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Integrated Townships Top Asset Class For Real Estate Investment: C&W Report
4 Oct, 2007, New Delhi
The Indian Real Estate environment is poised at the most dynamic stage of its evolution,
redefined by the growing investors' confidence in the market. According to Cushman &
Wakefield, till date, foreign funds and institutions have raised approximately US$ 30 billion
to be invested in Indian real estate with an estimate of US$ 3 billion that has been
committed.
The industry is progressing up the learning curve which is reflected in the number and diversity of transactions where the spectrum of private equity transactions range from project specific special purpose vehicles (SPVs) to entity level investments. According to Cushman & Wakefield's latest report 'India Gaining Momentum - Indian real estate investment dynamics' launched at the GRI India forum, investments in the market have spread rather evenly over three broad investment vehicles. While majority of the investment still remained either at the Portfolio and SPV level partnership, at 40% and 36% respectively, the number of entity level partnerships formed 26% of the total investment in the sector.
Anurag Mathur, Deputy Managing Director Cushman & Wakefield India, said "Majority of the transactions until last year were structured at an SPV level, as most investors were evaluating the markets. However over the past few months, the private equity market has evolved drastically with many more examples of portfolio level as well as entity level participation both from national and international investors."
This healthy mix can be attributed to the growing confidence of investors in the industry. Investing in a portfolio of properties or at an entity level essentially diversifies the risk for the investor. Portfolio investments also achieve better congruence of valuations. On the flip side however; there is always a risk of less performing projects being grouped.
According to the C&W report, investors have also shown an appetite for investments across asset classes, with integrated townships having witnessed highest attention with 28% of the private equity investments. The advantage of this asset class is that, it is viewed as a low risk investment avenue due to its diversification benefits and low entry cost with larger upside potential. Despite the speculative element, the end user demographics facilitate more secure returns.
Increased number of vertical specific investments for stand-alone products has been witnessed over the last one year, more profound in sectors like retail and hospitality. Hospitality, with 16% emerged as another high growth sector given the growth potential seen in the market despite the fact that investments in hospitality tend to be capital intensive and brand driven. A number of developers (with historic land banks) have ventured into this industry, with many alliances between developers and hotel operators for their future expansion plans. A few ventures in the sector include US hospitality major, Carlson that has partnered with Unitech Group by picking up a stake in their new venture for introducing the Regent hospitality brand in India. Emaar has reportedly aligned with Premier Inn for 80 budget hotels in the next 10 years; Vatika Group is reportedly utilizing 33 acres from its land bank for developing "Westin" (a Starwood brand) chain of hotels in Bangalore, Jaipur and Gurgaon.
Anurag Mathur added, "Earlier investments into such projects were largely as part of an intergraded or mixed use product. The establishment of these verticals as stand-alone focused business lines by the Indian real estate entities indicates the growing maturity of the industry. Market participants have realized the importance of creating verticals focused on a particular asset class. This provides a professional approach to development management as the dynamics of each asset class need specialized manpower to manage the projects."
This has been also reflected within retail development with various developers now focusing on the retail sector as a core business. A number of retail development companies such as Phoenix Realty, and dedicated retail divisions established by large developers such as 'InOrbit' by K Raheja Corporation's are introducing the desired professionalism within the industry that will give a further boost to this sector which currently has a share of only 1% in the number of transactions, last year, in stand alone projects.
SEZ's, on the other hand, offer immense opportunity filliped by the incentives provided like tax benefits, limited restrictions on foreign investment as well as a wider portfolio exposure. Due to policy-level uncertainties there have been limited announced transactions in this sector, however now with clear resolve from the government, the confidence and interest towards this sector is increasing.
Cushman & Wakefield
Cushman & Wakefield is the largest fully-integrated real estate services firm in the world. Founded in 1917, it has 215 offices in 56 countries around the globe and 12,000 talented professionals. Cushman & Wakefield is involved in every stage of the real estate process, from strategy to execution. The firm represents clients in buying, selling, financing, leasing, managing and valuing assets, and provides strategic planning and research, portfolio analysis, site selection and space location services. Cushman & Wakefield commenced its India operations in 1997 and today has grown to over 800 employees across our offices based in New Delhi, Gurgaon, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata. The first international real estate service provider to have been granted permission by the Government of India to operate a wholly-owned subsidiary, Cushman & Wakefield India is strategically poised to service the varied needs of clients throughout the Indian sub-continent. It offers a full range of real estate services combining local expertise and experience with technology and standards of service that are well-established and consistent across all Cushman & Wakefield's offices worldwide.
Global Real Estate Institute
The GRI is a global club of senior real estate investors, developers and lenders. Its mission is to help its members build personal relationships and work together in creating better places as a legacy to our children. Founded in 1998, its core constituency consists of the world's leading real estate players. The GRI runs its activities through a series of Annual Meetings focused on different regions of the world, mainly across Europe and Asia to date. Individual and Corporate Membership of the GRI is open to senior players in the real estate industry that find it beneficial to belong to a global community of elite achievers in their industry.
