Tag Archives: Cushman & Wakefield

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2020 तक आठ प्रमुख शहरों में होगी 41.56 लाख घरों की मांग, डेवलपर्स नहीं कर पाएंगे मांग के अनुरूप आपूर्ति

देश के प्रमुख आठ शहरों में घरों की मांग बहुत अधिक बढ़ने वाली है। कुशमैन एंड वेकफील्‍ड द्वारा जारी ताजा रिपोर्ट में अनुमान जताया गया है कि शहरी क्षेत्र में घरों की मांग 2020 तक 41.56 लाख यूनिट की होगी, इसके विपरीत निजी डेवलपर्स केवल 10.23 लाख यूनिट की ही आपूर्ति कर पाने में सक्षम होंगे।

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यह आठ शहर हैं- अहमदाबाद, बेंगलुरु, चेन्नई, दिल्ली-एनसीआर(एनसीटी, गाजियाबाद, फरीदाबाद, गुरुग्राम और नोएडा), हैदराबाद, कोलकाता, मुंबई औश्र पुणे।

रिपोर्ट के अनुसार 2016-2020 के दौरान प्रमुख आठ शहरों में कुल मकानों की मांग लगभग 42 लाख यूनिट रहने का अनुमान है। इसके अनुसार निजी डेवलपर्स द्वारा इस दौरान निर्माणाधीन व योजनागत 10 लाख मकानों की आपूर्ति किए जाने की उम्मीद है।

सबसे ज्‍यादा मांग दिल्‍ली-एनसीआर में रहेगी, यहां 2020 के अंत तक करीब 10 लाख यूनिट की मांग होगी।, यह भी अनुमान है कि सबसे ज्‍यादा मांग एलआईजी (15 लाख रुपए से कम) मकानों की होगी।, 2020 तक तकरीबन 19.8 लाख एलआईजी यूनिट की मांग का अनुमान है, इसमें प्राइवेट डेवलपर्स केवल 25,000 यूनिट की आपूर्ति करेंगे।, इसी प्रकार एमआईजी (15-70 लाख रुपए) मकानों की मांग 14.57 लाख युनिट की होगी, जबकि इसके विपरीत आपूर्ति केवल 6.47 लाख यूनिट की रहेगी।
कुल हाउसिंग आर्पू‍ति में 63 प्रतिशत हिस्‍ससा एमआईजी मकानों का ही होता है।

Normal dispatch cost of moderate homes drops 36% in Mumbai more than 2 years

Average dispatch cost for moderate units in Mumbai, the nation’s business capital, declined 36% in the main quarter of 2016 from two years back. Normal dispatch costs have seen decrease crosswise over significant urban areas, making the new ventures less expensive than those propelled 12-24 months back.

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While moderate homes dispatch costs declined 25%, 10% and 5% in Pune, Delhi-National Capital Region and Kolkata, individually; Mumbai saw the most astounding decay over these two years, said a Cushman and Wakefield report.

In Mumbai, normal dispatch cost in this class remained at around Rs 4,300 for every sq ft, as designers hope to draw in purchasers in the minimal effort portion in Mumbai.

“Designers have now come to perceive the capability of the moderate lodging portion and are expecting more prominent force sought after in the reasonable section as clients are seen to be more value delicate in the present business sector,” said Shveta Jain, Executive Director, Residential Services at Cushman and Wakefield. “With solid accentuation on moderate lodging by the administration, charge motivating forces stretched out by the legislature, and in addition the mindful methodology by end-clients in different fragments, engineers are wagering on the reasonable portion.”

Engineers expect legitimization in dispatch costs in this profoundly cost touchy portion to expand the business speed in the fragment. Engineers have likewise been embracing a technique of offering private units in littler estimating with a specific end goal to pull in purchasers. The normal unit size of moderate units in Mumbai was seen at around 850 sq ft, a 11% decrease amid these two years, the report said.

Amid the present quarter, dispatches in Mumbai at 5,360 units represented 17% of aggregate dispatches in main eight property markets. This speaks to a 35% year-on-year increment in the quarter finished March.

The mid-fragment represented the larger part of dispatches, with dispatches in the portion spread over the eastern rural areas, Thane and Navi Mumbai. Amid the quarter, the moderate portion represented just 5% of aggregate dispatches in the city.

