Article from MoneyControl
India’s real estate market has been plagued with tepid demand, project delays and subdued macro indicators for over two years. However, 2015 saw some green shoots with a pick up in property deals in the commercial as well as the residential space ushering in hope that some pick up could be around the corner.
But is that enough to stir a turnaround? The deal of 2015 that stands out the most is the buyout of Mumbai’s iconic Lincoln House by the suave deal maker Cyrus Poonawala from the US government worth a whopping Rs 750 crore making it the largest residential real estate deal in the country.
Formerly called the Wankaner House, this palatial seaside heritage property spread over a sprawling 2-acres was used as the US consulate until 2011. But now, after marking the country’s most expensive home buyout ever, Pune based industrialist Cyrus Poonawala’s family intends to use the Lincoln House for residential purposes. Adar Poonawala said, looking at the size of the deal they initially thought about it but within a week or two, they made up their minds and decided to go ahead.
The property is a 2-acre Grade-III property and has a built-up area of around 50,000 sq ft. Just a week before Lincoln house was sold, industrialist Kumar Mangalam Birla bought the Jatia House in Mumbai’s Malabar Hills for Rs 425 crore. Anuj Puri of JLL said: “I do feel the lower end in residential and really the top end, which is the marquee properties are not impacted with economic downturn or overall sentiment in the market.
These are properties at the top end; very few that come out, but when they come out there are lot of seekers.” From the commercial space, in the country’s largest commercial real estate deal, Bengaluru based developer RMZ bought 1.2 million square feet in Mumbai’s Bandra Kurla Complex for nearly Rs 2350 crore. In the same area, Godrej Properties sold 0.4 million square feet to pharma giant Abbott for Rs 1400 crore.
The realty sector also saw renewed interest from private equity players who invested upto Rs 18,500 crore in the sector in 2015, up 84% from last year. The deals that stand out include global giants Warburg Pincus and Goldman Sachs, investment in Piramal Realty for a combined value of Rs 2800 crore, and Singapore based GIC’s Rs 2000 crore investment in debt ridden DLF through a special purpose vehicle (SPV).
The government too on its part made attempts to help revive the ailing sector. Along with the smart city project, a revamped version of Pradhan Mantri Awas Yojna was launched as “The Housing for All” mission, targeting two crore affordable urban housing units by 2022. This coupled with the decision to streamline approvals for construction projects in urban areas enthused builders and investors alike.
State government’s also were quick to adopt. Maharashtra’s chief minister for instance promised 11 lakh affordable homes in Mumbai, and the city’s municipal corporation promptly issued a circular that cut down the number of permissions needed by developers to begin construction. While stalled legislatures like the land acquisition bill pulled down the enthusiasm, a big plus towards the end of the year was the Real Estate Regulation and Development bill, which was cleared by the Cabinet and is waiting Parliamentary approval.
The bill aims to protect customers and promote transparency and fair play in the industry. The main focus is to set up a real estate regulatory authority in each state and bar promoters from changing building plans without customer consent. The year 2016 is expected to see many more moves on the policy front, particularly with Maharashtra’s housing policy that is expected early next year.
The allowance of the Real Estate Investment Trusts or REITs will be another key trigger that is expected to dictate foreign investment in real estate in the coming months. Moreover, PM Narendra Modi’s strategic pacts inked with Singapore this year, including memorandum of understanding (MOU’s) for urban planning will throw open interesting concepts for the government’s ambitious urban housing plans in the months to come..