Regional Headline :

Realty capital commitment may reach Rs3 trn in 2 years

PRIVATE CAPEX CHAMPIONS -V

RAGHAVENDRA KAMATH Mumbai, June 27

REAL ESTATE PROJECTS saw %1-trillion investments in the past two years. That is set to go up by three times over the next couple of years as developers bet big on the boom in residential property and sustained leasing activity in commercial property. Virtually every company in the space is spending crores to buy land parcels and to develop them.

Anand Kulkarni, director, Crisil Ratings, points out the capital committed across residential and commercial properties in FY24 and

REAL ESTATE OF AFFAIRS

. QIPs (FY24) size in crore)

Fund raising by realty, hotel cos

IPOs (FY24), size in % crore)

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Hotels 1 370 Suraj Estate Deve opers

FY25 would bearound X3 trillion. So promising is the outlook that last year alone about 1,185 acreswas picked upwhile 410 million sq ft of residential properties were launched. The stakes are get Brookfield India m Real Estate Trust

fi Developers

Anant Raj I Industries 500

Source: Primedatabase.com

ting bigger with project launches tipped to jump by 25% this year. Moreover,the tab for construction could be as high as ₹75,000 crore, Sangram Baviskar, founding member and MD-real estate at

M Prestige Estate to have a capex of ₹3,000-4,000 crore across segments

M Brigade may M Brigade spend some to spend 6,250 crore ₹850 crore on building to add residential 1,000 property hotel keys

M IHCL recently said it has a five-year capital deployment plan of ₹3,500 crore

TruBoard Partners, estimates. Real estate sales have been on the upswingin the aftermath of the pandemic.Home sales hitadecadal high in Q1FY24 with nearly 130,000 units sold across the top

seven cities, according to Anarock Property Consultants. Sales have since tapered off in Q2— which saw a sequential decline. Nonetheless, they are tipped to grow 8-10% in 2024 on abase 0f 480,000 unitsin 2023. Office absorption is also on an uptrend with the six months to June recording 29.4 million sq ft, a 19% jump over the first half of FY23,according to Colliers.Absorption could cross 50 million sq ft before the year is out much like in 2023 and 2022. ShobhitAgarwal, MD and CEO at Anarock Capital, believes it’s the strong demand thatis encouraging developerstolaunch more projects. Also, the inventory overhang is virtually gone. “There has been a shift by most employers to move away from work-from-home to workfrom-office (partially or fully).Also, buyers have felt the need to own

larger homes,” said Jayant B Manmadkar, CFO, Brigade Enterprises.

The big boys are all upping the ante. Brigade Enterprises, for instance, is expected to buy land worth 1,200 crore annually and spend some 6,250 crore on constructing residential property. It will develop 16 million sq ft of projects which are in the pipeline; of this,around 12.5 million sq ftisin theresidential sectorin Bengaluru, Chennai, Hyderabad and Mysore. The company is also spending %850 crore on hospitality projects asitlookstoadd 1,000 hotel keys.

ManmadKkar says most developers should continue to generate strong cash flows which they can put to work. At the same time, money is being mopped up via IPOs, QIPs and rights issues.

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Realty capital commitment may reach X3 trn in 2 years

AS ANAROCK’S AGARWAL points out,“The improved cash flowvisibility and the better corporate governance under RERAhave given financial institutions confidence in developers,he said.

Prestige Estate Projectshas said it will sell 5,000 crore worth of shares to institutional investors. The company, which incurred a capex of %3,000-4,000 croreacross segments last year, is looking to incur similar amount this year, the management indicated on a recent earnings call. The company also plans to monetise its hotel business by selling shares of itsarm Prestige Hospitality Ventures. InFY24, it achieved the highest-ever launchesof 31 million sq ftintheresidential business with a GDV (gross

developmentvalue)of 21,000 crore. Bengaluru-based Sattva Group plans to invest ₹12,000-14,000 crore in the next tw-three years developing commercial office, residential and hotel projects.

Spurred by rising demand, hotels tooareadding capacity.Indian Hotels Company (IHCL) recently said it has commenced a five-year capital deployment plan of 3,500 crore.The money would be used to upgrade assets,build capabilities and forselect new projects. The company plans to open 25 hotels in FY25. It will also introduce a new format for the Gateway brand as it moves towardsa 100 hotel portfolio by 2030.

(This concludes the series on private capex champions)