Among different markets, Pune likewise saw an expansion in the normal size of flats that were dispatched in March quarter which were noted to be bigger by a normal of 24% over those propelled a year prior affecting the normal ticket size of the new dispatches inside the city.

In Delhi-NCR, the cognizant exertion by designers in Delhi-NCR to expand the appeal of the reasonable fragment comes during a period when dispatch of moderate units has remained similarly high. Engineers in this business sector have concentrated on the reasonable fragment that represented 41% of aggregate dispatches amid the quarter, with dispatch of 1,855 units. This spoke to a 67% expansion from the comparing quarter a year ago.

Google leases 1 lakh sq ft office space in Bengaluru

Google has taken 1 lakh square feet office space on lease in Bengaluru’s Bagmane World Technology Center to grow its business in India as a feature of CEO Sundar Pichai’s arrangements to take advantage of the neighborhood market and designing ability.

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The American web index organization struck the arrangement for the workplace space as of late, three individuals mindful of the matter said on state of obscurity. “The organization is likewise searching for extra space in Hyderabad, aside from setting up its biggest grounds,” said someone else, who did not have any desire to be distinguished.

A Google representative, be that as it may, said in light of an email question from, “We don’t remark on bits of gossip and hypothesis.”

Pichai had in December 2015 said, “We will increase our building ventures at our Bengaluru and Hyderabad offices. We will likewise manufacture an enormous new grounds in Hyderabad.”

The organization had said that it will put resources into regards to Rs 1,000 crore in building the new grounds, which will be spread more than seven sections of land in Gachibowli in Hyderabad and will be its greatest grounds outside the US.

Google had in 2015 rented 430,000 sq ft of office space from land designer Unitech in the second period of its Signature Towers II venture in Gurgaon. This was notwithstanding the 160,000 sq ft of space it as of now had, spread more than eight stories in the same complex.

Google had before said it hopes to twofold the quantity of its representatives in India to 13,000 by 2019. A man mindful of the arrangements said the organization may not instantly grow its headcount fundamentally but rather will do as such in the following three-five years.

Pichai had said that the organization will concentrate on three territories to make the web more applicable for Indians and their every day needs, including steps, for example, setting up free Wi-Fi crosswise over no less than 100 train stations the nation over and adjusting Google’s center items to work better on 2G web associations.

As indicated by Cushman and Wakefield, office space request in India grew 19% in the primary quarter of 2016 from a year back to 11.7 million sq ft over the main eight markets.

 

 

Unitech wants to raise Rs 500 crore from private value firms

Realty firm Unitech is hoping to raise about Rs 500 crore from private value firms for the advancement of lodging venture in Noida and reimburse LIC’s obligation.

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The organization is ahead of time phase of examination with 2-3 private value firms, including one from the Middle East, to raise supports, sources said.

Unitech would utilize the sum raised to clear the duty of Life Insurance Corporation of India (LIC) and improvement of another lodging extend in Noida, they included.

The organization has as of late raised Rs 85 crore from Piramal gather, sources said.

Unitech had a year ago raised about Rs 70 crore from Piramal gathering to finish development of its joint wander lodging extend in Chennai.

Unitech representative declined to remark on this matter.

LIC has issued a notice to e-closeout Unitech’s 14 lakh sq meter arrive in Noida on May 6 if the realty firm does not reimburse the whole levy before that date.

Recently, the representative said the organization was presently making the extraordinary installment to LIC without further ado.

“We are near settling the financing for the same,” the representative said.

The organization’s united net obligation as of December 31, 2015 remained at Rs 6,802.05 crore with obligation to value proportion at 0.64.

Unitech’s Managing Director Sanjay Chandra had in February said the organization was trying endeavors on various fronts to enhance the income for finishing its continuous activities.

The organization had rolled out certain hierarchical improvements to give more honed administration center to individual activities, Chandra had said.

Land part is confronting a colossal request log jam from last 3-4 years, compelling engineers to raise supports from PE players to meet development cost and reimburse obligation.

Private value (PE) interests in the realty area ascended by 72 for each penny to Rs 25,683 crore amid 2015, most elevated following 2008, essentially on store implantation in the drowsy lodging portion, as per property expert Cushman and Wakefield.

