2016 Could Be The Year Of Revival For Indian Realty: RICS-JLL Investor Sentiment Survey
~~70 % of investors foresee improvement in sales over the next 12 months~~
~~Number of successful exits expected to go up in 2016~~
~~Pure equity expected to make a comeback~~
~~Newer sources of capital from Japan and China expected to enter the Indian real estate market in 2016~~
~~ Continued consolidation over the next 12-18 months~~
~~Mumbai & Bengaluru continue to be front-runners as preferred investment destinations~~
~~Investor sentiment will experience further fillip with RERA implementation~~
Mumbai, January 21 2016: In what signals a slow but steady revival of the Indian real estate sector in 2016, almost 70% of investors foresee improvement in sales over the next 12 months, according to a recent sentiment survey conducted by RICS and JLL across a wide range of investors, including private equity investors in the real estate sector.
These findings have been arrived at as part of a recent sentiment survey, covering a wide range of investors and are featured in the RICS-JLL Research Report 'Peering into 2016: Taking Pulse Of Investor Preference', released today at the RICS Real Estate Investment Conference at the ITC Maratha, Mumbai.
RICS is a global professional body that promotes & enforces standards and qualifications in real estate, construction and infrastructure.
The anonymous survey of seasoned real estate investors in the Indian real estate market focused on capturing the mood of participants and identified their specific areas of concern. The focus of the survey centered around specific factors such as return expectations, exits, preference on asset typology and impact of new and proposed regulatory reforms on the real estate market over next 12 months.
As per the report, investors clearly voiced that even though the refinancing cycle is not expected to meet its logical conclusion in 2016, the number of successful exits will increase over the next 12 months. Respondents also believe that there will be continued consolidation over the next 12-18 months, tinged with an increase in distress deals. Additionally, pure equity will make a comeback, with a majority of respondents expecting its share to increase substantially in the case of select ‘Grade A’ developers.
“Today there are several financing options available. Driven by the need to increase returns and a desire to diversify, investor’s interest in international property markets is once again on the rise and India definitely seems to be leading that interest. This research paper is an attempt to gauge the investment sentiment and pulse of the market. The idea is to evaluate trends, opportunities and new frontiers that will pave the way for the market in 2016 and beyond, I am truly hopeful that 2016 will unlock the investment floodgates for the realty sector," said Ms. Devina Ghildial, MD- South Asia, RICS.
Majority of investors surveyed felt that while office cap rates will remain the same, the average return on investment (ROI) expectations on the other hand would actually decrease over the next 12 months. Speaking of asset classes, commercial office and mid-segment residential property will be the top two preferred choices of investors with IT/ITeS office rounding up the third spot. From a city perspective, Mumbai and Bengaluru remain close contenders as the top two preferred investment destinations, with Pune coming in a distant third beating the NCR.
A majority of respondents have also opined that recent and proposed regulatory initiatives such as the relaxation of FDI rules in real estate and passage of Real Estate Regulatory Bill will enhance investment in smaller projects and positively impact the sentiment by boosting buyer confidence.
"While the respondents are overwhelmingly optimistic on the markets fundamentals (sales) improving in 2016, they are however circumspect on the possibility of REIT listings hitting the Indian capital markets in 2016 and the emergence of affordable housing as a viable investment theme," said Ramesh Nair, COO-Business and International Director, JLL India.
The report also highlights that a majority of respondents believe that Japanese and Chinese investors will enter the Indian real estate market in 2016. This trends is something new, as historically the sector has attracted FDI mainly from countries like the US and UK.
RICS promotes and enforces the highest professional qualifications and standards in the development and management of land, real estate, construction and infrastructure. Our name promises the consistent delivery of standards – bringing confidence to the markets we serve. We accredit 118,000 professionals and any individual or firm registered with RICS is subject to our quality assurance. With offices covering the major political and financial centres of the world, our market presence means we are ideally placed to influence policy and embed professional standards. We work at a cross-governmental level, delivering international standards that will support a safe and vibrant marketplace in land, real estate, construction and infrastructure, for the benefit of all.