Ashwini Sharma- Senior Director, Capital Markets & Investment Services, Colliers leading the conversation stated that the real-estate industry has witnessed many ups and downs, upsurge in terms of the land prices, sales pick up and private equity infusions across various asset classes. Also, there are newer funding and investment models which developers are keen on exploring.”
As per Sunil Agrawal- Founder & Managing Director, Black Olive Ventures Pvt. Ltd. there has been diversification into few new asset classes like logistics and data centers but, overall funding has mostly focused on residential or commercial real estate. Looking at a particular deal structure, there are pools of capital that are being raised at different expectations of the investors. Investors are happy to give money at 9-10% but they want safe investment and stabilized assets. On the other hand some are ready to lend at around 20-24% and willing to take the risk appetite of land acquisition. You could look at a plain vanilla deal or an equity kicker, fractional ownership is similar to a collective investment scheme.”
Santosh Agrawal- ED & CFO, Alpha Corp Development Private Limited expressed, “We have been involved in the development management model where the risk has been divided among the landowner and the developer. This ensures that the delivery happens according to the agreed parameter, and on time. With respect to the financial institution, development management model works well as the experienced professional run the show. It mitigates cost increase risk and funds and returns can be re-worked as per the changing needs. We have been doing this since 2003 and we have seen that wherever a development model has been adopted, the project has been completed on time and there is a less regulatory risk.”
Anuranjan Mohnot- Co-Founder & MD, Gruhas & Lumos Alternate Investment Advisors Pvt Ltd shared, “We have done multiple transactions in Bengaluru, Pune, Chennai, Ahmedabad, and Mumbai where the focus was to do equity transactions. Come at an early stage and provide an equitable solution to a project but in the last 6-7 years the kind of stress which real estate sector has produced has changed the entire philosophy of the most lenders in the country. There are hardly any equity providers in the country because most of the investors in India don’t have faith in giving money to a real-estate developer on equity terms. They are more comfortable in providing debt. What really needed is equity by reviving the confidence of the investors.”
Nihar Thanawala- Director, Motilal Oswal Alternate Real Estate added, “In 2013-14 NCR was 50% of the entire residential market of India. If you leave aside the fact that Mumbai has high capital value, today the NCR would be one of the largest markets. Going forward we will see NCR becoming a market where investors will will put certain percentage of capital on a year-to year basis. There will always be three or four partners with whom we will end up doing repeat business and the idea is to keep adding more as our book size grows.”
Sharing his perspective Kaushik Desai- Managing Partner, WSB Real Estate Partners stated, “Any investor will look at adjusted returns and project’s timely delivery. Financial closure of the project is very important. As per our investment thesis, the developer needs to bring in his own equity and exit is not only for investor but for the end customer as well with delivery of project. As an investor if we start looking at the history of any real estate market, we will not be able to invest in any geographies. We take in consideration the new trends, behaviours and developments in each market for investing decisions.”
Siddharth Batra- Advocate-On-Record, Supreme Court of India, Former Additional Advocate General, Haryana spoke about the role of NCLT in building investor confidence. “NCLT comes under the IBC code which was brought in 2016 when stresses were handled by the bank on their own. There have been cases such as Unitech, Supertech and many others where resolution has still not been achieved. With every stressed asset, there are difficulties because of the multiple stakeholders. Moreover, in cities like Gurugram, government authorities need to bring more clarity to master plan, development rights, land acquisition, byelaws etc. to avoid conflicts.”
IBC is still at a very nascent stage. Time is of the essence now. Once a project is started, there’s a timeline for delivery. One of the biggest problems have been the non-payment by allottees as per the payment schedule that brings financial distress to the projects. And the developer is held responsible for delay in project completion. This aspect gets overlooked in many litigation cases. -Siddharth Batra
It is about building a large franchise right around united assets classes rather than doing them opportunistically. Residential has had the inherent benefit of being a self-liquidating asset class which helps to achieve certain timelines. Certain asset classes may be lucrative, but may require more patient capital. Therefore it is a function of how returns stack up over a certain period of time and how you can play the cycles right. -Nihar Thanawala
As per an industry estimate, at least 1.5 lakh crore rupees is required to revive projects in Delhi NCR alone. It requires a lot of regulatory push to expedite the process of investments in these projects which unfortunately is not happening. There are multiple NBFCs or banks who are down-selling their stress books. These projects are viable and can be delivered within the next 2-3 years but need pumping in of last mile funding. -Anuranjan Mohnot
Tax laws have been built around manufacturing. Real estate is the most ignored and the least understood asset class. There are double or triple taxations. Real estate needs a different approach when it comes to litigation, tax laws and financing laws. In other countries, laws allow to launch bonds and get a tax concession. Indian bond market is not developed. Real estate fund has to go and solicit funds in their own individual network. -Kaushik Desai
New collaborative structures are being adopted by developers to ease the pressure on financial institutions such as development management model where one entity is focused on driving the sales and another entity is taking care of the approvals. -Sunil Agrawal
A thrust of capital is required in the sector. Certain metros have seen REITs because that segment has been established and settled. But, there are no proper laws or regulations for real estate, whether it’s IBC or bond market. SEBI has come up with three different regulations, but they need clarifications and have almost put the industry to a standstill. -Ashwini Sharma
The developers need patient capital that is commensurate with the project cycle. But, they also need to work out strategy to tap that capital by managing the project progress within those timelines. -Santosh Agrawal
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