Land bill to shield clients from deferrals

A Mumbai-based client (name withheld on solicitation) booked a level worth Rs 1.88 crore with a main developer in Pune in 2010. He was guaranteed ownership of the condo in 39 months. Be that as it may, the developer did not convey the level 65 months subsequent to consenting to the arrangement.

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In Cut to March 2016, the engineer sent an ownership letter to the client. At the point when the purchaser requested pay for the postponement, he was initially denied and afterward “verbally offered Rs 2.5 lakh”, which he rejected calling it a “concession”. He said that had he deferred the installment (which was for the most part settled in February 2013 according to the installment terms), he would have needed to spend a fundamentally higher sum as punishment as indicated by the understanding.

The scene may sounds recognizable? That is on the grounds that cases like this one happen much time and again. However, the circumstance is liable to change soon.

The new land administrative bill accommodates approach remuneration to both the engineer and the purchaser in the event of postponements from either end. It is not yet clear, in any case, if the procurements of the new bill will have a review impact. Going ahead, the bill intends to resolve such irregularities and get some adjust the exchanges between the purchaser and the engineer. The bill has been gone by both the places of parliament and now anticipates Presidential consent.

Pune-based backer Dnyanraj Sant, who battles purchaser cases, said, “The greater part of the cases I battle are for postponed ownership. Clients have enrolled the assention and paid the sum, yet have not been given either the ownership as guaranteed or remuneration when the venture went much past the guaranteed date.”

Developers say such procurements will expand the cost, refering to hazard premium, the necessity to give guarantee of five years and adherence to due dates as reasons. In a late meeting to teach manufacturers and designers about the procurements of the charge, it was expressed that cost would build eight to 12%.

Sant, be that as it may, does not concur, with the thinking. “All little and enormous manufacturers should stick to standard standards of development and territory. In the event that an engineer is taking after the standards, he ought not be stress over giving service contract.” he contended.

The bill additionally accommodates a substantial punishment on designers who neglect to hold fast to the standards. The Builders are additionally required to stop 70% of the aggregate assets gathered from the purchaser in a different record, which is to be utilized just for that specific task. They Builders contend that the procurement places capital requirements on them. Market players say it will drive the manufacturers to take advantage of more costly wellsprings of financing that will be gone on to the cost.

The procurement’s point , in any case, is to keep the developer from going amiss supports to different undertakings with the expectation that tasks are conveyed on time.

The bill additionally orders that engineers first enlist a task with the controller before proceeding with the deal and begin the development instantly in the wake of accepting the beginning authentication. Manufacturers say this will abandon them with no extension for pre-dispatch deals. “Considering the timetable procurement, developers will need to finish the task according to the pre-chosen course of events, independent of whether the offers of most units have experienced or not,” Sumeet Bhatia, office head, Pune, of Cushman and Wakefield, said.

Market members say developers will need to arrange their undertakings in a superior manner in the future. They won’t have the capacity to escape with reasons like inaccessibility of crude material. Each remaining detail will must be tied up and this will include some significant downfalls. “This implies venture expense will rise and designers will pass it on to the buyers,” said Rohit Gera, overseeing executive, Gera Developments. Whenever inquired as to whether the bill neglects to give alleviation to greater part of the buyers searching for ease lodging, Gera said, “A solitary bill can’t be an answer for every one of the issues debilitated the area. To bring down the expense of undertakings, powers need to investigate different measures, for example, authorizing arrive and enhancing open base in periphery areas.”This charge, he included, will give significant serenity to the client, yet the genuine feelings of serenity will come at a premium, he included.

Social extremist Vivek Velankar said, be that as it may, that the expansion in expense may not influence purchasers that much. “In spite of the fact that the costs will go up due to the danger premium that developers are prone to charge, the aggregate sum paid by a customer pays won’t be particularly distinctive given the five-year guarantee,” he said. At present, the customer needs to spend on repair and upkeep of interior fittings out of his own pocket, regardless of the fact that the house is only a year old. “Presently, the developer will need to pay for any repair work,” Velankar included.

