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Global investment in realty sector to reach $45 trillion by 2020

MUMBAI:Driven by rapid urbanisation and demographic changes, especially in emerging markets, global investment in the real estate sector is likely to increase 55 per cent to $45.3 trillion by 2020 from $29 trillion in 2012, according to PwC.

PwC in a report ‘Real Estate 2020: Building the Future’ said that the investment in developing Asia-Pacific countries, which includes India, is likely to rise by 140 per cent to $10.2 trillion by 2020 from $4.3 trillion in 2012.

“Rapid urbanisation and demographic changes, especially within emerging markets, will lead to substantial growth in the real estate investment industry over the next six years,” PwC Executive Director (Capital Markets) Shashank Jain said.

The expansion will be the greatest in the emerging economies, where economic development will lead to better tenant quality and, in some countries, clearer property rights, and will play out across housing, commercial real estate and infrastructure.

“Real estate is an integral part of the emerging markets’ growth phenomenon. In India, for example, real estate has played a large part in driving economic growth. It’s an exciting time for the real estate sector, in an emerging country like India,” he said.

According to the report, the investment in Asia-Pacific countries is highest compared with the US, Europe, Latin America, developed parts of Asia Pacific and even Sub Saharan Africa and Middle East and North Africa.
Jain observed that intense competition for prime real estate will force real estate managers and investors to seek out new opportunities for yield.

“Yet the growing and changing real estate world will present them with a far wider range of risks, which they must be equipped to manage,” he said.

Meanwhile, the growing middle class and ageing populations in these emerging economies are boosting th e demand for newer types of real estate, Jain said.

While office, industrial, retail and residential will remain the main sectors, affordable housing, agriculture, health-care and retirement accommodation will become significant sub sectors in their own rights, he added.
Swiss economic growth slowed to a crawl at the end of 2013, official data showed Thursday, amid concern that the strong Swiss franc and recent vote limiting immigration from the EU might further hamper the country’s economy.

Switzerland’s economy grew just 0.2 percent during the final three months last year, compared to the previous quarter, according to the statistics from Switzerland’s State Secretariat for Economic Affairs, or SECO.

Fourth quarter growth, which had been expe ..
Fourth quarter growth, which had been expected to slow, was thus below the 0.5 percent hike seen in the third quarter and at the low end of expectations.

Analysts polled by the AWP financial news agency anticipating growth of between zero and 0.5 percent during the three-month period.

“The overall figures are a bit disappointing,” J. Safra Sarasin analyst Alessandro Bee told AFP.
Compared to the same period a year earlier, the wealthy Alpine nation saw its economy grow 1.7 percent, which remained lower than the third quarter’s annual growth rate of 1.9 percent.

SECO meanwhile said it now expected full-year growth for 2013 to tick in at 2.0 percent, up from 1.0 percent in 2012.

This initial estimate is in line with the central bank’s forecast that growth would slow in the fourth quarter and that the economy for all of 2013 would swell between 1.5 and 2.0 percent.
Capital Economics analyst Jonathan Loynes cautioned though that the fourth quarter slowdown “may raise fears that the economy is finally succumbing to the strength of the Swiss franc.”

Switzerland is not a member of the European Union and is thus outside the eurozone.
The Swiss economy has long been one of few bright spots on the European map, but the surging value of its franc has created headaches for exporters, whose margins can easily be eroded by unfavourable exchange rates.

To counter this effect, the central bank in 2011 set an exchange-rate floor of 1.20 francs to the euro.
Loynes pointed out that the franc had long hovered near the floor, but stressed that “the breakdown of growth by expenditure components provides some reassurance on this front,” since the slowdown appeared to mainly be attributed to a hike in imports.

During the final three months of last year, imports swelled 1.4 percent, amid a 0.7 percent hike in household consumption.
Exports, not including luxury goods like precious metals and gems and artwork, meanwhile plunged 1.7 percent after showing strong growth during the previous quarter.

Exports in Switzerland’s important chemicals and pharmaceutical sectors were especially hard-hit, SECO said.
Bee said the drop in exports was disappointing, but added that “I think the numbers reported in the third quarter for exports were too positive,” so the comparative drop was perhaps overstated.

He also stressed that domestic demand was still strong and should continue to boost growth going forward.
At the end of 2013, many analysts revised up their outlook for Swiss economic growth for this year, as they anticipated that exports would start picking up again.

But earlier this month, the country voted by a razor-thin margin to establish quotas on immigration from the European Union, putting in jeopardy a whole series of agreements with the bloc, its main trading partner.

Many observers have expressed concern that the prevailing climate of uncertainty might weigh heavily on investments in the country and its products.

Bee said Thursday he thought the effects of the vote would be felt more in the long term.

“The limitation of free movements will have an impact but not in the short term,” he told AFP.
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5 Indian Cities receive record PE investment into Real Estate in 2015

Mumbai Metropolitan Region (MMR) received the maximum chunk of this investment at 34% followed by Delhi-NCR at 29% and Chennai at 14%. Bangalore and Pune got 11% and 5% respectively. Hyderabad got 3% while all the remaining cities put together got 4% in PE investment.

The year gone by was interesting for capital market activities in real estate. 2015 proved to be a good year for key Indian metros as inflows into real estate by private equity (PE) funds was at a record high. The total investment that the sector got was approximately Rs. 19,500 crore.

Mumbai Metropolitan Region (MMR) received the maximum chunk of this investment at 34% followed by Delhi-NCR at 29% and Chennai at 14%. Bangalore and Pune got 11% and 5% respectively. Hyderabad got 3% while all the remaining cities put together got 4% in PE investment.

