October 09, 2015
An interview with AnujPuri, Chairman & Country Head, JLL India
What are the most fundamental changes in Indian real estate since the last major investment cycle 8-10 years ago?
The level of maturity among developers and investors has improved substantially compared to a decade ago. The return expectations by investors have come to realistic levels and the focus is on developers with good track record. Transparency is on the rise and a large set of developers are adhering to ethical business standards with the aim of creating long term value. On the other hand, investors are more diligent and thoughtfully putting their money in the right places. Reckless exuberance and unrealistic returns have paved way for sensible business decisions. In the last 8-10 years, we have matured as an industry to a great extent.
How are ‘new’ international investors likely to invest in India? Blind pools, managed accounts, debt funds, equity investments?
Since Mr. Modi led BJP has won the general elections in May 2014, international investors’ view towards India has improved. While the debt investment will still constitute high proportion of funding (in non core assets), we expect equity investment to restart; which had taken a back seat since past few years, provided valuations reach a their realistic levels.
What will stimulate the recovery of the resi market in Delhi and Mumbai? And what are the likely time frames?
The answer to this question does not have a one dose solution. Compared to the same time last year, Indian economy has shown signs of improvement be it GDP, inflation or job market sentiment. These all will play a role in overall recovery of residential market in India. As per JLL REIS, the sales rate (sales rate = sales during the period / inventory till date) for Delhi – NCR in 1H 2015 has dropped to just 8% compared to 26% for 2014. If the situation doesn’t improve in next 4 – 6 quarters, we expect investors to reduce their expectations considerably creating a big gap between developer and investors quoted price. A little prices push from the developers, reduction in the lending rates from the government, controlled supply of new inventory and a little increase in the absorption rate will break the inertia. The important part is an orchestrated push on all fronts and not sequential unplanned individual series of events. In Mumbai, while we are expecting recovery in sales, it will not be a sharp recovery. Extremely low levels of finished but unsold inventory clearly show demand but low risk appetite in the city. With limited options available for buyers, we expect the ball to roll, but at a slow and constant speed.
Outside of Delhi and Mumbai, which city and which sector are you most bullish about over the next 12 months?
Considering stable demand and manageable property price rise, Bangalore has been seeing investor interest in residential and office space. Going forward, we expect Pune & Chennai to witness increase in investor interest followed by Kolkata and Hyderabad. In terms of asset classes, apart from residential and office, we expect retail to start seeing investor interest. With Goods and Service Tax (GST) expected to see light of the day, warehousing and logistic sector is set to improve and will see considerable jump in investor interest.
Which infrastructure projects are likely to have the most positive knock-on effects for real estate? And why?
Infrastructure projects like Delhi Mumbai Industrial Corridor (DMIC), Trans Harbour link, Smart Cities, Coastal Road, Navi Mumbai Airport are few of the key infrastructure projects which, once completed, will have material positive impact on real estate. These projects will play a major part in emergence of new land development area and will add sizable meaningful supply.
GRI in association with The Property Times.in
