JLL India Facilitates Sale of 50% Stake in Westend Mall, Pune

In its latest landmark deal, leading international property consultancy JLL India has facilitated the sale of 50% stake in Westend Mall in Aundh, Pune to US-based private equity player Blackstone Group.

Post-acquisition of retail malls in Ahmedabad, Amritsar and Navi Mumbai last year, this is the fourth acquisition by the PE giant. Globally, Blackstone is the largest real estate private equity firm in the world today with $102 billion of assets under management.

Sanjay Bajaj, Managing Director – Pune, JLL India said, “Westend is the largest integrated mixed-use development in the micro-market of Aundh and Baner, which houses some of the top IT companies and an abundant residential catchment in the vicinity. The Westend Mall, a part of the development, is the largest operational retail mall in west Pune, with marquee brands such as H&M, Shoppers Stop, Cinepolis with IMAX, Max, Starbucks, etc. In addition to the mall, the development also houses top-notch IT companies like Convergys, Sungard, OneNetwork, etc.”

As a location, Aundh has long since established itself a priority port of call for IT firms, and has developed a consummate social infrastructure ethos around it. IT-centric office spaces in this location are in great demand not only because of the presence of high-end shopping outlets and restaurants but its excellent connectivity to central Pune as well as Mumbai via the Expressway.

Because of the dense saturation of IT companies in the vicinity which includes Hinjewadi, there are approximately 0.5 million people working in this micro-market, thereby, making it a strong case for entertainment and retail.

Against the backdrop of several question marks being raised on the impact of various potential disruptive changes in the real estate sector, this deal underscores the fact that institutional investors are still wired into relevant big-ticket opportunities.

This major development into West Pune is also significant because this region has so far been seriously under-served in terms of quality retail developments. By harnessing the demand for Grade A real estate developments in the city, Blackstone has once again evidenced that it has a firm finger on the pulse of the Indian growth story.

Source: News

To Keep House Prices In Check, Construct More Roads

“It is not wealth that built our roads but roads that built our wealth.” This line by former American president John F Kennedy holds true not only for the US but also India. Road infrastructure seems to be closely linked to residential price movements. Length of road construction is known to have a direct bearing on real estate. More importantly, it is equally vital in potentially lowering average house prices, particularly in urban areas, as can be seen in the graph below.

Anuj Puri, Chairman & Country Head, JLL India

Anuj Puri, Chairman & Country Head, JLL India

 

As road lengths increase, connectivity improves across a wider geography – thereby attracting new project launches at lower price points. This can reduce prices in urban agglomerations. If more roads are constructed in rural areas, price rise in urban cities could be restricted to moderate levels. This would help increase affordable housing projects near the metros.

Currently, the only solution to the problem of urban housing shortage in Indian cities is building new infrastructure to connect more precincts to the city centre. This theory becomes clearer when we compare the pan-India average residential price growth to the total length of road constructed in India annually which is released by the Ministry of Roads.

Not surprisingly, there was a strong inverse correlation between the two indicators. It suggests that when new roads are constructed across rural and urban areas, the spread of development happens over a wider geography. This can potentially bring down the premium that certain urban agglomerations command for having better connectivity. This could be particularly true for infrastructure-starved cities in India such as Mumbai and Bengaluru.

Fortunately, road infrastructure has emerged as a key focus area for the current government. According to media reports earlier this year, the road transport and highways ministry has set an ambitious target of laying more than 40 km of roads every day in 2016-17 – more than double the current pace. The construction target too has been set at 15,000 km against the 6,000 km constructed last year.

The Indian government plans to invest INR 3 trillion (US$ 44.73 billion) for developing 35,000 km of roads across the country, of which 21,000 km will be economic corridors and 14,000 km will be feeder routes. This is expected to improve freight movement, ease traffic bottlenecks and improve inter-city connectivity in the country. It will be interesting to watch residential property price movements in the coming years.

Source: News

Demonetization: Immediate And Long-Term Impact On Real Estate

PM Modi’s surprise move to remove Rs. 500 and Rs. 1000 currency notes from legal use came as a shocker to all Indians. As of now, everyone is still inconvenienced, but all Indians also realize the greater good this move will accomplish in cleaning out black money from the economy. Crowds outside ATMs are already thinning out and life is gradually normalizing across Indian cities. However, the ones who will continue to be affected the most are obviously those who have been holding and transacting in large amounts of unaccounted cash.

Kishor Pate, CMD - Amit Enterprises Housing Ltd.

Kishor Pate, CMD – Amit Enterprises Housing Ltd.

When considering the business sectors on which the demonetization move has greatest pertinence and effect, the real estate sector comes almost naturally to mind, and Indian real estate industry has historically seen a high incidence of cash transactions. However, the large-scale turmoil that many market pundits have been predicting is an exaggeration. The market is expecting a correction in the resale properties segment, which is very likely to happen.

However, the primary sales market in the larger cities is not going to be affected, especially when it comes to strong, established developers. Prices have already stabilized in view of the situation prevailing prior to the demonetization move, and there is minimum chance of further correction – especially in low-end projects. High-end and luxury projects may see a correction to some extent.

Land transactions, which have historically been driven by cash, are taking a major hit and we can expect a correction of 20-30% in land valuations in the unorganized sector. Lower land costs in emerging areas and smaller cities will eventually result in lower cost of budget housing, as developers will assuredly pass on the benefit of these savings to their customers. Pricing is a critical factor in the current market environment, and no player will lose the chance to offer more benevolent price tags in order to secure business.

The full impact of demonetization will be more visible only after the next Union Budget is announced in February. The negative sentiment currently prevailing is likely to be negated to a large extent by some very positive announcements. We expect the Finance Minister to roll out special incentives for first-time home buyers in the budget properties category, and also a positive revision of income tax slabs – which will help reduce the financial burden on home buyers and increase purchasing power.

With home ownership always being a priority investment objective for all Indians, this will have very positive implications for the residential real estate sector.

On the whole, the demonetization move is very good news for the health of the Indian real estate sector. The Real Estate Regulatory Bill (RERA) will be deployed across the country by mid-2017, and Maharashtra has recently put forth its own draft laws. Along with the impact that the demonetization move has had on India’s parallel ‘black economy’, we will see a lot of sanitization in the industry.

The Indian real estate sector will now become more transparent, credible and attractive to all kinds of serious investors, especially institutional investors. In the long term, we will see a much more holistic and healthy pattern of growth in the Indian real estate sector. The Government’s many initiatives to render the Indian business environment more attractive for both domestic and foreign investments will definitely bear fruit.

For end-users and investors, the current time is extremely favourable to make their move to secure the best real estate bargains. Smaller residential developers and investors will be more eager than ever before to offload their inventory so as to alleviate their liquidity woes to some extent. The salaried class which uses home loans to purchase properties will not face any problems at all because of the demonetization move.

Since the above measures will serve to make the real estate sector more transparent and wholesome, future growth in the residential property sector will be steady and rational. Those who invest in residential real estate now can, therefore, look forward to very satisfactory long-term capital appreciation.

Also, to be noted – the slowdown induced by the demonetization move has nothing to do with the huge pent-up demand for housing in India. This is still very much intact and in fact growing at steady pace. The residential sector was in fact in revival mode shortly before this move, and though overall sentiment has now faced a new setback, this is strictly temporary. Fly-by-night developers get driven out and large players who have already made transparent transactions a standard will emerge stronger. Within the next 12-18 months, we will see a much more sustainable and robust real estate market emerging in India.

Source: News