INSUBCONTINENT EXCLUSIVE:
The government announced several incentives for the real estate sector in the interim budget.Nation's cash-starved residential real estate
market is set to get a boost from foreign and domestic private equity firms, which are lining up big bets worth hundreds of millions of
dollars for the sector.The domestic residential real estate space has been in a rut for years with failed and delayed projects putting
Developers more recently have been hit by a credit squeeze as banks struggle with bad debts and a crunch in the shadow banking
sector.Private equity firms are now swooping in to buy assets at attractive valuations, say industry insiders, as regulatory changes and a
more dovish monetary policy outlook bode well for the sector."With major impetus being given to affordable housing PE investors are sensing
a big opportunity in this segment," said Anuj Puri, chairman at Anarock, a real estate consultancy firm."The expected 8-10 per cent annual
return in the affordable segment of residential real estate is attracting not just domestic investors but also foreign entities from the US,
Singapore and Canada."Blackstone Group, one of the largest owners of commercial real estate in India, this month agreed to buy a majority
stake in Aadhar Housing Finance - an affordable housing project, and committed 800 crore rupees ($112 million) of additional equity to the
asset.Piramal Enterprises and Ivanhoe Cambridge, the real estate arm of Canadian fund CDPQ, last week announced a $70.15 million investment
in Palava - a project of Lodha Group on the outskirts of country's financial hub, Mumbai.Several domestic real estate funds, including
HDFC Property Fund and Kotak Realty Fund, are also scouting opportunities in the real estate space, say industry sources aware of the
talks.And one industry source said that Canadian asset management firm Brookfield Asset Management is exploring roughly half a dozen
residential real estate investments and it aims to nearly double its bets in the space to over $1 billion, from $450 million in the coming
year.The Abu Dhabi Investment Authority (ADIA), along with Hines Investments is also poised to announce an investment in the space, a source
involved in the deal said.Brookfield declined to comment, HDFC Property, Kotak Realty, ADIA and Hines were not immediately available for
comment.TIMING IT RIGHTRising bad debts and real estate project failures have made banks cautious on lending to developers, leading to a
slowdown in the property market that relies heavily on borrowing for both home building and buying.Developers in the country were typically
averse to private equity as it is more expensive funding compared to debt they could raise from banks, or non-bank finance companies
(NBFCs).However, with funding from NBFCs drying up in the aftermath of a string of defaults at lender ILFS, developers are being forced to
explore debt and equity funding from private equity."For the PE players the valuations are probably a lot more attractive today than they
were four to five years ago," said Anshul Jain, managing director at Cushman and Wakefield India."From a risk perspective too, risk is
slightly lower as some green-shoots are visible in the segment
PE can see that pricing and sale pricing is at an all-time low, so valuations are at an all-time low, so it's a good time for them to
enter."The government has also announced several incentives for the real estate sector in the interim budget earlier this month."This is a
very positive budget from a real estate point of view," said Samir Jasuja, managing director of PropEquity, an online real estate data and
analytics platform.The government announced a total tax rebate for individuals with annual income of up to 5 lakh rupees, and offered some
tax incentives that would benefit both property developers and potential homebuyers.These measures, along with the rate cut by the central
bank last week, are expected to give an added push to the segment.
