Indian real estate market has been facing strong headwinds over the past
several quarters due to low demand and oversupply in both residential
and commercial segments.
Nine years after it was formed, New York-based Brahma Management has lined up big investments for the Indian real estate market
. Brahma, an FDI-funded investment and asset management company, has
already invested around Rs 2,500 crore in the sector and has plans to
put in another Rs 3,000 crore over the next two years.
So far,
its investments in the realty sector include Gurgaon-based projects
Brahma City and Athena, and The Valley, a joint venture township project
in Panchkula. While Athena is a retail and commercial office center,
Brahma City is a gated township spread over 150 acres of land.
Indian real estate market
has been facing strong headwinds over the past several quarters due to
low demand and oversupply in both residential and commercial segments.
Gulbir Madan, chairman of Brahma, thinks differently. He says that India
is coming out of a cyclical downturn. "We are just coming out of a real
estate recession. The largest wealth creator in India will be real estate.
I am very bullish on the sector," says Madan adding that in the US, the
single-family homes are the biggest wealth holder, more than bond and
equity markets. "Whenever you have a real estate recession, it affects
the country dramatically. One of the biggest shortfalls in our country
will be real estate."
Madan says that there are multiple
roadblocks for the sector, including the recently introduced land
acquisition act. "I think it will become very difficult to acquire large
tracts of land. To acquire land for a project like Brahma City will be
extremely tedious," he says. Madan says that he is fortunate to have
acquired land (for Brahma City) back in 2009 and 2010. "Going forward,
it will be practically impossible to make townships unless developers
move out of the cities. But they have to wait for the infrastructure to
come up."
"Real estate projects elsewhere in the world succeed
because they have 10-lane highways. People can travel 30 miles out which
will take them 30 minutes. They are not constrained in a city. It
becomes too difficult to move out 30 miles here. That's why the pricing
gets skewed," explains Madan.
With a big presence in Gurgaon, the
fund is now planning to foray into other markets such as Bangalore and
Mumbai. "We don't buy things for appreciation. We don't expect booms. We
buy things to make a business return out of it." Brahma also claims to
be a debt-free company. "The problem in India is that half of the
developers are levered. I get projects constantly which are half done
and they cannot complete it because they are out of funding. They offer
us projects. None of my projects have any funding because the cost of
money is around 15 per cent. We have put in all our equity," says Madan.
SOURCE : WEB