18 October 2019 FLASH UPDATE INDIA REAL ESTATE
Plots & storeys India's weekly real estate news & numbers
HIGHLIGHTS
Prestige Estates Projects considering REIT for its Kid-centric homes can offer a 5-7% premium over income generating assets comfort homes: Ashiana Housing
Blackstone-owned Nexus, Prestige in talks to merge Bengaluru’s realty inventory will be cleared in 5 mall business years: CREDAI
Altico Capital submits resolution plan for full Xander sets up USD 250 mn industrial realty fund to repayment over five years acquire logistics assets
DLF sells 376 completed flats worth INR 7bn in DHFL seeks two-way carve-out of its wholesale Gurugram housing project; says real sector facing lending business demand slowdown Morgan Stanley, ex-employees' fund bet on India's Commercial realty leasing touches 47 million sq ft in warehousing space Jan-Sep 2019 Kotak Mahindra AMC, Axis AMC move Bombay HC Ascendas India to buy office building for INR 7.5bn against DHFL in Bengaluru MahaRERA to register developers, promoters' self- Realty market sentiments sink to demonetisation regulatory organizations period level NBCC submits revised plan to complete stalled SoftBank plans USD 5bn rescue financing for Jaypee projects WeWork Omaxe in talks to raise INR 4bn for Delhi project 84% of delayed residential projects in Delhi-NCR and Mumbai Emaar bullish on Indian realty sector; eyes joint venture projects, new markets
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JM FINANCIAL INSTITUTIONAL SECURITIES LIMITED India Real Estate 18 October 2019 We highlight this week’s top real estate news:
Prestige Estates Projects considering REIT for its income generating assets: The company’s rental income from retail and commercial properties is expected to reach INR 26bn in the next three-four years from INR 9.27bn exit rental income at present. “One way to reduce dependency on debt is to look at REIT and we are working towards it,” said Irfan Razack chairman Prestige Group. The company is also working towards India’s first retail REIT. “It can either be office or retail portfolio that will go first for REIT,” Razack said. Prestige Group has more than 36 million sq ft of under-construction and upcoming office properties. It also has six malls in the pipeline in addition to 10 operational retail assets. “We are in talks with global funds to float an over USD 300mn commercial platform with a development potential of 10-15 million sq ft,” Razack said. The fund raise will be a precursor to the REIT listing. (Source)
Blackstone-owned Nexus, Prestige in talks to merge mall business: Blackstone-owned Nexus Malls and Bengaluru-based Prestige Group are in initial talks to merge their mall businesses, said two people with knowledge of the matter, in a sign of consolidation in India’s competitive shopping-centre space. If the talks fructify, it will create the largest mall operator in the country and they added that the combined entity could be listed as a real estate investment trust (REIT) as part of the plans. (Source)
Altico Capital submits resolution plan for full repayment over five years: Altico Capital submitted its resolution plan to lenders as the steering committee led by SBI met the management. The company has proposed to repay in full in a staggered manner over the next five years, two people with the direct knowledge of the matter indicated. "The company believes in reviving its financials through asset monetisation as they bat for their expertise in dealing with real estate builders," said one of the persons. "The equity value should go up only when lenders are paid off, and that is how Alitco intends to do," said the executive present in the meeting. Altico's asset sales could immediately fetch at least INR 20.0bn as the company aims to sell some of its real estate projects. After the latest rating downgrades, some lenders recalled about INR 15.0bn worth of credit lines earlier committed to Altico, putting pressure on the non-bank lender to repay immediately. (Source)
DLF sells 376 completed flats worth INR 7bn in Gurugram housing project; says real sector facing demand slowdown: DLF said it has sold 376 ready-to-move-in luxury flats worth INR 7bn on the first day of the launch of its new housing project in Gurugram, even as the overall property market is facing a demand slowdown. The company has launched the second phase of its luxury residential project Ultima. The second phase of this project comprises ready-to-move-in 3-4 bedroom apartments, priced at INR 16mn onwards. DLF had launched 400 units in the first phase of the Ultima project which is spread over 22 acres (Source)
Commercial realty leasing touches 47 million sq ft in Jan-Sep 2019: Robust demand for office spaces has pushed commercial property leasing in the first three quarters of 2019 by 30% from a year ago taking it closer to entire 2018’s performance and making it certain that this year will surpass the peak touched last year. Driven by tech corporates-- accounting for about a third of the leasing activity--office space take-up touched 47 million sq ft in the first nine months as against entire 2018’s performance of 48.9 million sq ft, showed data from CBRE South Asia. With this, office leasing activity is now expected to touch its highest level ever, estimated to be over 60 million sq ft in 2019. (Source)
JM View: The leasing activity is estimated to hit a new peak of 60 million sq ft in 2019. The expected supply stands at c.160msf in over 300 projects across the 7 key cities which indicates a demand supply balance over the coming 3 years.
