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A look at investment options in realestate in 2020

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1/2/2020 A look at investment options in real estate in 2020 - Moneycontrol.com

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With ready A-grade rent-

yielding commercial

assets becoming scarce

and the residential market

no longer offering the

kind of returns it did a few

years ago, investors are

now turning to sunshine

options such as

warehousing, co-working spaces and co-living.

In 2019, commercial office real estate flourished and remained the top-ranking real

estate asset class. The first REITS by Embassy Office Parks was launched in April.

The launch of Embassy REIT in 2019 opened up a new asset class for investment in

country. Its success can be gauged from the fact that between 18 March and 30

November 2019, the price of a single REIT unit reached Rs 445.3 from a launch price of

Rs 300, registering a significant 48 percent rise.

The country is expected to see the launch of more REITs in 2020.

Residential continued to struggle under the funding

crunch and slow annual sales growth. In fact,

affordable housing remained upbeat in 2019 thanks

to multiple government sops throughout the year.

First-time homebuyers were given further tax

deductions (now amounting to Rs 3.5 lakh in a year)

on interest amount of home loans below Rs 45 lakh

availed within the financial year 2020 end. Luxury

and ultra-luxury segments remained limited to end-

user interest, with no serious investor activity.

Rs 25,000 crore stressed asset fund expected to

play key role in 2020

For the housing sector, the only light at the end of

the dark financial black hole in 2019 was the

announcement of the alternative investment fund

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A look at investment options in realestate in 2020

Non-anchor PSBs approach govt forpost-merger branding: Report

Senior NCP leader Daway

1/2/2020 A look at investment options in real estate in 2020 - Moneycontrol.com

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Real estate in 2019: A look at 10 game-changing regulatory decisions(https://www.moneycontrol.com/news/real-estate-2/real-estate-in-2019-a-look-at-10-game-changing-regulatory-decisions-4774371.html)

Realty recap 2019: Rs 25,000 crore stressedfund offers hope for stuck realty projects(https://www.moneycontrol.com/news/real-estate-2/realty-recap-2019-rs-25000-crore-stressed-fund-offers-hope-for-stuck-realty-projects-4764721.html)

(AIF) of Rs 25,000 crore to facilitate the completion

of stuck affordable and mid-segment homes.

In 2020, the government’s stressed asset fund is

expected to play key role in fulfilling last-mile

funding for liquidity-hit stalled projects, according

to an assessment by CARE Ratings.

According to experts, residential growth in 2020 will

mainly depend on the swift on-ground

implementation of some of the previously-

announced sops. If not, it may negatively impact the sector with buyer sentiments

derailing even further. And if done timely, these measures will yield positive impact

on the Indian real estate in 2020. A major part of the residential growth will most

likely unfold in the second half of 2020. And, the financially stronger players will stay

ahead in the game.”

The year 2020 is also expected to witness multiple IBC-led resolutions of large real

estate companies. This in-turn is expected to improve buyer sentiment and also revive

some of the key markets in NCR and Mumbai-MMR in terms of demand for housing

units.

Co-working, co-living and student housing to rule

Activities in rent-yielding commercial asset segment and construction across new

segments like warehousing, as interest from foreign investors will continue to be

elevated in 2020.

Asset classes like co-working, logistics and warehousing, co-living and student housing

gained traction in 2019, attracting slow but steady investments (collectively 210 mn

dollars).

There is a major shift from investors putting in their money into small office spaces to

co-working spaces. There’s also been a trend wherein investors are buying into large

floor plates and handing them over to co-working players to manage such spaces on a

revenue share model with their gains often working out to be around 13-14 percent

IRR, said real estate experts.

Student housing is yet another option as it is a resilient and a risk averse segment.

The industrial and warehousing sector has attracted Rs 254 billion worth of

investments since 2017, with a growing demand for larger facilities among e-

commerce companies and third-party logistics. The inflows are expected to touch Rs

495 billion by 2021, as existing participants expand their portfolios and new players

enter the market, says the report by Colliers Research.

The concept of co-working spaces essentially involves groups of individual

professionals and small and increasingly large-scale businesses who share

workspaces. In an age when business cycles have dramatically reduced and

companies need to constantly innovate to survive and remain competitive over the

long term, a co-working workplace may provide the environment that fosters fresh

thinking and innovation.

A look at investment options in realestate in 2020

Non-anchor PSBs approach govt forpost-merger branding: Report

Senior NCP leader Daway

1/2/2020 A look at investment options in real estate in 2020 - Moneycontrol.com

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Besides companies, people such as business nomads, expats or those travelling to the

country for a limited period are amongst those preferring to work out of plug-and-play

co-working spaces. Another constituent is the growing volume of freelance workers

(gig economy) who support corporate entities with specialised outsourced services in

the advisory, consulting and designing domain such as recruiting and advertising, says

a Knight Frank report.

Co-working spaces also enable the typical start-up to bypass the fixed rental cost with

the additional capex requirements of fit outs and operational hassles of a traditional

office space and opt for the flexibility of a co-working office. This not only allows the

new business to occupy a contemporary workplace on a per seat basis but also the

flexibility to increase, reduce or to exit the workplace.

