Which infrastructure projects in India are likely to have the most positive knock-on effects for real estate?

An interview with Rish R. Tej,CEO, Sheer Capital Advisory Pvt. Ltd

What are the most fundamental changes in Indian real estate since the last investment cycle?

Investors deploying capital towards Indian Real Estate projects, have been cautious and there has been a flight to safety. Capital preservation has been the primary focus, hence most transactions since the GFC have been in the form of structured debt transactions where the investor is senior to the developer/ operator in terms of cashflow distribution and has been protected by being provided a security package including a mortgage on the underlying land and asset, a share pledge of the borrowing SPV as well as corporate and personal guarantees.

How are ‘new’ international investors likely to invest in India? Blind pools, managed accounts, debt funds, equity investments?

The trend is shifting more and more away from blind pool capital towards managed accounts, where large LPs are partnering with successful Fund Managers, to source and manage their investments but the LPs have a far more active role and discretion in choosing which opportunities work for them. Each managed account will have a focused strategy and the manager adheres to the mandate as the LP will have other Managed Accounts with different strategies, like Residential Equity/ Debt, Buying core assets etc., so the LPs create a diversification in their portfolio by defining the strategy for each managed account.

What will stimulate the recovery of the resi market in Delhi and Mumbai? And what are the likely time frames?

In a word, Execution. Developers in Delhi and Mumbai have to focus on execution and deliver the existing projects that have been delayed over the past several months. The reasons for the markets current poor performance is the excessive speculation, unusual price rise and over supply in key micro markets, in the past. The residential market is going through a consolidation phase, which might continue for another 12-24 months, but there is a silver lining, as office leasing has picked up and generally residential sales velocity follows with a lag.

Outside of Delhi and Mumbai, which city and which sector are you most bullish about over the next 12 months?

The Bengaluru (Bangalore) market has been the most resilient in this slow down, both in terms of residential sales and office leasing absorption.

Office leasing has been out performing over the last 12-18 months and should continue to do well through 2016, as there is a growing demand and under supply in the large cities like Mumbai, Delhi NCR and Bengaluru.

Which infrastructure projects in India are likely to have the most positive knock-on effects for real estate?

The Navi Mumbai Airport in Panvel, Mumbai and the Taj International Airport on the Taj Expressway corridor near Greater Noida, Delhi NCR will be big growth drivers for the micro markets in proximity to the proposed Airports.

The expansion of the metro network in Delhi NCR and Mumbai is helping to improve connectivity and has already resulted in price appreciation in real estate values in the neighborhoods where the metro expansion is proposed. The average daily passenger ridership is about 2.2 Million for the Delhi Metro and about 300, 000 for the Mumbai Metro which is poised to more than double over the next 5 years.

GRI in association with The Property Times.in