JLL India Releases New Report ‘Real Estate Private Equity 3.0’

Fund Raising Now Focused On Residential Real Estate; Number Of Diversified Funds Visibly Reduced

MUMBAI, November 18, 2015: Leading international real estate consultancy JLL India has released its latest research on the Indian real estate sector, dealing with how private equity (PE) into the country’s property sector has changed over the years – and the current status on this front. The report ‘Real Estate Private Equity 3.0’ points out that PE players are now raising funds for specific real estate asset classes like residential, unlike the earlier modus operandi of raising diversified funds.

Anuj Puri picAnuj Puri, Chairman & Country Head, JLL India says,“There has been a clear increase of focus among investors about where they want to invest their funds in. During 2007-08, investors left no stone unturned to participate in India’s economy and real estate growth story, and invested across all possible asset classes. In the same period, 66% of funds were diversified. The share of such funds has reduced to negligible levels, post-2014. In contrast, residential-focused funds have increased to 85% today from the then measly figure of 14%. These two trends show that the investment approach of investors has changed from weighing every asset class on the opportunity it presented to becoming residential-focused, as this asset class has given maximum returns over the years.”

Investment activities pick up

jll pe reportFrom 2014, Indian real estate has witnessed PE investments worth USD 2.2 billion. This is even before taking into consideration platform level deals which are worth USD 2 billion. When we compare the quantum of activities in last 18 months to investments between 2009 and 2013 that were worth USD 3.9 billion, this uptick is clearly evident. Per year investment has increased by two times.

As PE funds mature, they become selective

Between 2005 and 2008, investments were not only seen across all real estate asset classes but investors also invested in Tier-II and Tier-III cities. As many as 30 Indian cities enjoyed investment during this phase. Post this phase, however, the selection criteria has gotten stricter and due diligence has increased – displaying a maturing of India’s real estate PE industry.

From 2014, it is largely the developers with very good track record that have managed to attract investments. At the same time, investors have restricted themselves to seven-eight cities only and a considerable portion of investment has gone into residential and office assets – showcasing a clear focus among the investors.

Click here to download the report ‘Real Estate Private Equity 3.0’

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Group Buying Real Estate: Everybody Wins

Ashwinder Raj SinghAshwinder Raj Singh, CEO – Residential Services, JLL India

Group buying is an interesting new trend that is garnering attention from everyone who has any stake in the real estate market. In this model, groups of buyers approach developers either directly or through agent representation to negotiate scale-based bargains which would be impossible individual home buyers to achieve. It works – and it in fact has special pertinence in the festive season.

For Buyers

property group buying real estateProperty buyers have been waiting for real estate prices to come down for quite some time now, and the fact that it is now a buyer’s market is ensuring that developers offer better deals, bigger discounts and a host of freebies. Groups of friends, family and colleagues or even of like-minded strangers who are interested in the same project are in a beneficial position when it comes to cumulative bargaining power.

For Developers

Group buying is beneficial for developers too, as most of the big players are sitting on huge unsold inventories. Instead of approaching individual potential buyers at huge dedicated marketing costs, it makes eminent sense for them to negotiate with groups of buyers and strike a deal that brings in substantial amounts of much-needed liquidity immediately.

The Festival Season Impact

Seeking to cash in on the upbeat consumer spirit during the festive season, real estate developers are already active with discounts and freebies. While selling real estate in bulk is definitely a route developers will seek to encourage and promote throughout the year, the concept of group discounts dovetails very logically with the incentives-driven festive ethos.

Bulk buying of real estate is being pursued not only by buyer groups but also real estate brokerages, which represent such groups and can often negotiate the best possible deals. In fact, even fund houses looking for investments in real estate have considerable interest in this platform. It is always profitable to invest in an under construction project so as to obtain the most competitive prices and sell off these holdings at a later date for healthy profits. In other words, group buying of real estate is, in today’s market environment, a proposition where everybody wins

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Bengaluru Debuts In JLL’s APAC City Investment Intensity Index

Figures in the top-20; far above bigger cities like New Delhi and Mumbai

Anuj Puri picAnuj Puri, Chairman & Country Head, JLL India

Bengaluru has made its debut in yet another global survey by JLL. After figuring in the top-20 technology-rich cities globally earlier this year, Bengaluru has made it to JLL’s latest Asia-Pacific city investment intensity index. The index compares volume of direct real estate investment over a three-year period relative to the current economic size of a city.

While global cities like New York, London and Tokyo nearly always rank at the top in commercial real estate investment volumes by virtue of their sizes, the top five cities across Asia-Pacific region are Tokyo, Singapore, Seoul, Sydney and Hong Kong, ranked by three-year rolling direct real estate investment volumes ended 2Q15.

Regional city rankings, however, change quite a bit once the size factor is accounted for. Within Asia Pacific, the latest Q2 2015 index sees Sydney and Auckland at the top two spots in terms of real estate investment relative to city size. Bengaluru is at No. 20. Tokyo, Hong Kong and Singapore still rank among the top ten but Seoul ranks lower (13th).

