Investment News

India’s office leasing crosses 20 million sq ft in the first half of 2018: Report

India’s office leasing crosses 20 million sq ft in the first half of 2018: Report

July 18, 2018 in Investment News, Leasing News

Office leasing activity across India’s top 9 markets rose more than 10%, with the total leasing of over 20 million sq ft during the first half of 2018. Bangalore along with Delhi-NCR, Hyderabad and Mumbai led the leasing activity with 80% share, showed data from CBRE South Asia.

Continuing the trend, office space take-up was dominated by small- and medium-sized transactions. Small-sized transactions with less than 10,000 sq ft space accounted for around 44% of the transaction activity, while mid-sized transactions ranging between 10,000 sq ft and 50,000 sq ft held a 42% share. The share of large-sized deals with over 100,000 sq ft also rose marginally from 4% in the previous quarter to about 5%.

“Corporates are likely to remain cost-sensitive, develop workplace strategies for efficient space utilization, which will impact the office space absorption. We foresee pre-commitments in quality, cost-effective projects nearing completion which will have a significant impact on office leasing activity across key cities,” said Anshuman Magazine, Chairman, India and South East Asia, CBRE.

Occupiers continued to future-proof their portfolios and hedge against future rental escalations by pre-leasing space across various cities. Pre-leasing activity rose significantly in the second quarter largely in Delhi-NCR, Hyderabad and Pune drove primarily by Banking, Financial Services and Insurance (BFSI), research, consulting and analytics.

Around 17 million sq ft office space supply was added during the period and this was the increase of over 50% compared with the first half of 2017. Four cities including Bangalore, Mumbai, Hyderabad and Delhi-NCR accounted for more than 80% of this supply addition, followed by Chennai.

Sustained occupiers’ interest resulted in rental values rising in the range of 1%-7% across micro-markets in Bangalore, Chennai and Pune.

“Office leasing activity is expected to remain stable in the short term, backed by corporates looking to expand or consolidate their operations. Across all cities, rising traffic congestion and public infrastructure have become key decision-making parameters significantly impacting location strategies of occupiers,” said Ram Chandnani, Managing Director, Advisory & Transaction Services, India, CBRE South Asia.

He expects infrastructure initiatives such as completion of highways and introduction of Mass Rapid Transport System (MRTS) services among others to significantly influence and drive occupier preferences in the coming quarters.

According to experts, the direct impact of Goods & Services Tax on the office sector remains limited, despite an increase in occupier outgo as the rate now stands at 18% compared with the previous 15% service tax. Going forward, they expect this tax rate increase to have a negligible impact on leasing momentum. Prominent sectors such as BFSI, engineering & manufacturing, research & consulting and co-working are likely to account for a larger share in leasing activity on a yearly basis.


Delhi’s Connaught Place World’s Ninth Most Expensive Office Area: Report

Delhi’s Connaught Place World’s Ninth Most Expensive Office Area: Report

July 13, 2018 in Investment News, Real Estate News

Connaught Place in Delhi is the ninth most expensive office location in the world, a CBRE report said here on Wednesday.

“Delhi’s Connaught Place moved one notch up to be the ninth most expensive office location with an annual prime rent of $153.26 per square feet from last year’s tenth most expensive office location,” said the report titled “Global Prime Office Occupancy Costs 2018″.

Meanwhile, Mumbai’s Bandra Kurla Complex moved down to the 26th position with an annual prime rent of $96.51 per square feet and the central business district in Nariman Point, Mumbai fell from 30th to 37th position with an annual prime rent of $72.80 per square feet, it said.

The most expensive office location in the world is Hong Kong (Central) with an annual prime rent of $306.57 per square feet, according to the report. The city held on to the top position for the second consecutive year, it said.

London (West End) and Finance Street in Beijing were second and third on the list.

CBRE’s Chairman, India and South-East Asia Anshuman Magazine said: “Strong demand from finance, technology and the e-commerce sectors has fuelled the growth momentum in prime occupancy costs from last year and commercial office market remains a strong growth propeller for the real estate sector.”


PE investments in Indian real estate hit Rs 59,100 cr in 2017: Knight Frank

PE investments in Indian real estate hit Rs 59,100 cr in 2017: Knight Frank

July 11, 2018 in Investment News, Knight Frank

Even as real estate in India has struggled over the past few years, private equity investors appear quite optimistic about its prospects.