Standalone Quote:

The new guidelines mean developers need to give ownership on the concurred date. Presently, the main thing I predict is that they will say we will give ownership in three years, rather than two years… In our nation, there are sure escape clauses in each law. The very motivation behind the demonstration is to ensure shoppers and the state apparatus ought to be given satisfactory base and assets to execute the demonstration

Cushman and Wakefield looks for more expense sops on home credit and reasonable lodging

n request to help lodging request, property specialist Cushman and Wakefield has recommended that the legislature ought to incentivise advancement of reasonable homes and expand tax reductions on home advances.

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It has additionally looked for better tax collection standards for Real Estate Investment Trusts (REITs) that have been acquainted with create stores for the business land in a straightforward way.

“To recuperate high land costs, designers have dismissed reasonable lodging and rather centered around mid-and top of the line sections, where the edges are higher. This has prompted an absence of moderate lodging alternatives in Indian urban communities,” C&W said in an announcement.

More noteworthy tax cuts, for example, administration charge exclusion for engineers of moderate activities would incentivise designers and goad the private division’s enthusiasm for the space, prompting production of reasonable lodging stock, it included.

Looking for expanded tax cuts on home advances, the specialist said that as far as possible on the interest payable ought to be expanded and reimbursement of key ought to be avoided from the advantages under Section 80C.

“A home purchaser is qualified for case both the hobby and essential parts of home advance reimbursements for tax cuts. In any case, the roof under tax breaks is right now topped at Rs 2,00,000 towards the aggregate interest payable on the home credit and Rs 1,50,000 for essential paid.

“In any case, the essential paid is clubbed under Section 80C with other expense sparing instruments which adequately does not give critical duty alleviation to the home purchaser,” it said.

The key reimbursements ought to, along these lines, be dealt with as a different expense exception substance and avoided from advantages under segment 80C.

“Derivations towards the aggregate interest payable on the home advance ought to likewise be expanded from Rs 2,00,000 to Rs 3,00,000. Such changes will help in drawing in home purchasers,” C&W said.

The advisor likewise requested “industry status” for the land part.

“Recompensing ‘industry status’ to land area in India will enhance financing to the ambushed designers and will likewise call for lower financing costs on credits. In addition, conceding industry status will likewise improve endorsement process and build straightforwardness,” it said. MJH SBT ABD ABK

PE interest in realty segment up 72% a year ago at Rs 25,683 crore

Private value (PE) interests in the land division ascended by 72 for every penny to Rs 25,683 crore a year ago, most astounding subsequent to 2008, for the most part on asset imbuement in the lazy lodging section, as per property advisor Cushman and Wakefield.

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Out of the aggregate PE interest in the realty segment amid 2015, over Rs 18,000 crore was in private section, which is confronting a gigantic stoppage since last 2-3 years, bringing about liquidity crunch and huge deferrals in ventures execution.

By C&W, the aggregate PE inflows in the area remained at Rs 25,683 crore in 2015.

“The PE speculations were extensively higher by 72 for each penny from the earlier year and most elevated following 2008. The generous increment in PERE(Private Equity in Real Estate) speculations amid the year was driven by a three-fold hop in ventures made in the private part,” the expert said in an announcement.

The aggregate number of arrangements additionally rose to 90 amid 2015 from 75 in the earlier year. In addition, the normal arrangement measure excessively expanded and was noted at Rs 290 crore, an ascent of 43 for each penny on year-on-year premise.

Lodging portion pulled in the most elevated offer of speculations amid 2015 with more than 70 for each penny offer altogether ventures, trailed by the business office with 21 for every penny offer.

The aggregate estimation of interests in the private fragment remained at Rs 18,070 crore.

“PE reserves keep on making lion’s share of the interests in the private area at the venture level. The interests in the private division has come during an era when private deals have been drowsy for over recent years, prompting thriving stock levels,” it said.

The expert anticipates that private deals will “see green shoots” in 2016, inferable from falling financing costs administration on home advances and rising wage levels particularly if the ‘Seventh Pay Commission’ gets executed.

Complete interest in business office resources was recorded at Rs 5,420 crore, a decay of 28 for every penny, from record high inflow saw in the earlier year.

C&W Executive Managing Director South Asia Sanjay Dutt said: “In spite of the fact that SPV (Special Purpose Vehicle) level arrangements by method for organized obligation has been the favored course received by dominant part of the PE assets to make speculations, substance level arrangements too have seen solid get both as far as arrangements and venture volume”.

