum number of stressed projects as most developers here are good at managing cash flows.”

Nilay Patel, Director / Partner, Deep Group Of Companies added, “Developers in Gujarat have about 20% of the land fund as a down payment in their pockets. Trust factor within Gujarat is so high across the channel partners, developers, buyers and investors that every player in the market has their own financier group to manage their working capital.”

Amit Goenka, MD & CEO, Nisus Finance stated, “Typically 18 to 20 billion dollars of FDI has been delegated to commercial real estate and some to warehousing. The amount of money in circulation or available for real estate is significantly large. Ahmedabad has been one of the big beneficiaries of these investments. With the existing global capital available, real estate industry of Gujarat should be more futuristic and envisage large scale projects, find the right partners and attract large private equity funding.”

Anuranjan Mohnot, Co-Founder & MD, Gruhas & Lumos Alternate Investment Advisors Private Limited said, “The developers in Ahmedabad follow the traditional way of funding and have their own equity in their projects. The developer’s focus on pre sales ensures that the construction cost is taken care of and last mile funding is available. In addition, the state has a better record in terms of approvals, minimizing construction delays. Only when it comes to corporate governances, things have to improve for a market like Gujarat.”

Rocky Israni, Founder & Managing Director, Pacifica Companies agreed, “If Gujarat real estate market needs to mature, we need to have better corporate governance and stop violating the regulatory processes and decrease cash component in transactions as is the practice with many industry players especially in smaller cities of the state. Such diversions are a deterrent for an investment cycle and investor confidence.”

EQUITY INVESTMENTS SCENARIO

The residential sector is witnessing tailwinds amid a significant rebound in sales momentum after a turbulent spell since the NBFC crisis in 2018, followed by the pandemic.

Amit Goenka shared, ““I am not a fan of equity investments, I don't think real estate can provide multiples in residential and if it can't then I would rather stick to credit or structure.”

Nilay Patel concurred, “It is unviable for anyone to put their money into equity for residential. Gujarat is a very safe destination, if one puts money in debt and can easily get it back from the market.”

Amit Bhagat said, “If there is governance and everything is in check, I would definitely bid on equity investing in Gujarat real estate. We need growth capital to match debts thus pushing the need for equity further. Cycles are getting shorter now so we will be back to low yields and equity.”

Rocky Israni affirmed, “Equity is expensive for developers and turns them complacent. Structured debt is what is replacing the conventional debt. It is advisable for cities like Ahmedabad to choose structured debt as it is a better product for developers in this city.”

As per Anuranjan Mohnot, “A lot of developers are now preferring equity even if it is expensive compared to debt, especially if it indicates positive graphs. So there is a huge demand. Equity is advisable in a growth phase because growth will need equity.”

GUJARAT REAL ESTATE MARKET HAS WITNESSED AN INCREASE IN CAPITAL VALUES FOR RESIDENTIAL AND COMMERCIAL PROPERTIES OWING TO THE SURGING DEMAND AMONG HOMEBUYERS AND BUSINESSES.

Tags : Finance Strategies Gujarat Investor Policies Piyush Gupta Managing Director Capital Markets and Investment Services India Colliers Amit Bhagat CEO & MD ASK Property Investment Advisors Pvt. Ltd Nilay Patel Director / Partner Deep Group Of Companies Amit Goenka MD & CEO Nisus Finance Anuranjan Mohnot Co-Founder & MD Gruhas & Lumos Alternate Investment Advisors Private Limited Rocky Israni Founder & Managing Director Pacifica Companies Equity Investments Real Estate