Page 44 - Construction Vision Sep-Oct 2017 issue

Certain co-working operators will prefer The qualifying criteria for affordable housing b. Only 20% of an Indian REIT's monies can
leasing out parts of or the entire areas of were also revised to 30 sq. m. and 60 sq. m. be invested in development, which is the
their co-working office spaces 'anchor on carpet rather than saleable area in the riskiest aspect. The remaining 80% of a
tenant' corporates. In other words, co- four main metros and non-metros REIT's assets must be invested in income-
working operators and corporates will move respectively. This effectively increases the producing property.
into a 'hybrid' sort of space and increasingly size of affordable housing market across The REIT potential in India is huge, with
rely on each other. India. Moreover, the demonetization of high- around 229 million sq. ft. of office space
value currency notes will cause land prices currently being REIT-compliant. Even if 50%
The sun rises on affordable housing to ease in the next few years - especially in of this space is listed in the next few years,
far-flung areas around Indian metros and we are looking at a total REIT listing worth
$18.5 billion. Moreover, India's stock of
Grade A commercial assets is increasing,
with REITs acting as a sure-fire growth
catalyst.

More industry consolidation on the cards

Slowing sales and lack of financial prudence
among several developers is leading to a
fairly obvious conclusion - consolidation.
The overcrowded real estate sector is going
to become a lot leaner and meaner, with
consolidation happening by ways of joint
developments and joint ventures between
landowners and/or small developers with
bigger, better-organised players, smaller
developers being bought out by larger
players, and struggling developers cashing
in their land banks by selling them to players
with stronger balance sheets and appetite
for growth.
the Tier-II and Tier-III cities. The
Affordable housing in India is finally set to government's dream of Housing for All by
The pace at which this happens will depend
get the much-coveted infrastructure status. 2022 appears a lot more attainable now.
on how much equity gets infused into the
One crore houses are to be built in rural
sector by the larger PE investors, and the
India by 2019, and this vital segment will Office sector transformation: From REIT
strategy that foreign and domestic
now see cheaper sources of finance - to complete
developers adopt. Some foreign developers
including external commercial borrowings The first REIT listing is expected within the
have already entered the country, setting up
(ECBs). Re-financing of housing loans by next few months, and prominent private
base and obviously playing for keeps.
National Housing Banks (NHBs) can give a equity funds such as Blackstone will likely
further boost to the sector. be the first movers. REITs will attract
Some investors and developers will take
institutional and smaller investors alike
plunge into the market now, while others will
A new Credit Linked Subsidy Scheme because of their inherent nature to provide
prefer to ride the fence for a while; but one
(CLSS) for the mid-income group with a regular dividends at relatively low risk.
way or the other, consolidation will be the
provision of Rs 1,000 crore in 2017-18 was Smaller investors are especially excited at
name of the game for the Indian real estate
announced even before Budget 2017-18. this new and easier investment opportunity
industry over the next five years.
Extension of tenure of loans under the because:
CLSS of Pradhan Mantri Awas Yojana a. Indian REITs will prefer to invest in
Larger players will peak in strength by
(PMAY) was increased from 15 to 20 years, commercial space developments -
around 2021, and smaller players will be
and the Budget also increased allocation to specifically the highest quality or Grade-A
eroded. Equity investment - or the lack of it ‐
PMAY from Rs 15,000 crore to Rs 23,000 properties - because of the higher rental
will play a deciding role.
crore in the rural areas. yields in this asset class; and
42 CONSTRUCTION VISION SEPTEMBER - OCTOBER