A report by Knight Frank says that PE investments in real estate rose from Rs 17,200 crore in 2014 to Rs 59,100 crore, a growth of a whopping 36 per cent compounded.

Much of the PE investments found their way into a commercial real estate. Since 2011, a total of Rs 57,300 crore has been invested into space

According to the Realty Asset Monetisation 2018 – An Overview by Knight Frank, Mumbai captured 40% of private equity investments into office assets in India while NCR saw Rs 11,350 crore being invested.

Bengaluru attracted private equity investments into office assets to the tune of Rs 7,850 crore.

Retail and warehousing have also seen a strong performance during the last four years.

The warehousing sector has seen an investment of Rs 28,136 crore since 2014, says the report, while Rs 10,362 crore has been invested into retail assets since 2011.

When it comes to retail, nearly half the incremental capital has gone into the new development and under-construction retail assets.

“The real estate industry has been through a churn over the past few years due to a slew of structural reforms like demonetisation, GST and RERA. This led to a reduction in investment risk perception coupled with the availability of matured assets,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

The exuberance by PE investors continues in the current year with Rs 33,700 crore already being invested in the first half of 2018.

“While office market has continued to remain strong, a closer look indicates that once-overlooked segments of retail and warehouse have seen a renewed interest from global institutional investors,” said Baijal.


Indiabulls Real Estate to buy back shares

Indiabulls Real Estate to buy back shares

July 9, 2018 in Indiabulla, Investment News, Real Estate News

Realty developer Indiabulls Real Estate has approved the proposal to buy-back up to 2.6 crore equity shares of the company aggregating up to Rs 624 crore. The maximum size of the buy-back is around 5.45% of existing paid-up share capital of the company, the developer said in a regulatory filing.

The maximum offer price for the proposed buyback will be the prevailing market price on stock exchanges subject to a price not exceeding Rs 240 per equity share. The aggregate value of the buy-back is less than 10% of total paid-up share capital and free reserves of the company.
“The proposed buy-back will make the balance sheet of the company leaner by the reduction in the overall capital employed in its business, which in turn will lead to higher earnings per share and enhanced return on equity,” the company said.
On Friday, shares of Indiabulls Real Estate closed at Rs 205.70, down 2.67% over the previous close.

The public announcement setting out the process, timelines and other statutory details will be released in due course in accordance with the buyback regulations.


Manesar Land Scam: 3,600 Claims For Plots, Flats On Government’s Table

Manesar Land Scam: 3,600 Claims For Plots, Flats On Government’s Table

July 6, 2018 in Investment News, Manesar Land Scam

The government has received around 3,600 claims for plots and flats that were ensnared in the Manesar land scam, according to a reply to an RTI query.

In March this year, the Supreme Court ordered that the ownership of 688 acres of land that the Bhupinder Singh Hooda government had issued an acquisition notification for in 2004 but withdrawn subsequently — triggering distress sales in the interim to builders who promised more than the compensation the state was offering — would pass into the hands of government agencies HSIIDC and Huda.

The scam was estimated at Rs 1,500 crore with land being bought from locals at throwaway prices.

The Supreme Court had said all homebuyers who had bought properties in projects developed on the land in question were entitled to claim their properties. The claims were supposed to be filed within a month of the judgment. But for nearly the entire period, the Haryana government had not decided if Huda or HSIIDC would accept the claims. Ultimately, in April, HSIIDC was chosen as the agency for accepting claims from homebuyers as well as landlords.

The ABW Manesar Allottee Welfare Society has also filed a petition seeking clarification of the Supreme Court order. One of the petitioners, Naresh Jindal, said the court had directed claims for possession or refunds could be filed to Huda or HSIIDC but there was no clarity on the interest applicable or the timeline.

The RTI query was filed by Aseem Takyar.


One year of GST : Benefits and Losses

One year of GST : Benefits and Losses

July 2, 2018 in GST, Investment News

“Good and Simple Tax” — that is how Prime Minister Narendra Modi introduced the Goods and Services Tax (GST) to Indians, in his speech at the launch of the new tax regime a year ago. GST was rolled out in the intervening night of June 30 and July 1, last year, in a ceremony held in the Central Hall of Parliament.