The industry is progressing up the learning curve which is reflected in the number and diversity of transactions where the spectrum of private equity transactions range from project specific special purpose vehicles (SPVs) to entity level investments. According to Cushman & Wakefield's latest report 'India Gaining Momentum - Indian real estate investment dynamics' launched at the GRI India forum, investments in the market have spread rather evenly over three broad investment vehicles. While majority of the investment still remained either at the Portfolio and SPV level partnership, at 40% and 36% respectively, the number of entity level partnerships formed 26% of the total investment in the sector.
Anurag Mathur, Deputy Managing Director Cushman & Wakefield India, said "Majority of the transactions until last year were structured at an SPV level, as most investors were evaluating the markets. However over the past few months, the private equity market has evolved drastically with many more examples of portfolio level as well as entity level participation both from national and international investors."
This healthy mix can be attributed to the growing confidence of investors in the industry. Investing in a portfolio of properties or at an entity level essentially diversifies the risk for the investor. Portfolio investments also achieve better congruence of valuations. On the flip side however; there is always a risk of less performing projects being grouped.
According to the C&W report, investors have also shown an appetite for investments across asset classes, with integrated townships having witnessed highest attention with 28% of the private equity investments. The advantage of this asset class is that, it is viewed as a low risk investment avenue due to its diversification benefits and low entry cost with larger upside potential. Despite the speculative element, the end user demographics facilitate more secure returns.
Increased number of vertical specific investments for stand-alone products has been witnessed over the last one year, more profound in sectors like retail and hospitality. Hospitality, with 16% emerged as another high growth sector given the growth potential seen in the market despite the fact that investments in hospitality tend to be capital intensive and brand driven. A number of developers (with historic land banks) have ventured into this industry, with many alliances between developers and hotel operators for their future expansion plans. A few ventures in the sector include US hospitality major, Carlson that has partnered with Unitech Group by picking up a stake in their new venture for introducing the Regent hospitality brand in India. Emaar has reportedly aligned with Premier Inn for 80 budget hotels in the next 10 years; Vatika Group is reportedly utilizing 33 acres from its land bank for developing "Westin" (a Starwood brand) chain of hotels in Bangalore, Jaipur and Gurgaon.
Anurag Mathur added, "Earlier investments into such projects were largely as part of an intergraded or mixed use product. The establishment of these verticals as stand-alone focused business lines by the Indian real estate entities indicates the growing maturity of the industry. Market participants have realized the importance of creating verticals focused on a particular asset class. This provides a professional approach to development management as the dynamics of each asset class need specialized manpower to manage the projects."
This has been also reflected within retail development with various developers now focusing on the retail sector as a core business. A number of retail development companies such as Phoenix Realty, and dedicated retail divisions established by large developers such as 'InOrbit' by K Raheja Corporation's are introducing the desired professionalism within the industry that will give a further boost to this sector which currently has a share of only 1% in the number of transactions, last year, in stand alone projects.
SEZ's, on the other hand, offer immense opportunity filliped by the incentives provided like tax benefits, limited restrictions on foreign investment as well as a wider portfolio exposure. Due to policy-level uncertainties there have been limited announced transactions in this sector, however now with clear resolve from the government, the confidence and interest towards this sector is increasing.
Cushman & Wakefield
Cushman & Wakefield is the largest fully-integrated real estate services firm in the world. Founded in 1917, it has 215 offices in 56 countries around the globe and 12,000 talented professionals. Cushman & Wakefield is involved in every stage of the real estate process, from strategy to execution. The firm represents clients in buying, selling, financing, leasing, managing and valuing assets, and provides strategic planning and research, portfolio analysis, site selection and space location services. Cushman & Wakefield commenced its India operations in 1997 and today has grown to over 800 employees across our offices based in New Delhi, Gurgaon, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata. The first international real estate service provider to have been granted permission by the Government of India to operate a wholly-owned subsidiary, Cushman & Wakefield India is strategically poised to service the varied needs of clients throughout the Indian sub-continent. It offers a full range of real estate services combining local expertise and experience with technology and standards of service that are well-established and consistent across all Cushman & Wakefield's offices worldwide.
Global Real Estate Institute
The GRI is a global club of senior real estate investors, developers and lenders. Its mission is to help its members build personal relationships and work together in creating better places as a legacy to our children. Founded in 1998, its core constituency consists of the world's leading real estate players. The GRI runs its activities through a series of Annual Meetings focused on different regions of the world, mainly across Europe and Asia to date. Individual and Corporate Membership of the GRI is open to senior players in the real estate industry that find it beneficial to belong to a global community of elite achievers in their industry.
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