In any case, he said the worldwide assets have been particular and have made ventures just with organizations which have great qualifications and a demonstrated reputation.

“The pattern of higher speculations through SPV level arrangements is liable to keep going ahead too in 2016 and general ventures are liable to expand attributable to developing financing needs of engineers, rising positive thinking in the Indian economy.

“Furthermore, new arrangement of speculators, for example, worldwide monetary organizations who have begun investing so as to investigate chances to procure better returns in Indian land part,” Dutt included.

All out office renting surpasses 50 million sq ft in 2015, net retention stays stable on higher migrations, unions: Cushman and Wakefield

Net assimilation of office space in the main eight urban communities of the nation dropped 1% to 33.5 million sq ft on the back of expanded migrations and combinations bargains, as per property consultancy Cushman and Wakefield.

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“General positive business slants and more grounded development recorded by worldwide and organizations in India in the course of the last few quarters have prompted organizations firming up extension and solidification arranges as they anticipate higher potential on the back of a hopeful business viewpoint, in this way keeping up the levels of net assimilation,” said the consultancy.

Of the aggregate net retention, Bengaluru contributed the most astounding at 10.3 million sq ft took after by Pune at 6.3 million sq ft and Hyderabad at 5.5 million sq ft.

“Be that as it may, in 2015 an extensive number of organizations went into uniting their operations in bigger spaces in an offer to enhance profitability, achieved by joined efficiencies which prompted absolute renting exercises breaking 50 million sq ft in 2015,” it said.

Renting exercises amid 2015 recorded a 15% expansion more than 2014 on the back of expanded certainty realized by consistent financial development and reestablished corporate certainty particularly in the IT-ITES and e-Commerce areas.

Impelled by expanded corporate certainty, the year 2015 saw 9% higher office space supply at 41.2 million sq ft, the most noteworthy supply found in the most recent three years.

Sanjay Dutt, overseeing executive, India at Cushman and Wakefield said the business office segment assembled energy with some vast rents and purchase out exchanges saw amid the year.

“Organizations have been firming up development and solidification arranges, prompting expanded renting movement as they anticipate higher potential and expanding business action. The ingestion pattern amid the year was generally determined by the IT-ITeS, E-Commerce, Consulting and Pharmaceutical areas.”

With late declarations, for example, Smart India and Make in India, that are adapted towards giving financial fillip to India’s economy, Cushman and Wakefield expects a development in new occupiers separated from an extension in the current corporates in India, why should anticipated that further confer would bigger spaces.

“A few new businesses which are in development mode will make extensive interest, offering office some assistance with spacing ingestion to stay solid. The following two years is required to see expanded occupier request on the back of enhanced business movement and monetary development,” he said.

Bengaluru represented 31% of aggregate net assimilation over the main eight urban communities, trailed by Pune and Hyderabad. Amid the year, organizations from the IT-ITES and e-Commerce area were seen to be migrating to bigger Grade A structures particularly in the Outer Ring Road submarket.

Net retention levels in Pune picked up energy amid the year and surpassed that of Mumbai, Hyderabad, Delhi-NCR, setting the city on the second place amid the year. The city’s net retention levels rose 61% amid the year at 6.24 million sq ft. Pune is quick developing as a favored alternative among corporates because of more prominent moderateness contrasted with urban communities, for example, Mumbai and Bengaluru, and its nearness to Mumbai.

As a consequence of expanded inclination for the city, supply dramatically increased to 7.71 million sq ft amid 2015 with the Suburban West submarket of Pune (Aundh, Baner, Pimpale Nilakh, Pashan, Sus, Bavdhan, Pimpri) seeing a lump of the development fruitions amid the year. Regardless of supply multiplying, high ingestion levels prompted opportunity levels tumbling to 18.8% at Q4 2015 from 22.1% toward the end of Q4 2014.

Aside from Pune, Hyderabad too saw a spurt in business office action amid the year. Net assimilation climbed around 25% amid 2015, with the IT-ITeS area and the pharmaceutical division representing the most extreme renting movement.

“A moderately reasonable business sector, and additionally enhanced political soundness in the state are seen to be driving interest for business office spaces. Post the bifurcation and with the new government concocting approaches for financial development and security, the corporate certainty is seen to be perky. Notwithstanding this all, the rental worth at which quality office space is accessible in the city has added to the engaging quality of the area,” the consultancy said.