The government has planned a mega event to celebrate the first anniversary of GST on July 1, which has now been christened ‘GST Day’. “Union Minister for Railways, Coal, Finance & Corporate Affairs Piyush Goyal will preside over as the Chief Guest of the event and Minister of State for Finance, Shri Shiv Pratap Shukla will be the Guest of Honour,” the finance ministry said in a statement.

Union minister Arun Jaitley who was instrumental in the implementation of GST would be addressing the gathering through video conferencing, news agency PTI reported. Jaitley is currently recuperating from a kidney surgery and Goyal is in-charge of the finance ministry in his absence.

In his GST launch speech last year, PM Modi had likened teething problems of the new tax system to ‘adjusting to a new pair of spectacles’.

A year later on Friday, Arun Jaitley in a blog post wrote, “Last year, the impact of the GST on direct tax collection was not visible. Since GST had been imposed in the middle of the year, it will be more apparent this year.”

In the post, Jaitley credited GST for having a ‘significant impact’ on the hike indirect tax collection too. “Those who have disclosed a business turnover for the GST now find it difficult not to disclose their net income for the purposes of income tax,” Jaitley said.

The Modi government has canvassed improvement in tax collection and compliance as one of its major successes on the economic front.

Another area where the finance ministry could take pride is fiscal consolidation. The fiscal deficit under this government has largely remained under control despite not being able to meet the target in the last financial year (FY).

The fiscal deficit is the difference between total revenue and total expenditure of the government.

In the budget for FY 2018-19, Arun Jaitley set the fiscal deficit target for 2018-19 at 3.3 per cent of the gross domestic product (GDP) to accommodate higher demand for expenditure against the earlier target of 3 per cent. The government also revised the deficit target for the year ending in March 2018 to 3.5 per cent of GDP from the targeted 3.2 per cent.

With the May fiscal deficit touching 55.3 per cent of the budget estimate (BE), the government would require a steady and healthy flow of revenues from GST to be able to meet the fiscal deficit target.

Collection from GST had been choppy through a large part of the last year but has stabilised in the last few months on the back of anti-evasion measures like the rollout of the e-way bill. GST collection in May amounted to Rs 94,016 crore, down from April’s record Rs 1.03 lakh crore but well above the monthly average since the tax was rolled out last year.

The government would thus, bet big on its year-old flagship tax reform to keep its coffers in a good shape to be able to carry out expenditures without fiscal pressure in the election year. The fact that revenue deficit had shot up to 2.6 per cent of GDP in FY 2017-18 from the budget estimate of 1.9 per cent, will make the government even more vigilant.

GST was rolled out a year ago in a setting which many compared to Jawaharlal Nehru’s famous ‘tryst with destiny’ speech on August 15, 1947. As the GST regime stabilises, India’s biggest tax reform has the onus to keep the country’s finances steady as we head to a general election.


Co-working spaces demand continues to rise, set to triple in 3 years

Co-working spaces demand continues to rise, set to triple in 3 years

June 29, 2018 in Investment News, Real Estate News, WeWork

The increasing demand for flexible and co-working spaces is prompting higher absorption of the commercial real estate. While co-working companies took up 1.8 million sq ft in 2017, the first quarter of 2018 itself has exceeded the annual tally of 2017.

During the quarter, co-working players have picked up 2 million sq ft of office space with the highest transaction activity witnessed in Bengaluru, NCR and Hyderabad markets, which contributed 43%, 16% and 15%, respectively, showed data from Knight Frank.
There are close to 200 co-working players running an estimated 400 shared workspaces across the country today, compared with just Regus and a few localised players in 2010 running less than 30 such centres.

“Globally, the co-working space has seen a phenomenal growth between 2010 and 2018 and most of the growth has taken place in the last three years. Although the concept is relatively new in India, it has witnessed solid growth from nearly negligible existence couple of years ago to 2 million sq ft absorption in just a quarter,” said Samantak Das, chief economist & national director, Knight Frank India.

Given the expansion plans of major players and the increasing appetite for this format from occupiers, Das believes property owners and co-working operators could well see annual transaction numbers treble from the current levels over the next 3 years.