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Ascendas India to buy office building for INR 7.5bn in Bengaluru: Ascendas India Trust has entered into a forward purchase agreement (FPA) with Hyderabad-based Garden City Realty which owns the 7-acre land parcel on which the office tower is expected to come up. Ascendas will make milestone payments and will own the building upon full payment. A forward purchase deal is an agreement where the buyer pays an advance to the seller to buy the developed property at a future date. The advance is used to fund the construction, similar to the one in the residential sector where the buyer’s money is used to develop the project and handed over post completion. Such deals are gaining momentum in India as it helps global investors shift the risk of land acquisition, approvals and delivery on to local partners. (Source)
Realty market sentiments sink to demonetisation period level: The outlook for Indian real estate fell to a 42 low in the quarter to September from a preceding quarter, a level previously seen during the heightened uncertainty period of pre-election in the first quarter of 2014 and the demonetisation period, found a jointly conducted survey by industry lobby Ficci, National Real Estate Development Council (Nardeco) and real estate services firm Knight Frank. According to the above survey, the future sentiment score also dropped to an all-time low at 49 in Q3 2019. The outlook for the coming six months has also turned ‘pessimistic’ for the first time, a clear indication that the sector is under immense pressure. Drying credit flow to developers due to the NBFC crisis and slowing down of the economy has all negatively impacted the current sentiment scores,” said the survey. (Source)
SoftBank plans USD 5bn rescue financing for WeWork: SoftBank Group Corp. is in discussions to provide WeWork with roughly USD 5bn of rescue financing in an effort to salvage one of the Japanese conglomerate’s biggest investments. The funds will come directly from SoftBank, rather than its Vision Fund, according to a person familiar with the matter who asked not to be named because the talks are private. SoftBank, which already owns about one-third of WeWork, would not amass a majority of voting rights, though its stake would increase, the person said. Part of the package may include non-voting preferred stock. (Source)
84% of delayed residential projects in Delhi-NCR and Mumbai: JLL Research’s data indicates that the total number of residential units classified as delayed or stalled in the top seven cites stands at 4.54 lakh. However, 84 per cent of these units are present in two major metro cities of Delhi NCR (62%) and Mumbai (22%). The percentage share of rest of the cities is in single digit. The delay in project completion is concentrated in Delhi- NCR and Mumbai and is not a trend across all the top seven cities. In Delhi, around 3/4th of the residential units are delayed or stalled and one out of every three residential units in Mumbai falls in the same category. The slowdown in completion of projects is not across the entire spectrum of housing categories but significantly visible in upper-mid and premium categories. What is needed is perhaps a push from the government and funding agencies along with a strict code of conduct among developers that will improve the situation, the report said. (Source)
Kid-centric homes can offer a 5-7% premium over comfort homes: Ashiana Housing: Kid-centric homes meet the needs of today’s young working parents by providing societies which are well-equipped with the latest and advanced amenities. As both the parents are working, an increase in purchasing power allows them to invest in extra amenities, which promise constructive engagement and development of their kids. Buying a home with thoughtfully designed amenities for children is making the lives of working parents much easier and convenient. If executed in the right way, kid-centric homes definitely have the potential to become a full-fledged segment. We expect a 5-7% premium in this segment over comfort homes after 2-3 years. (Source)
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Bengaluru’s realty inventory will be cleared in 5 years: CREDAI: The city has witnessed a home absorption of 17,500 units in the first half of 2019, a 1% increase over the same period last year, as per data released by CREDAI (Confederation of Real Estate Developers’ Association of India). Bengaluru, almost on a par with Gurugram, has reported an uptick in the corporate real estate as well, accounting for 14 million sq. ft, of the country’s total absorption of 45 million sq ft during the first half of 2019, said CREDAI. Kishore Jain, president, CREDAI Bengaluru, said, “After a peak performance during 2003–06 period, when one of the years saw the numbers touching 50,000, the absorption numbers have declined to 35,000 levels in the last few years. However, we are seeing a slight improvement in the market, and outlook for the rest of the year should be good.” (Source)
Xander sets up USD 250 mn industrial realty fund to acquire logistics assets: Xander Investment Management has set up a USD 250mn industrial real estate venture to purchase assets in the high-growth logistics and e-commerce sectors at industrial corridors across major cities in India. Sponsored by Xander Group, the platform has raised capital from leading European institutional investors that have previously been limited partners in the firm’s sponsored opportunity funds. Xander Investment will be the investment advisor to the platform that will invest the capital in high-quality assets over the next 12 months. The platform has recently acquired two million sq ft of industrial assets in Mumbai and Chennai for USD 80mn. It is anchored by multinational and domestic corporations such as Amazon, Kerry Indev, DB Schenker and TVS Logistics. (Source)