More transparency is important

city momentum index bloreDue to lower market transparency, foreign investment into India is often through debt or at the entity level. Hong Kong, Singapore, Tokyo and Taipei still rank among the top ten with their transparency scores close behind (Korea sits further down), while the less transparent markets of China, India and emerging Southeast Asia are under-represented among the league. This provides opportunity for investors with local knowledge to find deals; the size of the cities’ GDP show there is capacity for real estate investment to increase.

Foreign investment interest in Bengaluru and other Indian cities may be underrepresented in the index as these figures reflect equity investments at the asset level. Directly, real estate investment is generally difficult for foreigners in India, and investors looking to take part in market growth may need to go through routes such as debt deals and joint ventures with local partners. The index advises investors to continue to seek core business park/ office investments in Bengaluru.

Interestingly, New Delhi and Mumbai also figure at No. 34 and No. 42 respectively in the index. The reason behind these two bigger cities figuring so low is because the index wants to highlight only those dynamic, mid-sized cities that are punching above their weight in terms of their attraction for investors.

New Delhi and Mumbai have enough investments coming in but their sheer size being far bigger than Bengaluru and the index being a ratio, they figure lower here. Bengaluru is a smaller city than the political and financial capitals of India and yet manages to attract a lot of investment in comparison of its size.

On an average, commercial real estate assets worth 10% of a city’s gross domestic product (GDP) change hands every three years. The index not only provides a measure of real estate market liquidity but also a useful barometer of a city’s overall attractiveness to investors. On top of considerations on returns, diversification benefits and factors such as real estate transparency level and the ease in cross-border purchases are increasingly being incorporated into investment strategies.


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A Festive Season Briefing For Homebuyers

Anuj Puri picAnuj Puri, Chairman & Country Head, JLL India

As we look at how the residential real estate market is behaving this festive season, developers and the consultants are on the same page while accepting that it continues to go through a slow time. Many developers still have their backs against the wall financially, and have been challenged to complete or show convincing progress on their under-construction projects.

Unfortunately, fact this has been overly hyped by the media, and even developers who are well capitalized and fully able to complete their projects have been tarred by the negativity brush. This has resulted in a drop in overall confidence from buyers, who are worried that they will commit their money into properties which will not be delivered on time.

Economic Signals

The economy has not shown the kind of perk-up which everyone had hoped for. However, matters have definitely improved over what we were seeing this time last year. All in all, the market’s outlook is improving. The RBI’s recent interest rate cut has helped improve sentiment, which is an important driver on the real estate market.

festiveWith this rate cut, the RBI sent an important signal to the market that inflation is under control, and that it is confident about economic growth. Such signals definitely have a positive effect on buyer sentiment. However, in terms of actual pertinence on property purchase, the impact may not be very significant – especially in expensive inner city areas in cities like Mumbai. If property prices are in any case unaffordable, a marginal reduction in the cost of borrowing will not make a difference. The reduction in interest rates will have a bigger impact on buying behaviour in less expensive markets, such as peripheral locations of the larger cities and tier 2 / tier 3 cities.

Pricing & Correction Outlook

In the last four quarters, the prices in Mumbai increased by 3.7%, prices in Chennai increased by 1.5% and no change recorded in the prices of Delhi-NCR. This presents a more or less stable scenario, which is likely to continue for another two or three quarters. Though many fence-sitting buyers have been waiting for real estate prices to correct, it is unlikely that any large-scale ‘shock disruption’ is imminent.

Corrections are very location-specific as well as developer- specific, and will happen where nothing else will work to encourage buyer activity. In cities and locations where there is still sufficient demand and prices are more or less affordable, there will be no correction, while they will certainly happen in areas where affordability is a deterrent to buyer sentiment.

However, much is already happening to make real estate more affordable. Across cities, developers have been actively re-configuring their projects to align with market demand, in the process saving on costs and passing on the benefit to buyers. Also, a majority of the new housing project launches have been at lower rates than those of earlier projects launched in the same locations in such category projects.

NRI Investment Action

If we take a step back from domestic real estate consumption and look at demand coming from across our borders, the outlook looks very upbeat. Currently, non-resident Indians (NRIs) are extremely active in investing into Indian real estate. In fact, NRIs are among the top five investor communities in the country’s property sector. Apart from their natural affinity to India and the fact that NRIs see a higher intrinsic value on Indian real estate over property owned elsewhere, purchase decisions are also being spurred by the Indian rupee’s ongoing weakness against the US dollar.

To Summarize

It is at best a mixed bag of market readings this festive season – but is it a good time to buy? Definitely, considering that buyers have never been more spoiled for choice – and, for that matter, bargaining power. Also, we are seeing hard discounts as well as offers to waive stamp duty and registration charges, VAT, service tax and floor rise premium – all of which translate into an actual saving on the cost of the property. More than in many of the preceding years, this festive season is an ideal time to zero in on the best deal and make that dream home a reality.