Warehousing

Around Rs 22,100 crore of institutional capital has flown into this sector during this

period. The actual size of capital movement would be higher, as these numbers only

cover the major investments by organised players.

Going forward, demand for large warehousing spaces is likely to see steady increase as

occupiers now to move out of their smaller warehouses and consolidate their activities

in larger facilities, which are presently in short supply compared to the demand.

As more and more companies streamline their logistics networks,  unorganised

players or smaller organised players would consolidate or sell their assets to larger

ones. The industry is expected to witness a structural shift over the next 3–5 years.

The warehousing aspect in the logistics supply chain globally is going through a

transformation. From being a mere storage space provider for goods, the segment is

offering an array of value added services such as packaging, small scale

manufacturing, cross docking, automation, algorithm based demand forecasting and

distribution centres.

Who should invest?

Warehousing will be in demand regardless of REITs simply because of the push for

logistics infrastructure in the country. GST rationalisation, and the growth of e-

Commerce are additional drivers for large scale warehouses in various locations.

Additionally, with India’s logistic industry being awarded the infrastructure status

there is more interest in the sector for investments. Investments in Tier 2 cities and the

outskirts of metros is a good bet by as they are perfect for a hub and spoke model and

allow for easy transportation, say real estate experts.

Student housing

Student housing offers opportunities both to those who have the appetite to invest and

developers who could bank on it as a lucrative rental yielding revenue stream.

Currently, there are several players in the student housing space who have entered the

market knowing fully well that there is huge demand but lack of supply. These include

Your Space; Oxfordcaps which offers premium student housing facilities in Delhi-NCR

and is headquartered in Singapore and Stanza Living.

The current demand for Purpose Built Student Accommodation (PBSA) across India is

over 8 million bed spaces, a figure which is expected to grow at a rate of around 8

percent each year to touch 13 million beds by 2025, according to the Global Student A look at investment options in realestate in 2020

Non-anchor PSBs approach govt forpost-merger branding: Report

Senior NCP leader Daway

1/2/2020 A look at investment options in real estate in 2020 - Moneycontrol.com

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Property 2019 report by Knight Frank.

Currently, the bulk of the student housing demand is serviced by the unorganised

sector comprising rented accommodation and private hostels. These properties are

often below student expectations. The demand supply gap coupled with strong

fundamentals of the sector has led to an increase in investor interest to develop and

operate well-located, high-quality purpose built accommodation.

Knight Frank estimates that there is currently a potential to deliver 6 million PBSA bed

spaces on greenfield land located in close proximity to universities, while a further 2

million can be delivered through retrofitting and augmentation of existing on-campus

hostels, said Saurabh Mehrotra National Director of Advisory Services, Knight Frank

India.

Among the top hot spots for student housing are Bengaluru which has the highest

concentration of university colleges in India.The current student population in

professional courses is estimated at 6,60,000 out of which 3,06,377 require

accommodation. Of this only 10 percent is covered by on-campus PBSA provision.

Co-living spaces

In India, the co-living spaces opportunity is here to stay as the millennial population

currently accounts for 440 million. The growing interest for co-living spaces in cities

such as Bengaluru, the National Capital Region (NCR) and Pune has been instrumental

in many investors sitting up and taking notice of this emerging sector to diversify their

portfolio and risk.

The demand for co-living spaces in terms of the number of beds is slated to grow from

to 5.7 million, up from 4.19 million. The share of private beds shall rise from

15 percent to 30 percent of the total demand in the co-living segment, says a report by

Cushman and Wakefield India titled Co-living – Redefining urban rental living.

The renting philosophy for co-living spaces is derived from millennial behaviour

where such renters share less utilised areas such as living spaces, kitchen, balconies,

etc. in order to make an economical rental decision and be part of a working

community.

This trend is giving impetus to an organised rental market in cities such as Bengaluru,

NCR and Pune in the same way as co-working spaces did for shared office spaces.

Co-living operators typically take properties on long-term lease from property owners,

bear the makeover costs, load the properties with amenities and invest in creating a

tech platform for residents. They also charge on per bed basis from renters for

managing the properties.

According to Ashish R Puravankara, MD, Puravankara Ltd, close to 11 million

square feet is in the pipeline for the next 4-5 upcoming quarters.

"We will be launching 4-5 projects with close to 8msft in the next 12- 18 months. Apart

from our existing markets like Bengaluru, Chennai and Kochi, the brand will enter

Mumbai and Pune market. We will be adding couple of more projects to our newly

launched ultra-luxury residential line - WorldHome Collection- in the next couple of

quarters. We are also focused on expanding commercial portfolio through

warehousing, co-living and co-working spaces," he told Moneycontrol. A look at investment options in realestate in 2020

Non-anchor PSBs approach govt forpost-merger branding: Report

Senior NCP leader Daway

1/2/2020 A look at investment options in real estate in 2020 - Moneycontrol.com

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vandana.ramnani@nw18.com (mailto:vandana.ramnani@nw18.com)

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A look at investment options in realestate in 2020

Non-anchor PSBs approach govt forpost-merger branding: Report

Senior NCP leader Daway