$800 mn invested in realty in first quarter

$800 mn invested in realty in first quarter

For the quarter ended March 2014, nearly $800 million was invested into India’s real estate sector, according to real estate research firm CBRE South Asia. 

This translates to almost Rs 4,800 crore having been injected into the sector through the private equity route over the past few months, CBRE South Asia Chairman and Managing Director Anshuman Magazine said on Thursday. 

“This couldn’t have happened at a more opportune time for a sector faced with a liquidity crunch, high land acquisition costs, and stringent due diligence from the banking sector — which continues to perceive real estate as a high-risk domain in India. It is this selective attitude towards lending to particular assets and markets, which has also provided opportunities to non-bank lenders such as pension funds and insurance companies to begin to consider funding India’s realty industry,” he said.

One of the first foreign pension funds to directly invest in an Indian company happened to be the Canada Pension Plan Investment Board (CPPIB) and Caisse de depot et placement du Quebec (CDPQ) in partnership with Oman's State General Reserve Fund (SGRF). 

The entity invested Rs 2,000 crore (approximately Rs 1,000 crore in Phase I) in Larsen & Toubro's (L&T) infrastructure development arm, L&T Infrastructure Development Projects Limited (L&T IDPL), during the first quarter of 2014.

Other key investment trends observed during the quarter were land transactions, investments in built-up commercial assets, and the sale of non-core assets by business entities.

More than 60 per cent of the realty investments observed during the quarter under review were seen to be the sale of land parcels by corporate entities seeking to maximize returns, primarily in the Mumbai Metropolitan Region (MMR), to realty developers for housing development projects.

Some of the most significant cases in this category involved the sale of a 25-acre land parcel owned by Tata Steel on Dattapada Road, Borivali (East), Mumbai, to the Oberoi Group for approximately $187 million for a luxury residential project. 

Big-ticket land sales were observed in Bangalore, Pune, Ahmedabad, and the Delhi National Capital Region during Q1 2014.

“It is interesting to note that these are all corporate deals, which goes to show that an increasing number of firms are now open to monetising their defunct real estate assets for the right valuation,” Magazine said.

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