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Maharashtra’s New Retail Trade Policy: A Potential Boon To Retailers

Retail entertainment zones will figure in cities’ master plans and development control regulations, and get up to 50% additional FSI

Ashutosh Limaye Ashutosh Limaye, National Director – Research, JLL India

Considering retail to be an essential amenity, the Maharashtra state government recently shared the draft of a new retail trade policy. To help retailers achieve optimal potential, the state government has suggested making some exceptions and relaxations in the current regulatory framework. Among the key suggestions is the introduction of retail entertainment zones (REZs).

retail policy


policyWhy REZs Are Needed

The development control regulations (DCR) shall reserve spaces for retail and entertainment on the same lines as reservations for essential services and restaurants, in order to make retail more affordable. Currently, the urban policy does not clearly reserve spaces for shopping and recreational needs of citizens, so shops tend to be set up in a haphazard manner. More importantly, shops compete for spaces in commercial locations, which are extremely expensive and untenable for the retail industry.

Creating a zone for retail and recreation will help increase consumption and simultaneously raise the standard of well-being of citizens. With this new policy, the state government will aim to recognise the need for shopping and recreational areas to create a much-needed balance between residential, commercial, industrial, shopping and recreational areas in urban places.

Accordingly, efforts will be made to:

  • Provide retail areas with direct access to mass public transport systems,
  • Secure a traffic plan designed for the long term,
  • Ensure year-round electricity, water, gas, sewage and IT connections.

REZs will be large retail developments where many big-box and other retailers will come together and give families an opportunity to spend an entire day out. The state government will consider such a ‘retail park’ concept under its master plans to give the advantage of choice to consumers, increase competition (which will help reduce prices for consumers) and also reduce vehicular usage by eliminating the need to travel to different parts of the city merely to compare retailers.

These retail parks would preferably be adjacent to highways and have an integrated public transport system. This will support connectivity, ease traffic in and around the city, provide customer convenience and result in cleaner cities.

Retail Zones To Figure In Regional / Town Planning

City master plans shall reserve land for retail development on the lines of Delhi, where they have been able to create specific centres in South and West Delhi for retail.


  1. Large malls of international standards require larger land parcels. Earmarked spaces in master plans will help them maintain high standards of development
  2. The earmarked spaces for retail / entertainment development would also rationalise land prices
  3. Infrastructure like roads, public transportation and power will be planned in advance.

Development Control Regulations

Requirements for retail and other businesses are different, and there is a need to incorporate such specific business needs. The following modifications will be done to enhance viability and quality of development for retail centres:

  • Higher ground coverage: Malls house various retail components across floors but customer movement reduces on the higher levels, making them less productive. Retail development shall be allowed higher ground coverage up to 70% (subject to setback and fire safety regulations as also FSI norms being followed).
  • Recreation ground: In a retail environment, organised players offer various types of recreational facilities and activities on a commercial basis. Such activities, within the applicable norms, should be allowed to set up in a ‘recreation ground’.
  • Floor to floor heights: Retail developments, being public spaces, get crowded. The availability of higher floor-to-floor height allows the common areas and shops to look spacious and provide a relaxed and comfortable shopping environment to customers. The floor-to-floor height limit shall be raised to 5.5 meters, as is allowed in several other states.
  • Parking norms: Malls, depending on their sizes and locations, receive a large number of vehicles. Limited parking space not only reduces the number of people visiting malls but also creates traffic hassles in and around them, leading to public inconvenience. The parking rules, which currently consider parking in excess of regulation as FSI, will be changed to allow larger numbers of car parks – without FSI implications.
  • Services: Unlike office spaces, retail spaces need more services due to movement of goods and customers throughout the day. Retailers need to replenish their stocks in the store to service customers’ needs, and thus require higher storage space in a mall. Moreover, to cater to large numbers of customers and to provide ease and comfort of movement, high capacity air-conditioning, escalators and lifts are required. 15% of development will be allowed as services including storage areas in the basements, etc.
  • Changes: Space requirements of retailers and demographic profiles of customers both keep changing. Changes in use of spaces – for example, from fashion retailing to restaurants to entertainment or vice versa, are frequently seen. To address these needs, spaces for retail and other uses will be allowed to amalgamate, divide or interchange with simplified approval processes.
  • Building height: Currently, there is a height restriction of 30 meters for buildings that house a multiplex or auditorium. Retail developments generally do not work at higher levels. Therefore, to use the entire eligible FSI of the land, alternate commercial use like hotels, service apartments, offices, etc. are required to be developed on upper floors. Restrictions on building heights will be relaxed as done in neighbouring states.
  • Additional FSI for retail zones: To enhance the viability and quality of development for retail centres, up to 50% additional floor space index (FSI) will be admissible over and above the base FSI subject to payment of full applicable premium, as per the prevailing ready reckoner rates.
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