DHFL seeks two-way carve-out of its wholesale lending business: Dewan Housing Finance Ltd (DHFL) is seeking to carve out its wholesale lending book into two parts to pay off its lenders, said a person familiar with the development. “The proposed resolution pitch that has been submitted to lenders, institutional creditors and non-convertible debenture holders has two deals. One wherein global stressed asset buyout fund Oak Tree Capital has offered to infuse INR 27bn as priority capital to fund last-mile projects. The other part of the carve-out will involve bringing in a long-term development manager for loans that have been offered to developers against land parcels. They have received separate bids from the Adani Group and Piramal Group for the same which involves capital infusion of nearly INR 10-12bn in the initial stage,” the person added. (Source)
Morgan Stanley, ex-employees' fund bet on India's warehousing space: Morgan Stanley and a fund management company set up by its former executives are getting aggressive in the country’s warehousing space. Morgan Stanley, which discontinued investing in the real estate sector a couple of years ago, has bought majority stakes in a warehousing developer and other such projects this year. Recently, Morgan Stanley Real Estate Investing (MSREI), the real estate investment management arm of Morgan Stanley Investment Management, purchased a controlling stake in warehousing project built by the Pragati Group in the National Capital Region (NCR) region. Morgan Stanley has also set up a platform with Bengaluru-based developer Puravankara Projects for industrial parks. (Source)
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Kotak Mahindra AMC, Axis AMC move Bombay HC against DHFL: Kotak Mahindra Asset Management and Axis Asset Management on Thursday moved the Bombay High Court seeking a direction to the crippled mortgage lender DHFL to disclose all its assets and liabilities. The petitioners also prayed for a temporary restraint on DHFL to prevent it from making further payments / disbursements to secured and unsecured creditors, except certain payments made on pro-rata basis to secured creditors. The court has granted four weeks’ time for the parties to file replies. Earlier this month, the court had restrained DHFL from making further payments/disbursements to any unsecured creditors until further orders. (Source)
MahaRERA to register developers, promoters' self-regulatory organizations: The Maharashtra Real Estate Regulatory Authority has proposed to register realty developers and project promoters’ Self-Regulatory Organization (SROs) with the authority. According to the regulator, this will help ensuring greater professionalism among realty developers, bring a certain level of consistency in their practices, enforcement of code of conduct and discourage fraudulent promoters. The registration of SRO shall be valid for a period of five years, the regulator said in a circular. The proposed SRO is expected to have at least 500 MahaRERA registered projects of their members and it has to be a group or association or federation of project promoters, which is a legal entity. Details of membership fees, code of conduct, duration and qualification of membership will be decided by the respective SROs. (Source)
NBCC submits revised plan to complete stalled Jaypee projects: The National Buildings Construction Corporation (NBCC) on Thursday submitted a revised proposal to complete the stalled projects of Jaypee Infratech. The proposal was later handed back to the NBCC counsel. The homebuyers' counsel urged the top court to share a copy of the NBCC proposal with them. Meanwhile, the Jaypee Group has moved the Supreme Court against the National Company Law Appellate Tribunal (NCLAT) order that barred its parent company Jaypee Associates from bidding for Jaypee Infratech (JIL). The realtor urged the SC hear its plea seeking to consider its own proposal on the project. The top court said it will hear the Jaypee Group plea on October 22, and extended the status quo on its insolvency proceedings till then. (Source)
Omaxe in talks to raise INR 4bn for Delhi project: Realty developer Omaxe is in advanced talks with private equity firms to raise over INR 4.0bn for its commercial project spread over 4.5 acres in Delhi’s Chandni Chowk, two persons familiar with the development said. Omaxe, in this public-private partnership (PPP) project with North MCD is developing a multi-level parking-cum-commercial centre at Gandhi maidan. The project is estimated to increase the parking capacity to over 2,400 car parks and 81 tourist buses. Apart from the private equity induction, the company is expected to fund the project through internal accruals of INR 2.5bn and customer advances of up to INR 4bn. Omaxe has already secured all the requisite permissions for the project, construction for which started in July and is expected to be completed by December 2021. (Source)
Emaar bullish on Indian realty sector; eyes joint venture projects, new markets: Bullish on Indian realty market, Dubai-based Emaar Properties on October 16 said it will continue to invest in the country's real estate space by developing its land bank and acquiring projects through joint ventures. The company, which aims to be a big player in India, plans to foray into two major property markets -- Mumbai and Pune -- and is also in talks with potential joint venture partners. Emaar is in the process of monetising non-core assets, including a hotel property in Jaipur, as it pursues aggressive growth plans while close to completing all existing projects. (Source)
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