Developers selling non core biz to improve balance sheet: Study
Sep 21, 2013
Source : The Hindu

BANGALORE: Developers are now focusing more in their own regions and are selling their non-core businesses to improve their balance sheet. Further, interest in tier II city investment has also reduced as investors are unable to make the desired returns in their earlier portfolios.

“Unlike in the past, when several large developers had over leveraged their position to build land banks, developers are now proceeding with caution and increasingly exploring a joint development model,” said Ficci-EY white paper.

According to Venu Gopal, executive director, EY, “The property market is witnessing some structural changes with developers gradually coming out of the four-year down cycle. Also, as real estate is evolving in the country, several new asset classes have also emerged in the realty segment in the last few years.”

Funding

“In the current scenario, developers are evaluating alternative sources of real estate funding, as traditional fund-rising channels are increasingly facing challenges,” said J.C. Sharma, Vice-Chairman and MD of Sobha Developers.

“In addition to funding, new opportunities have also evolved in the sector over the past few years, providing an impetus to developers to expand their portfolio. Development of these asset classes, such as affordable housing, senior citizen homes, entertainment real estate and transit oriented property development is gaining momentum,” he explained.

White paper

The Ficci-EY white paper on ‘Building new dimension for real estate growth’ was released at the Ficci south India real estate conference.

Talking about common drivers behind the growth of real estate in southern states, Gopal said “a total of 15.65 lakh students coming out from professional degree colleges in four states in 2012-13 and services sector with presence of many IT/ITeS companies.”

Besides salaried professionals, the region is witnessing new-age entrepreneurs and rising domestic and foreign investments creating an ecosystem that is favourable for growth of businesses.

Gopal said this has resulted in nearly 45 per cent of the country’s office space stock to be located in these States. Moreover, more than 64 per cent of the country’s IT/ITeS SEZ is located in South India.

Residential property

The residential property market in southern States with moderate and uniform price rise is driven more by end users and less by investors.

“Now the global economic crisis and domestic challenges of weak rupee, inflation and high interest rates have impacted even the south Indian real estate market. However, the government’s drive to build infrastructure and focus on its core competence will give these states an edge to weather the headwinds,” Gopal said.

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