As an aftereffect of a spurt popular and bring down supply in 2015, opening level have decreased to 12.03% toward the end of Q4 2015 from 17.9% toward the end of Q4 2015 a year ago.

Delhi-NCR saw high combination and movement action amid the year that prompted 44% decrease in net ingestion to 3.83 million sq ft in 2015. The primary and the final quarter, specifically, saw low net ingestion levels in Delhi-NCR. High movement action was seen in Mumbai as well, that prompted net ingestion levels declining 30% to 3.18 million sq ft in 2015. Renting exercises, which represents migration and solidification exercises, saw an ascent of 2% and 14% separately in Delhi NCR and Mumbai.

Realtors keen to enter office space on demand uptick

The rising interest is this space has been generated by better demand outlook and constrained supply of grade A office spaces as most developers did not launch any major office projects since 2009, given the weak uptake until recently.

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With commercial real estate showing signs of recovery, property developers that had stopped investing additionally in this segment are now looking to invest in office projects.

The company is also entering Mumbai, Gurgaon, Pune and Hyderabad markets by acquiring assets. It has been annually constructing 2 million sq ft of commercial property across major cities in India and expects to step it up to 3 million sq ft. Apart from looking to construct more commercial projects, developers are also building their commercial projects portfolio by acquiring ready properties.

According to property consultancy firm Cushman & Wakefield, net office absorption in the top eight cities is expected to touch 36.5 million sq ft in 2015, which will be 18% more than last year, and 65% higher than 2013. “We will see the highest net absorption for office space this year since 2008 peak of 40 million sq ft. This has clearly attracted developers’ attention as given the current stagnation in residential market, commercial segment is offering some optimism to them.

“Eventually, the fact that more jobs are getting created will lead to increased demand for residential projects among buyers,” said Sanjay Dutt, executive MD, South Asia, Cushman & Wakefield. Developers such as RMZ Corp, Mantri Developers, Supreme Universal, Vatika Group across property markets are now looking to launch and build more commercial projects. “Mood to buy homes is somber now but when market picks up, south (India) will be the first to flip back as most white collar jobs are created here,” said Raj Menda, Corporate Chairman, RMZ Corp. Bengaluru-based RMZ is in the process of acquiring some commercial assets of BPTP and Equinox Realty to increase its portfolio.

“Given the current response for our 1.5-lakh sq ft commercial project at Baner in Pune, we are looking to launch one more commercial project spread over 5 acres there. In Mumbai, we are reviewing proposals for joint ventures for undertaking commercial projects as well as for acquiring preleased commercial properties,” said Sunny Bijlani, director, Supreme Universal. In Delhi-NCR too, Vatika Group is also increasing its focus on commercial projects, given the sluggish state of residential market. For developers, the alignment in focus is also a part of balanced business strategy.

Sushil Mantri of Mantri Developers of Bengaluru said his company is looking to build a portfolio of 10 million sq ft in five years. “Real estate is a cyclical business with ups and downs. There is a need for balanced portfolio, so we diversified into yield business,” said Mantri. The company has converted a one million sq ft of hotel property in Bengaluru to commercial.

“Hospitality has a long gestation period and is a non-viable loss making business. We will only do hotels in mixed used development, depending on demand,” said Mantri. The company has created a rental yield business under Aditya Sikri as CEO to drive commercial and retail business for the company. The company aims to now have 65%residential portfolio from 85% now.

RMZ has also converted a 5-lakhsq-ft property in Bengaluru’s Devanahalli into commercial with demand being high on this segment. In 2009, a reverse trend was observed wherein developers converted their commercial projects into residential ones. “There is a significant pick-up in commercial in the last one and a half year. Office leasing has been booked in advance with around 70-80% of the under construction properties being pre-committed in advance by Fortune 500 companies,” said Nishant Singhal, director-strategy, Investors Clinic, explaining the reversal in trend.

Debt funds fail to deliver interest payments as real estate languishes

:It’s a wager gone terribly wrong. Rich savvy investors, who invested in real estate debt funds expecting higher yields and capital protection, are spending sleepless nights as they have not been receiving regular interest payments over the past year. Some of these investments may go down the sewer unless there is an immediate uptick in property sales and a resultant revival in the real estate sector, wealth managers and analysts opine.

