Private Equity Investment in real estate at 9 year high in 2016

Private Equity Investment in real estate at 9 year high in 2016

During 2016, Private Equity Investment in Real Estate (PERE) increased by 26 percent with Rs 399 billion recorded in 2016 and Rs 316.7 billion in years 2015. Private Equity Investment in the sector has a hit a nine year high. The highest share of inflow was taken by Mumbai at 32 percent of the total private equity investments in Real Estate (PERE).

The average deal size increased to Rs 3.4 billion from 2.8 billion 2015, signing improved confidence amongst investors to make larger investments into the Indian real estate sector. During 2016, PE inflows into the housing sector increased by 5 percent. Domestic funds were most active investors in housing and accounted for almost 80 percent of the total investments.

Investment in commercial office assets were lower than the previous year, as a few large deal of office part initiated during in 2016 are still in active discussion and likely to close this year.

Last year 2016 was one of the best years for the organised retail real estate sector, with the sector attracting Rs 72 billion of PE investments. PE inflows into malls hiked seven times since 2015 levels on back of rising interest from institutional investors and funds looking to invest in top- grade leased malls with low vacancy levels. Recent efforts by the government to regulate the sector have been saw positively by investors who are now looking at the long term potential of the Indian market.

February 17, 2017 / by / in , , ,
Tax benefit to first time home buyers to be a game changer

The government will give a benefit of 2.4 lakh to first-time home buyers with taxable income below Rs 18 lakh a year, which would be a game changer for the sector. The scheme is likely to be informed shortly and will be effective from January 1, 2017. This scheme would be a game changer. The amount is equivalent to the total interest subsidy over a 20-year loan and will be given upfront to the housing financing company, through nodal agencies such as National Housing Bank and Hudco to reduce the outstanding loan. For a 15-year loan, the value of the benefit would be Rs 2.2 lakh.

Affordable housing has become an important sector. For the last two years, the government has been trying to make an environment where affordable housing can be pushed ahead. Home loans should cover stamp duties which are 10% of the cost. It will make it very easy for homebuyers to acquire property since there will have easy access to funds.

Government should help reduce construction costs and suggested SEZ-like structures for affordable housing. When it comes to real estate developers, cost of land is insignificant for affordable housing.

February 16, 2017 / by / in , , , ,