Co-working, or collaborative offices, a relatively new concept in India, involves various individuals, or start-ups, sharing a common workplace environment. It is steadily gaining momentum across prime Indian property markets due to relatively cheaper costs and the flexibility it affords.

“It’s not a fad; it’s here to stay for a long term. In addition to start-ups and SMEs, large corporates are now also investing in employees and better work environment for them to boost productivity. We are seeing a shift in the way people want to work, and we will continue to invest to expand our capacities,” said Karan Virwani, Director, WeWork India.

While Regus is the most established shared workspace operator in the country today with over 2 million sq ft and 20,000 seats under operation, WeWork and CoWrks are among the newest and aggressive players in this space. Regus is now taking note of the changing environment and adapting promptly.

“We have been bullish and focus on growth in India. We want to double our network in 36 months to over 200 centres in tier-I and II cities. We are adapting our design template, product and services offering to suit the new millennial employees,” said Harsh Lambah, country head – India, IWG Plc, that owns Regus and Spaces brand in the country.

WeWork and CoWrks started their India operations in 2016 and operate around 1.5 million sq ft and 1 million sq ft, respectively, with plans to more than double their footprint by 2019-end. Both these companies have acquired 0.7 million sq ft each of co-working space in Mumbai, Bengaluru and the NCR in the six months since October 2017.

Despite the growing demand for co-working space, experts agree, there are several challenges that this segment is expected to face apart from changing the conventional mindset of occupiers. Data security and privacy are also impediments in the way of a corporate taking up co-working space, especially as the value of data becomes an ever greater source of competitive advantage. Corporate occupiers, therefore, tend to lean toward co-working space with contained floors, or spaces, within the facility to overcome this risk.

The co-working business model is based on the operator’s ability to buy space long and selling it short. However, this is also a double-edged sword that makes it difficult to predict cash flows of such an enterprise. The average tenure of co-working space occupiers can vary from under six months to close to two years depending on the operator and the occupier profile. This makes, maintaining a deal pipeline, one of the most important parts of this business.


IDBI Bank Real Estate Assets could Make or Break LIC Deal

IDBI Bank Real Estate Assets could Make or Break LIC Deal

June 27, 2018 in Investment News, Real Estate News

Life Insurance Corporation of India’s (LIC’s) bid to acquire IDBI Bank by is likely to have the bank’s real estate assets make or break the deal. Sources told Money control that while LIC has expressed a desire to acquire real estate assets of IDBI Bank, it may not be willing to sell them.

“Real estate assets will ideally need to be a part of the acquisition structure. We are in talks to work that out,” said a senior LIC official. He added that this would one of the pre-conditions of the deal.

LIC is in talks to acquire a majority stake in IDBI Bank. The proposal is being finalized and will be sent to the cabinet for approval in the next few days. Following which, the deal will be referred to Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDA) and Securities and Exchange Board of India (SEBI) for approval.

In February 2018, market regulator SEBI bought IDBI Bank’s seven-storey office building in Bandra – Kurla Complex (BKC) for approximately Rs 1,000 crore.

The 3.21 lakh square feet building was the second largest deal in BKC since 2013.

The lender’s total real estate assets including land holdings, residential and office buildings are collectively worth Rs 7,000 crore. IDBI Bank has more than six properties in prime locations across Mumbai.

In August last year, the bank proposed plans to sell two residential properties and four commercial properties.

The residential properties are in the well-known Rajesh Mansion and Mittal Castle plots in Mumbai’s premium locations. The commercial properties on offer include the Minerva Theatre land plot, a unit in Corporate Park Chembur, an entire floor in Mafatlal Centre at Nariman Point and an office area in Mittal Court, Nariman Point.

In FY18, the government-owned bank realised almost Rs 4,400 crore through the sale of its investments in non-core assets including the BKC property sale.


Manesar Land Scam: Buyers Seek Clarity on SC Order

Manesar Land Scam: Buyers Seek Clarity on SC Order

June 25, 2018 in Investment News, Manesar Land Scam, Real Estate News

The ABW Manesar Allottee Welfare Society has filed a review petition, seeking clarification in the Supreme Court order dated March 12, 2018, on the Manesar land scam case, which reversed the decision to scrap the acquisition, and ruled that ownership of the land now rested with Haryana State Industrial and Infrastructure Development Corporation (HSIIDC). The review petition (number 022358/2018) was filed on Tuesday under Section 51 of the Civil Procedure, 1908, for clarification and modification of the order/judgement dated March 12, 2018.