The preference for these cities reflects learnings from past experience. While investors remain cautious about which cities to invest in, what is interesting to observe is that the ratio of structured equity and debt was more than half of the total investments received.

Even for plain equity investments, core commercial assets are preferred over other asset classes. This reflects how investors are cautiously optimistic about the potential for major gains in the Indian real estate. Equally important for them is to invest only in projects of credible developers having a good track record.

While the PE focus continued to remain high on residential and office projects, entity level investments and platform level deals came into the limelight indicating increase in investor confidence. A total of INR 6,048 crore worth of entity-level deals were witnessed but were limited to good developers / corporates only as investors relied on previous track record before putting their money to work.

In terms of asset focus, residential projects attracted considerable share of funding; however, equity investment in this space is still insignificant. On the contrary, income-yielding office projects attracted a majority of equity investments. While residential and office will continue to attract a majority of investments, retail is expected to start seeing better traction.

Going forward, investors are expected to remain focused on the top seven cities only. In the past few months, Chinese and Japanese investors have shown interest in bringing their long-term money into India. Overall, the stage is set for a superlative show this year. We won’t be surprised if 2016 shows a glimpse of investment activities that were seen in 2007, which was the previous peak and saw an investment of more than USD 8 billion.

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Bengaluru’s commercial real estate growth fastest in Asia-Pacific: JLL India

Globally, Bengaluru ranks fourth after London, Silicon Valley and Dublin, JLL India said in a statement.

Bengaluru is ranked first in the Asia-Pacific region in terms of city’s socio-economic growth and momentum in the commercial real estate space, according to property consultant JLL.

Globally, Bengaluru ranks fourth after London, Silicon Valley and Dublin, JLL India said in a statement. Hyderabad is at 17th position in the global ranking.

“India’s Bengaluru tops the JLL City Momentum Index (CMI) rankings for Asia-Pacific, as the city’s rapid progress in technology and global connectivity helped drive real estate growth,” JLL said.

In the list of top 10 cities in Asia Pacific, Shanghai is at the second position, followed by Sydney, Beijing, Shenzhen, Tokyo, Nanjing, Hyderabad, Melbourne and Seoul.

Covering 120 major established and emerging business hubs across the globe, the index measures a city’s short-term socio-economic and commercial real estate momentum. It also takes in account whether a city has the essential ingredients to ensure longer-term sustainable momentum.

“Bengaluru is effectively the ‘Silicon Valley’ of India with its mix of research institutes and higher education establishments contributing to the creation of a strong IT cluster,” says Jeremy Kelly, JLL’s Director, Global Research.

“With 40% of India’s IT industry located in the city, the presence of international IT giants, together with the largest number of high-tech start-ups of any Indian city, are contributing to entrepreneurial growth,” Kelly said.

Based on the report ‘City Momentum Index 2016: The Rise of the Innovation-Oriented City’, India has increased its representation in the top 20 Emerging World Cities as Bengaluru is joined by Hyderabad.

“The findings follow India’s rapid economic growth and a generally positive outlook for the country’s future,” JLL India Chairman and Country Head Anuj Puri said.

“Over the next few years, we will have 5.5 million software programmers – even more, than the US Software and IT services firms have been major drivers of office demand in the past decade and are now the largest occupiers of prime space,” he added.

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Indian real estate market headed for revival: report

Mumbai, Bengaluru will continue to be most preferred investment points; commercial office and mid-segment residential seen as top property asset classes

Proposed regulatory initiatives such as the relaxation of FDI rules in real estate and passage of real estate regulatory bill is seen to enhance investment in smaller projects. Photo: Mint

Mumbai: The Indian real estate market is heading for a steady revival in 2016, with over 70% of investors expecting improvement in sales in the next 12 months, said a research report by property consultant JLL India and Royal Institute of Chartered Surveyors (Rics), an accreditation body.

The report Peering Into 2016: Taking Pulse of Investor Preference says there is a spike in investor interest in the real estate market as around 43% of respondents saying that the number of successful exits will increase this year.

While Mumbai and Bengaluru will continue to be the most preferred destinations for investment, commercial office and mid-segment residential property will be the top two preferred asset classes by investors, the report said

“After relatively muted calendar years 2013 and 2014, private equity (PE) investors significantly increased their bets on the Indian real estate sector in 2015. This report examines the motivations and expectations of PE funds who are now actively ramping up their exposure to this sector,” said Ramesh Nair, chief operating officer, JLL India.

As per the report, a majority of exits over the last 12-18 months has been characterised by refinancing or buyback. A significant number of investors who participated in the survey believe that the refinancing theme is set to continue beyond the next 12 months, it added.

The report said proposed regulatory initiatives such as the relaxation of foreign direct investment rules in real estate and passage of real estate regulatory bill will enhance investment in smaller projects and positively impact sentiment by boosting buyer confidence.

“Today there are several financing options available. Driven by the need to increase returns and a desire to diversify, investors’ interest in international property markets is once again on the rise and India definitely seems to be leading that interest,” said Devina Ghildial, managing director (South Asia) Rics.

According to the report, newer sources of capital from Japan and China are expected to enter the Indian real estate market in 2016 while pure equity investments are likely to make a comeback this year.

For the report, JLL carried out a survey of seasoned investment professionals across a number of issues like market fundamentals, successful exits, distressed deals as well as top three asset classes and top three cities for investment over the next 12-month period.

“Few of the challenges in the market have bottomed out. So definitely the market is reviving but it is going to be a slow one. There is a going to be greater balance between demand and supply. Investor sentiments have improved,” said Venkatesh Gopalkrishnan, President (business development) and chief investment officer, Shapoorji Pallonji Real Estate.

“However, it is a cautious one where investors are now more focussed on good quality and locations.”

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