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Ballpark estimates suggest that almost half of the 50-odd real estate funds – which provide mezzanine funding to developers – have turned irregular in their interest payments, which on a normal course are paid every quarter or in two instalments every year.

“Some of the NCD issuers – and real estate funds that have invested in NCDs – are seeing delays in interest payments and probable defaults,” said Prateek Pant, executive director – products & services, RBS Private Banking.

“There’s clearly a lot of liquidity stress in the real estate market. HNIs who have direct investments in NCDs are now grappling with irregular interest payments,” Pan added.

Payment delays apart, several funds have also marked down coupon rates and extended principal repayment schedules by almost 12 to 24 months. Most funds have a one-year moratorium immediately after the launch, during which period it is not obliged to make any pay-backs. From the second year onwards, funds start repaying interests every quarter, along with some principal amount. As the years progress, the portion of principal repayment goes up.

“A handful of debt oriented RE funds has also faced delayed payments from builders and exits have been slower than estimated impacting investor returns,” said Sriram Iyer, CEO of Religare Wealth Management.

“While all of this lending is backed by collateral in the form of land or building and in some cases, personal guarantees, funds have not resorted to liquidation of collateral which in itself may not be an easy option to exercise,” Iyer added.

It’s not only small funds, but a few from larger pools managed by the likes of HDFC, Birla Sunlife, JM, ICICI Pru, Kotak, IIFL, Edelweiss, Indiabulls, DHFL, ASK Group and Edelweiss have also tweaked payment schedules, sources said.

“The smaller funds – with asset exposure in the range of Rs 50 – 100 crore – are staring at payout stress,” said Shouvik Purkayastha, MD – capital markets group, Cushman & Wakefield. “Some have frozen their coupons because of low cash-flows. But unless there’s an actual default, there’s good probability of money coming back to investors, albeit a bit delayed and a bit lower returns than promised by these funds,” Purkayastha added.

Real estate funds moved on from being pure equity play (where they participated in projects) to mezzanine debt funding a few years ago as yields hovered between 18 and 24 per cent per annum. To secure their money, funds gathered 2 – 4 times collateral and tagged along ‘desra’ clauses which took care of immediate payout to investors. Long term payouts, however, are dependent on developer cash flows.

India’s real estate sector has been witnessing weakness in sales momentum, rising inventory and debt levels for the past three years. As per the latest data, unsold housing stock across top eight property markets in the country rose 18 per cent to over 1.1 billion sq ft as on June 30. Barring Hyderabad, all other cities have shown a rise in the unsold inventory, with Bengaluru showing maximum increase of 55 per cent compared to a year ago.

Though the growth in unsold stock in the National Capital Region has been just 7 per cent, the region tops the chart with 326 million sq ft, followed by Mumbai Metropolitan Region at 201 million sq ft. Last month, Moody’s Investors Service said that India’s bigger property developers will continue to face a challenging operating environment including weak cash flows, flat sales and stagnant prices over the next one year.

“The whole concept of structured debt, even though it offers some protection, is not as secured as bank funding,” said Sumeet Abrol, Partner, Grant Thornton India, adding, “these are debt-like products; but not as secured as classic debt. The whole pay-out in structured debt funding is dependent on cash-flows of the project.”

According to analysts, funds deployed between 2010 and 2012 are phasing through a lot of stress. Project cash-flows have also declined significantly as there’s limited consumer interest at the aggregate industry level, analysts opine.

“While commercial real estate is showing some improvement mainly because of low supply, residential property sales velocity has fallen sharply. This is impacting payouts of most mezzanine funds,” Abrol added.

It’s not only real estate debt funds, but also rental yield funds that are facing sectoral headwinds. Tepid demand for commercial real estate has flattened rental yields; several funds operating in this space have not exercised escalation clauses which allow them to charge a higher rent after a specific time-period. Rental yield funds are returning 7 – 9 per cent PA – about 11 – 13 per cent lower than the promised yields.

“Overall performance of rental yield funds has been sub-par,” said Atul Singh, MD & CEO, India of Julius Baer. But rather than reducing prices outright to drive sales volumes, developers are modifying products configuration and offering incentives to prop up sales momentum.

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