One of the petitioners, Naresh Jindal, said the court had directed that members of the applicant could either apply for possession from Huda/HSIIDC or seek a refund from the aforesaid authorities. However, there’s no clarity on the interest applicable or mention of a timeline. “If a refund is sought by us applicants, we should be entitled to interest on the refund amount. But the rate of such interest has not been provided in the SC order,” said Jindal. Similarly, the order does not provide a fixed timeline for HSIIDC to complete construction and hand-over possession.

Homebuyers have further questioned whether buyers seeking refund should be eligible for 12% interest per year or not and that the court should fix a deadline for completion of construction. “We have requested the court to set a deadline for completion of construction, which is to be carried out by government authorities so that homebuyers do not have to wait another decade to get their homes,” said TS Rawat, another homebuyer.

Out of the 400 acre land under the Manesar scam, a big chunk was brought by ABW developers to build their project ABW Aditya Niketan. More than 2,000 homebuyers have invested in this project, but construction hasn’t even started.

Homebuyers have also highlighted that only recently, some private entities have got HSIIDC land registered in their names. “While the Court had appointed HSIIDC/Huda as custodian of the 400-acre land, there have been reports that parts of this land have been registered in private names, which is a concern,” said Mandeep Negi, another homebuyer.

TOI had earlier reported that less than two months after the Supreme Court order in the Manesar land scam, a portion of the 400-acre land, whose ownership the SC had vested with HSIIDC, was sold off by private individuals through 20 different registries at the Manesar tehsil office. A tehsildar, a Nayab Tehsildar, a registry clerk and two computer operators were involved in the land deals, which were signed from March 14. Once it became public, even though the state government swiftly inquired into the matter and suspended the tehsildar and other junior employees, homebuyers are worried this could affect them.

Meanwhile, HSIIDC has missed the two-month deadline to verify ownership claims of homebuyers who had bought properties in the land in question. SC said applicants had a month to file their claims on properties and the government body had to verify these within two months of judgement. However, almost three months later, the process is yet to be completed.

The Manesar land deals happened in 2004 when the BS Hooda-led Congress government had withdrawn a notification for acquiring 688 acres, after initially issuing it. Meanwhile, the prospect of acquisition triggered distress sales among landowners, who were persuaded that selling out to private developers would fetch them a better price. By the time the state rescinded the notification, builders had managed to buy 400 acres for Rs 100 crore, where the market value was Rs 1,600 crore.


Warburg-Embassy JV Buys 110 acre in Haryana to Build Industrial Park

Warburg-Embassy JV Buys 110 acre in Haryana to Build Industrial Park

June 22, 2018 in Investment News, Real Estate News

Private equity major Warburg Pincus and Embassy Group’s joint venture company Embassy Industrial Parks has acquired a 110-acre land parcel in Haryana’s Farrukhnagar town near Gurgaon.

The entity is looking to invest Rs 600 crore, including the land cost, to develop a 3-million Sq-ft industrial park on this plot. The industrial and warehousing solutions company has already leased out 1 million sq ft of this proposed development.

In 2015, Warburg Pincus and Embassy Group had together infused $250 million equity capital to build industrial and warehousing spaces across India. By the end of this year, the company will have 1million sq ft fully operational and 3 million sq ft of partly ready, under-construction, but leased space.

“Substantial part of this equity capital has already been deployed and we are open to investing more for right opportunities. By 2019-end, we will have 6-7 parks operational and by the end of 2020, we’ll increase this number to 9-10 operational parks,” Anshul Singhal, CEO, Embassy Industrial Parks, told ET.

The Farrukhnagar industrial park is part of Embassy Industrial Parks’ Rs 1,910-crore Memorandum of Understanding (MoU) with the government of Haryana. As part of this pact, the company has developed a 6 lakh sq ft industrial park in Bilaspur and that was also sold out before its completion.

This has resulted in Embassy leasing out total 1.6 million sq ft within 24 months since signing the Haryana government MOU.

This is a significant component of the 3.6 million sq ft available at these two next-generation industrial parks.


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